1. Coordination and Control The focus is to find the appropriate structure to manage the MNC

2. n Organization Structure is the overall pattern of structural components and configurations used to manage the organization. n Structure allows the firm to allocate resources, assigns tasks, transmit information, and instructs on rules and procedures (Coordination and Control)

3. Strategy/Structure Debate n Which one comes first? n Chandler’s study of organizations suggests that structure follows strategy n Stopford’s study suggests that structure changes in different stages

4. Stopford’s Study three stages n Using 2 variables - Product diversity and importance of international sales n International division n Area division or Product division n Global matrix

5. Evolving structure in MNCs International Division Area Division Worldwide Product Division FOREIGN PRODUCT DIVERSITY FOREIGN SALES AS PERCENTAGE OF TOTAL SALES Global Matrix

6. Failure of the matrix n Most MNCs followed the prescription of Stopford n focus was on centralization or decentralization n the use of global matrix failed

7. Reasons why the Global Matrix as structure “failed” n It emphasized differences among subsidiaries n duplication of communication n not enough flexibility in practice n too much focus on structure and not on environment and strategy. n It may hinder transfer of knowledge

8. Factors that should determine the appropriate structure n Size, Strategy, Technology n Environment n Cultures of the different countries.

9. Different approaches to International Organization Design

10. Approaches to Organizational Design: The corollary approach n delegating responsibility for processing international requests to individuals within existing company. n Used by firms with very small international activity

11. Approaches to Organizational Design: The export department approach n creating a separate internal export department for overseeing international operations n Used by small to medium size firms

12. Approaches to Organizational Design: Decentralized Federation n Used by firms with a multinational strategy approach n national focus and little intervention by parent company n building of local production facilities, decentralized strategic decisions n more delegation to local. Typical of many European MNCs

13. Decentralized Federations HQ MULTINATIONAL STRATEGY MODEL - COMPETE BY BEING NATIONALLY RESPONSIVE Mainly financial flows (capital in, dividend out) Loose, simple controls (strategic decisions centralized)

14. Approaches to Organizational Design: Coordinated Federation n Used by firms with an international strategy approach n It allows for leveraging the capabilities of parent company overseas n formal system of controls by headquarters, subsidiaries viewed as “inferior” n Used primarily by US.. based MNCs

15. INTERNATIONAL STRATEGY MODEL - COMPETE THROUGH KNOWLWDGE TRANSFER Coordinated Federations HQ Mainly knowledge flows (technology products, processes, systems) Formal system controls (planning, budgeting, replicating parent company administrative system)

16. Approaches to Organizational Design: Centralized Hub n export based global strategy, focus on scale economies and quality control n tight control at home, and mainly flow of goods out n typical of Japanese MNC, and favored the cultural reality of Japan.

17. GLOBAL STRATEGY MODEL - COMPETE THROUGH GLOBAL EFFICIENCY HQ Mainly flows of goods Tight, simple controls (key strategic decisions made centrally) Centralized Hub

18. Approaches to Organizational Design: Transnational Organization n multiple and diverse perspectives of the environment, both host and home countries n management capabilities are distributed worldwide and interdependent n no need for centralization, subsidiary mandates to achieve global scale n flexible integrative process n management process can change by product, or country as necessary.

19. Organizational implications: The integrated network THE

20. Organizational implications: The integrated network n Don’t manage like the United Nations Differentiate roles and responsibilities Differentiate roles and responsibilities Don’t let a single perspective dominate Don’t let a single perspective dominate Legitimize business, area and functional management Legitimize business, area and functional management Don’t search for a standard coordination process: Don’t search for a standard coordination process: Develop and apply different tools to different tasks. Develop and apply different tools to different tasks.

21. Building and balancing multiple organizational perspectives n Build legitimacy and credibility of non- dominant groups: n Co-opt specific individuals n Provide required mandate n Provide access to information channels n Modify existing channels n Create new channels

22. Building and balancing multiple organizational perspective n Create influence in decision processes n Use micro-structural tools n Use both visible and invisible hands n Maintain balance over time n Manage ambiguity and flux n Develop fit and flexibility

23. Anatomy, Physiology, and Psychology of Transnational Organization. n Anatomy is the formal structure, assets and resources of the organization n Need to depart from simple line relationship or product Vs. structure debate n Emphasis on informal structure and communication lines

24. n Use of task forces or committee as supplemental DM alternatives. This allows for organizational flexibility, thus quick response to ever changing environment.

25. Physiology - the focus here is efficient flow of information n MNCs must look beyond traditional methods for ensuring free flow of information. n efficient flow of information is more critical in integrated network which characterizes a transnational organization n organizations should take advantage of informal relationships to further corporate objective.

26. Psychology n Shared corporate values and beliefs n The corporate objectives must be clearly stated, desirable corporate behavior modeled by management and policies and practices must reinforce appropriate organizational behavior. n Changing of organizational psychology is very important for anatomy and physiology to make sense.

27. Managing Change in the Transnational Organization n Change in individual attitudes and mentalities (psychology) n Change in interpersonal relationships and processes (physiology) n Change in formal structure and responsibilities (anatomy) n Back to Chandler’s thinking, i.e. strategy before structure