Chapter 8 Organization Structure and Control Systems Power

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Chapter 8: Organization Structure and Control Systems Power. Point by Hettie A. Richardson Louisiana

Chapter 8: Organization Structure and Control Systems Power. Point by Hettie A. Richardson Louisiana State University © 2008 Pearson Prentice Hall

Opening Profile: Changing Structures in Emerging Markets n Expansion modes in emerging markets may

Opening Profile: Changing Structures in Emerging Markets n Expansion modes in emerging markets may not fit the mainstream MNC model Many are “born global” n Competition is limited in niche businesses n They thrive in old-economy industries abandoned by established MNCs n 2 © 2008 Pearson Prentice Hall

Opening Profile: Changing Structures in Emerging Markets n Family based governance structures and rigid

Opening Profile: Changing Structures in Emerging Markets n Family based governance structures and rigid control systems must be redefined n Hybrid structures and fast-growth entities will emerge 3 © 2008 Pearson Prentice Hall

Organizational Structure n Must evolve to accommodate internationalization n Must “fit” with strategy n

Organizational Structure n Must evolve to accommodate internationalization n Must “fit” with strategy n Should be contingency based 4 © 2008 Pearson Prentice Hall

Evolution and Change in Structures n Stages model n Alcoa n Created smaller units

Evolution and Change in Structures n Stages model n Alcoa n Created smaller units n Linked geographically dispersed, but similar businesses (e. g. , Brazil and Australia) 5 © 2008 Pearson Prentice Hall

International Division n Organized along functional, product, or geographic lines n IBM World Trade

International Division n Organized along functional, product, or geographic lines n IBM World Trade n Pepsi Cola International 6 © 2008 Pearson Prentice Hall

Global Functional Structure n Designed on the basis of the company’s functions n Allows

Global Functional Structure n Designed on the basis of the company’s functions n Allows for functional specialization and economies of scale 7 © 2008 Pearson Prentice Hall

Organizing for Globalization n Need for differentiation n Need for globalization n IBM n

Organizing for Globalization n Need for differentiation n Need for globalization n IBM n Rationalization n Development of alliances 8 © 2008 Pearson Prentice Hall

Comparative Management in Focus: The Overseas Chinese Global Network n “Chinese commonwealth” n Overseas

Comparative Management in Focus: The Overseas Chinese Global Network n “Chinese commonwealth” n Overseas Chinese n Control $2 trillion in liquid assets n Contribute 80% of the capital for the PRC n Contribute 70% of the private sector in Malaysia, Thailand, Indonesia, and the Philippines 9 © 2008 Pearson Prentice Hall

Comparative Management in Focus: The Overseas Chinese Global Network n The Overseas Chinese business

Comparative Management in Focus: The Overseas Chinese Global Network n The Overseas Chinese business culture n Business largely confined to family and trusted friends—guanxi n Adherence to patriarchal authority n Thrift and a high savings level n Investment in tangible goods n Wary outlook 10 © 2008 Pearson Prentice Hall

Organizing to “Be Global, Act Local” n Colgate-Palmolive n Primary structure is geographic n

Organizing to “Be Global, Act Local” n Colgate-Palmolive n Primary structure is geographic n CEO oversees centralized operations n Levi Strauss n Allows managers to act independently n Keeps some centralized control, but decentralizes control of foreign subsidiaries 11 © 2008 Pearson Prentice Hall

Management Focus: Proctor and Gamble’s Structure n P&G/Gillette merger: Gillette adopts P&G’s organizational structure

Management Focus: Proctor and Gamble’s Structure n P&G/Gillette merger: Gillette adopts P&G’s organizational structure n P&G’s structure: n Global Business Unit (GBU) n Market Development Organization (MDO) n Global Business Services (GBS) 12 © 2008 Pearson Prentice Hall

Emergent Structural Forms n Interorganizational networks n Royal Philips Electronics n Intel n Global

Emergent Structural Forms n Interorganizational networks n Royal Philips Electronics n Intel n Global e-corporation network structure 13 © 2008 Pearson Prentice Hall

Emergent Structural Forms n Transnational corporation (TNC) network structure n Asea Brown Boveri (ABB)

Emergent Structural Forms n Transnational corporation (TNC) network structure n Asea Brown Boveri (ABB) 14 © 2008 Pearson Prentice Hall

When is Change Needed? n Clashes among divisions, subsidiaries, or individuals over territories or

When is Change Needed? n Clashes among divisions, subsidiaries, or individuals over territories or customers n Duplication of administrative or personnel services, sales offices, account executives n An increase in overseas customer service complaints 15 © 2008 Pearson Prentice Hall

When is Change Needed? n A shift in operational scope n Conflict between overseas

When is Change Needed? n A shift in operational scope n Conflict between overseas and domestic staff n Centralization leads to excessive and, thus, misused or misunderstood data n Unclear reporting relationships 16 © 2008 Pearson Prentice Hall

Direct Coordinating Mechanisms n Mc. Donald’s in Moscow n Problem: Quality control n Solution:

Direct Coordinating Mechanisms n Mc. Donald’s in Moscow n Problem: Quality control n Solution: Built processing plant in Moscow and provided managerial training n Other options: Visits by head-office personnel and regular meetings 17 © 2008 Pearson Prentice Hall

Indirect Coordinating Mechanisms n Examples: sales quotas, budgets, and financial tools and reports n

Indirect Coordinating Mechanisms n Examples: sales quotas, budgets, and financial tools and reports n Three financial statements n One for accounting standards in host country n One for the standards in the home country n One for consolidation 18 © 2008 Pearson Prentice Hall

The Appropriateness of Systems n Where are top managers from? n US individualism vs.

The Appropriateness of Systems n Where are top managers from? n US individualism vs. Japanese collectivism 19 © 2008 Pearson Prentice Hall

The Role of Information Systems n US MNCs monitor via specific functional reports n

The Role of Information Systems n US MNCs monitor via specific functional reports n Inaccurate information, different norms, MIS adequacy n Noncomparability of performance data 20 © 2008 Pearson Prentice Hall

Evaluation Variables across Countries n Adjust statements to reflect variables unique to each country

Evaluation Variables across Countries n Adjust statements to reflect variables unique to each country n Take nonfinancial measures into account 21 © 2008 Pearson Prentice Hall