Globalization and Organization Structure

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Globalization and Organization Structure Keywords
Configuration - the geographic location of
activity Co-ordination - integration of
activities - there is interdependence Last
lecture we were looking at possible strategies
Global
Trans-National
Pressure toward global integration
Multi- domestic
Domestic
Pressure for localization
Focus Our choice of strategy impacts on, or
determines, our choice of structure - Strategy
and Structure interact
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Growth of International Structure 1. Start with
exporting - accident - ad hoc structure 2.
Growing importance of international activity
leads to establishing an international division
- Differentiate it from domestic activity so
that it gets proper attention Requirement
International Manager needs to understand the
product-market strategies of all domestic
product-market divisions - This is a tall
order! 3. Next stage go in one of two possible
directions depending on whether product
globalization or market differentiation is the
more important i.e. whether we will be
relatively centralized (globalization), or
decentralized (market differentiation)
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3(a) If local differentiation is more important,
go to an area structure We see the relevance of
this in the extreme case of a multi-domestic str
ategy
The organizational answer is to have relatively
autonomous area managements to run all aspects
of the business in its particular market
niche. The more local conditions influence
decision making, the higher the level of local
autonomy. The local company becomes a miniature
replica of the parent company. N.B. Host
governments like this as all types of skills and
technologies are transferred, and local autonomy
caters to nationalistic feelings
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• Problems
• High autonomy can lead to communication problems
  with Head Office
• and lack of H/O control over standards, policies,
  reporting and control
• processes
• 2. Excess autonomy inhibits MNC learning (GM s
  Opel in Germany is a good
• example - virtually independent of Detroit in
  every sense - no inputs
• in either direction)
• 3. Challenge to home office authority
• 4. Low volume implies high cost operation
• 5. Lack of scale to warrant some activities such
  as RD

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3 (b) Product standardization dominant - leads to
Organizing on Product Lines - global strategy
is classic case
International Division
Each product division becomes a more or less self
contained entity with RD, production,
marketing, accounting, services, all centrally
organized and located
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Local organizations do not have much autonomy
. May have local offices either for local sales
representation, or perhaps to manufacture
components for subsequent centralized assembly
(e.g. Airbus) The profit centre concept doesnt
fit because local offices have no control over
design or production, nor overall marketing
strategy Problems 1. Inflexible, slow to
respond to changes in markets or product
design 2. Loss of contact by H/O with other
markets, sources of RD, technology 3. Low local
autonomy - limited ability to respond to
particular market needs 4. All activities
dominated by home office - risk of
national/cultural imperialism.
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4. Trans-national Operation - Merge the two
dimensions of concern N.B. May not be necessary
for some companies But may be essential for
others, e.g. telecommunications High
centralization for RD, achieving economies of
scale High pressure for localization to provide
local networks, cope with local political
pressures e.g. Cable Wireless was largely area
based, in Boswana, Bahrain, Hong Kong,
etc. But has been slow to adapt to changes in
the industry which are driving towards
globalization Possibly some of the current
problems of ATT and BT are similar in
nature Difficulty Must move toward a matrix
type of organization to integrate products and
markets This is inherently difficult, even
in a single country market
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What we need to achieve 1. Two-way flow of
ideas and resources 2. Free and frequent
movement between offices 3. Use of local boards
of directors 4. A global perspective both at H/O
and in the field Hence leadership roles are not
fixed - sometimes in the areas, - sometimes
in H/O Maximization is over the organization as
a whole (global), not over individual elements
(area or product) Matrix management places a
premium on horizontal flows of information and
flexibility
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So we have a mixed situation - Some products
are standardized, produced at the centre for all
markets - Some products are localized and
produced in local country for local market -
Some products are manufactured in local
(dispersed) countries for global markets The
complexity of management planning, implementation
and control is obvious
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Fundamental Question What is the breadth and
depth of management talent, especially at the
level of the affiliates?
Parent seeks alliances or acquisitions
High
Affiliate takes strategic initiative
Localization pressure
Affiliate influences parent strategy
Affiliate follows parent instructions
Low
Low
High
Affiliates Capability
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Managers need to abandon self interest and work
towards the benefit of the organization as a
whole Matrix structure implies shared
responsibility Put the matrix concept into the
heads of all managers, so that the organization
will work that way regardless of the formal
organization structure Successful matrix
management is more a question of management
attitudes than a question of organization
structure - style - attitude - mind set
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Seamless organization - Suggests that the
organization eliminate the barriers between parts
of the organization, using devices such as -
teams - clusters But note that this only
shifts boundaries outward - there still remains
a boundary, and the question remains, how do we
communicate across it? Note the ability of
communication technology to penetrate
barriers - In effect email, www, the internet
punch holes in the old barriers. But what of
the individuals who need/crave structure and
clarity? There is a reduced pool of potentially
competent managers - can we train up managers
who are comfortable with ambiguity?