Organization, Implementation, and Control

1
Chapter 13

• Organization, Implementation, and Control

2
Learning Objectives

• Describe alternative organizational structures
  for international operations.
• Highlight factors affecting decisions about
  the structure of international organizations.
• Indicate roles for country organizations in the
  development of strategy and implementation of
  programs.
• Outline the need for and challenges of controls
  in international operations.

3
Organizational Structure

• Companies must change strategies as their
  structures evolve from domestic to multinational.
  The basic functions of an organization are to
  provide
• A route and locus of decision making and
  coordination.
• A system for reporting and communications.

4
Organizational Designs

• Types of structures used by companies to manage
  foreign activities

Little/No Formal Organization
International Division
Global Organizations
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Little or No Formal Organization

• Domestic operations assume responsibility for
  international activities in the early stages.
• The organizational structure reflects the
  increased demands from the international
  marketplace.
• The export department structure becomes obsolete
  as the firm becomes more involved in foreign
  markets.

6
The International Division

• Centralizes in one entity all of the
  responsibility for international activities.
• Best serve firms with few products that do not
  vary significantly.
• Coordination is important.

7
Global Organizational Structures

• Types

• Most often used by multinational corporations.
  Improved cost efficiency is a major benefit.
• Second most used approach. Follows the marketing
  concept most closely.

Product Structure
Area Structure
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Global Organizational Structures(continued)

• Types

• The simplest from the administrative viewpoint.
  A variation is one that uses processes as a basis
  for structure.
• Especially used if customer groups are
  dramatically different.

Functional Structure
Customer Structure
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Global Organizational Structures(continued)

• Types

• Combines two or more organizational dimensions
  simultaneously.
• Integrates the various approaches. Most
  companies find this arrangement problematic.
  Complexity of this structure may increase the
  reaction time of a company.

Mixed Structure
Matrix Structure
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Implementation

• Locus of Decision Making
• Decentralized systems have loose and
• simple controls. Subsidiary operates
• as a profit center.
• Centralized systems have tight controls.
• Strategic decision making is at
• headquarters.
• Coordinated decentralization calls for
• overall strategy to come from headquarters.
• Subsidiaries are free to implement within
  agreed upon range.

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Decision Making

• Factors that impact structure and decision
  making.
• Degree of involvement in international
• operations.
• Products that the firm markets.
• Size and importance of the firms markets.
• Human resource capability of the firm.

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The Networked Global Organization

• The network avoids problems of effort
  duplication, inefficiency, and resistance to
  ideas.
• Subsidiaries are able to make local business
  development decisions within the global framework.

13
Internal Cooperation

• Success for a global firm involves the ability to
  move intellectual capital.
• Boundarylessness describes a situation in which
  people can act without regard to status while
  feeling the freedom to search elsewhere for
  innovative ideas.
• International teams promote cooperation.

14
Internal Cooperation(contd.)

• Greatly assisted by Internet-based technology.
• Access to virtual teams.

15
Country Organizations

• Roles

Contributor
Strategic Leader
Black Hole
Implementor
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Country Organizations

• Strategic Leader
• A competent national subsidiary that may be
  serving as a partner in developing and
  implementing strategy.
• Contributor
• Country organization with a distinctive
  competence.

17
Country Organizations

• Implementor
• Most entities hold this role. It provides
  critical mass for the global effort.
• Black Hole
• The international company has a low
• competence country organization, or
• none at all.

18
Controls

• Internal benchmarking is of great importance in
  todays market.
• General instruments of control
• Bureaucratic/Formalized Control
• Cultural Control

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The Bureaucratic/Formalized Control System

• Elements
• International budget and planning system.
• Functional reporting system.
• Policy manuals to direct functional performance.

20
Cultural Control

• Requires personal interaction.
• Requires careful selection and training of
  corporate personnel.

21
Exercising Controls

• Manufacturing subsidiaries tend to be controlled
  more intensively than sales subsidiaries.
• U.S.-based multinationals place more emphasis on
  quantitative data.
• Control systems must consider the impact of the
  environment.