The organizational context

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• The organizational context

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Figure 2-1 Management demands of international
growth
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The path to global status

• Causes structural responses, due to
• Strain imposed by growth and geographical spread
• Need for improved coordination and control across
  business units
• The constraints imposed by host-government
  regulations on ownership and equity
• Evolution path common but not normative

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Figure 2-2 Stages of internationalization
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Stages of internationalization Exporting

• Typically the initial stage of international
  operations
• Usually handled by an intermediary (foreign agent
  or distributor)
• Role of HR department unclear at this stage

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Figure 2-3 Export department
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Sales subsidiary

• Replacing foreign agents/distributors with own
  through sales or branch offices/subsidiaries
• May be prompted by
• Problems with foreign agents
• More confidence in international activities
• Desire for greater control
• Give greater support to exporting activities
• PCNs may be selected, leading to some HR
  involvement

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Figure 2-4 Sales subsidiary
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International division

• Creation of a separate division in which all
  international activities are grouped
• Resembles miniature replica of domestic
  organization
• Subsidiary managers report to head of
  international division
• Objectives regarding foreign activities may
  determine approach to staffing of key positions
• Expatriate management role of corporate HR

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Figure 2-5 International division
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Global product/area division

• Strain of sheer size may prompt structural change
  to either of these global approaches
• Choice typically influenced by
• The extent to which key decisions are to be made
  at the parent country headquarters or at the
  subsidiary units (centralization versus
  decentralization)
• Type or form of control exerted by parent over
  subsidiary

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Figure 2-6a Global product division
Figure 2-6b Global area division
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The matrix

• An attempt to integrate operations across more
  than one dimension
• Violates Fayols principle of unity of command
• Considered to bring into the management system a
  philosophy of matching the structure to the
  decision-making process

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Figure 2-7 The matrix
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Problems with the Matrix Bartlett and Ghoshal

• Dual reporting
• Proliferation of communication channels
• Overlapping responsibilities
• Barriers of distance, language, time and culture

• Leads to conflict and confusion
• Creates informational logjams
• Produce turf battles and loss of accountability
• Make it virtually impossible to resolve conflicts
  and clarify confusion

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Control mechanisms

• Globalization brings considerable challenges
  which are often under-estimated.
• Every morning when I wake I think about the
  challenges of coordinating our operations in many
  different countries
• Quote by Accor CEO

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Figure 2-10 Control mechanisms
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Mode of operation and HRM

• Not just subsidiary operations
• Firms may also adopt contractual modes
• Licensing
• Franchising
• Management contracts
• Projects
• And/or cooperative modes (such as joint ventures)

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Interfirm linkages

• Alliance (strategic alliance, cooperative
  venture, collaborative venture or corporate
  linkage)
• A form of business relationship that
• Involves some measure on interfirm integration
• Stops short of a full merger or acquisition

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HR factors

• HR issues and activities that affect the
  successful functioning of international joint
  ventures include
• Assigning mangers to the joint venture
• Evaluating their performance
• Handling aspects pertaining to career path
• Compensation benefits