Advance Topics in Change Management Lecture 28: Designing International Organization Structures.

Advance Topics in Change Management

Lecture 28: Designing International Organization Structures

Objectives

• To discuss the different structures that MNCs can adopt

• To discuss the advantages and disadvantages of those structures

MOTHER-DAUGHTER STRUCTURE

MNCs WITH AN INTERNATIONAL DIVISION

WORLDWIDE FUNCTIONAL STRUCTURE

Questions

• What are the advantages of a world-wide functional structure?

• What are the disadvantages of a world-wide functional structure?

WORLDWIDE FUNCTIONAL STRUCTURE

• Similar advantages and disadvantages to domestic functional structures (economies of scale within functions, skill development, but slow response and decision-making).

• But less effective in many MNCs: inability to adapt readily to the greater local diversity of business environments.

• Typically found in firms with narrow product ranges in relatively stable technical environments where technical excellence is crucial.

WORLDWIDE GEOGRAPHIC GROUPS

Question

• What sort of industry characteristics might lead MNCs to establish world-wide geographic groups?

WORLDWIDE GEOGRAPHIC GROUPS

• Typically found in low technology industries where sales and marketing are key functions and vary regionally. Product range diversity tends to be limited in such MNCs and products are often modified extensively to suit local markets.

WORLDWIDE GEOGRAPHIC GROUPS An Example: Unilever

• Unilever Executive• is responsible for managing profit and loss, and delivering growth

across our regions, categories and functions.• Paul Polman - Chief Executive Officer• James A Lawrence - Chief Financial Officer• Sandy Ogg - Chief HR Officer

• Professor Geneviève Berger - Chief Research & Development Officer

• Manvinder Singh (Vindi) Banga - President Foods

• Douglas Anderson Baillie - President of Western Europe • Harish Manwani - President, Asia Africa• Michael B. Polk - President, Americas

Worldwide Product Structure

Questions

• When do you think that a world-wide product structure would be appropriate?

• Why do you think that it might be appropriate under those conditions?

Worldwide Product Structure

• Often found in large MNCs that have a variety of diverse product ranges that need little adaptation for different markets, and where technological scale economies are important.

Worldwide Product Structure An Example: Lafarge

• Chairman and Chief Executive Officer• Chief Financial Officer• Vice-President Organization and Human

Resources• Vice-President Strategy, Business Development

and Public Affairs• Vice-President Communications

• Co-President of the Cement Business * 3• Co-President of the Aggregates and Concrete

Business * 2• President of the Gypsum Business

Worldwide Matrix

Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment

Questions

• What information on the preceding slide suggests that Proctor and Gamble has a matrix structure?

• What reasons lie behind this choice of structure?

Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment

Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment

Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment

Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment

Question

• Take a look at the next two slides on Google and Microsoft.

• Why do they appear to have different organizational structures?

Google’s Executive Officers• Eric Schmidt, Chairman of the Board and Chief Executive

Officer • Sergey Brin, Co-Founder and President, Technology • Larry Page, Co-Founder and President, Products • Nikesh Arora, President, Global Sales Operations and

Business Development • Shona L. Brown, Senior Vice President, Business Operations • David C. Drummond, Senior Vice President, Corporate

Development and Chief Legal Officer • Alan Eustace, Senior Vice President, Engineering and

Research • Patrick Pichette, Senior Vice President and Chief Financial

Officer • Jonathan Rosenberg, Senior Vice President, Product

Management

Microsoft’s Senior Leaders• Steve Ballmer Chief Executive Officer• Lisa Brummel Senior Vice President, Human Resources• Jean-Philippe Courtois President, Microsoft International• Kurt DelBene President, Microsoft Office Division• Peter Klein Chief Financial Officer• Andrew Lees President, Mobile Communications Business• Qi Lu President, Online Services Division• Mich Mathews Senior Vice President, Central Marketing Group• Don A. Mattrick President, Interactive Entertainment Business• Bob Muglia President, Server and Tools Business• Craig Mundie Chief Research and Strategy Officer• Ray Ozzie Chief Software Architect• Rick Rashid Senior Vice President, Research• Eric Rudder Senior Vice President, Technical Strategy• Steven Sinofsky President, Windows and Windows Live Division• Brad Smith (LCA) General Counsel and Senior Vice President, Legal and

Corporate Affairs• B. Kevin Turner Chief Operating Officer• Hank Vigil Senior Vice President, Consumer Strategy and Partnerships

Question

• Look at the next slide on Subway.

• What does the information tell us about Subway?

Subway’s Departments• Franchise Sales • New Business Development• Subway Real Estate Corp• Store Design• Franchisee Services• Operations• Creative Services• Customer Care• Public and Community Relations• Publications • Profit Building & Local Marketing• Meetings and Events• Research & Development• International

Subway Stores Locations – Selected Countries

Country # of Stores Country # of Stores

  AUSTRALIA 1301     MEXICO 541

  BRAZIL 740     NEW ZEALAND 239

  CANADA 2704     RUSSIAN FEDERATION 298

  CHINA 262     SAUDI ARABIA 46

  FRANCE 303     SINGAPORE 94

  GERMANY 613     UNITED KINGDOM 1426

  INDIA 242     UNITED STATES 24728

  JAPAN 293   TOTAL 35874

US as a percentage of Total 69%

ERNST AND YOUNG’S PRE-2008 ORGANIZATIONAL STRUCTURE: MOTHER-

DAUGHTER (FRANCHISING)

Questions

• Why did Ernst and Young (and other auditors) have this company structure?

• What are the disadvantages of such a structure?

ERNST AND YOUNG’S 2008 ORGANIZATIONAL STRUCTURE: WORLDWIDE GEOGRAPHIC GROUPS

Intended Consequences of New Structure

• Facilitate greater consistency in service quality• Meet the demands of multi-national customers

better• Streamline processes and programmes within

Ernst and Young• Promote learning between partnerships• Bring ‘smaller country practices together with

larger ones’ to allow for ‘greater sharing of resources and knowledge.

First SolarQuick Facts and Figures• Formed in 1999 • Largest manufacturer of thin film solar modules• Fastest energy payback time of any PV technology • Common stock is traded on the NASDAQ Stock Market• Number of employees: 5,500+• Headquarters: Arizona, US• Manufacturing facilities: Germany, Malaysia, and the US• Sales and Marketing: Australia, France, Germany, Spain,

and the US• Project development: Canada, China, and the US• Government affairs: Belgium, Germany, and the US

Questions

• How might first Solar be structured?

• What are your reasons for thinking this?

First Solar – Executive Management• Executive Chairman• Chief Executive Officer• President• Executive Vice President, Human Resources• Executive Vice President, General Counsel

Corporate Secretary• Executive Vice President, Marketing and Product

Management• Executive Vice President, Public Affairs• President, Utility Systems and Chief Financial Officer• Chief Accounting Officer• Chief Technology Officer• Vice President for Sales, Managing Director of First

Solar GmbH

FORMS OF INTERNATIONAL CO-ORDINATION IN FOUR TYPES OF PROFESSIONAL SERVICES FIRMS

Reciprocity-Based International

Networks of Firms

Collegially Co-ordinated

International Firm

Financially Controlled

International Firm

Hierarchically Controlled

International Firm

Type of International Governance

N/A Committee Public limited company

Private company

Strength and Type of Control Mechanisms

Weak (social) Weak, (bureaucratic) Relatively strong, financial

Relatively strong, bureaucratic

Focus of Training

Very limited training, if any

Consistency Limited training Firm-specific technical and behavioural standards

Degree of Standardization of Routines

Very limited Very limited Limited Relatively high

Career systems Specific to individual firms in network

Firm specific, ‘up or out’ system

Industry specific, high mobility across firms

Firm specific, ‘up or out’ system

Aims of Employees

Become a partner Short-term financial rewards

Become a partner

Conclusions

• There are similarities between the advantages and disadvantages associated with international organizational structures and corresponding national organizational structures that we examined earlier

• However, international structures are likely to be more complex as the organization faces a wider range of challenges (different product markets, governments, and regulations).