The organizational context Figure 2 1 Management demands

The organizational context

Figure 2 -1: Management demands of international growth

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 normative

Figure 2 -2: Stages of internationalization

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

Figure 2 -3: Export department

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

Figure 2 -4: Sales subsidiary

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

Figure 2 -5: International division

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

Figure 2 -6 a: Global product division Figure 2 -6 b: Global area division

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

Figure 2 -7: The matrix

Problems with the Matrix Bartlett and Ghoshal • Dual reporting Ø Leads to conflict and confusion Ø Creates informational logjams • Proliferation of communication Ø Produce turf battles and loss of channels accountability • Overlapping responsibilities • Barriers of distance, Ø Make it virtually impossible to resolve conflicts and clarify language, time and confusion culture

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

Figure 2 -10: Control mechanisms

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)

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

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