1 Chapter 13 Organization, Implementation, and Control.

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Chapter 13

Organization, Implementation, and

Control

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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.

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Organizational StructureCompanies 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.

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Organizational DesignsTypes of structures used by companies to manage foreign activities:

Little/No FormalOrganization

Little/No FormalOrganization

International DivisionInternational Division

Global OrganizationsGlobal 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.

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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.

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Global Organizational StructuresTypes: 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

CustomerStructure

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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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ImplementationLocus 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 firm’s 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.

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Internal CooperationSuccess 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.

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Internal Cooperation(contd.)

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

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Country OrganizationsRoles:

Strategic Leader

Implementor

Contributor

Black Hole

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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.

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Country OrganizationsImplementor

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.

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Controls

Internal benchmarking is of great importance in today’s 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.

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Cultural Control

Requires personal interaction.

Requires careful selection and training of corporate personnel.

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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.