Chapter 5 Chapter 5 Global Organization Global Organization Design Design
Chapter 5Chapter 5
Global Organization Global Organization DesignDesign
Motivations for Global Motivations for Global ExpansionExpansion
• Economies of scale• Economies of scope• Low-cost production factors
Economies of ScaleEconomies of Scale
• The property whereby long-run average total cost falls as the quantity of output increases
Economies of ScopeEconomies of Scope
• Scope : the number and variety of goods and services a company offers.
• Increase a company’s market power and synergy
• Ex : Bancassurance
Low-Cost Production Low-Cost Production FactorsFactors
• Opportunity to obtain raw materials, labor, and other resources (reduced government restrictions) at the lowest possible cost.
Stages of InternationalStages of International Development Development
• Domestic stage• International stage• Multinational stage• Global stage
Domestic StageDomestic Stage
• Domestically oriented• Managers are aware of the
global environment.
International StageInternational Stage
• Takes exports seriously
• Begins to think multi -domestically
Multinational stageMultinational stage
• Extensive experience in the international markets
• Business units scattered around the world
Global stageGlobal stage
• Stateless corporations
Designing Structure to Fit Designing Structure to Fit Global StrategyGlobal Strategy
Global StandardizationGlobal Standardizationvs. vs.
Local OpportunitiesLocal Opportunities
Globalization StrategyGlobalization Strategy
Products are standardized across national markets
Decisions regarding business-level strategies are centralized in the home office
e.g. Boeing, Intel
Advantages Disadvantages- Economies of scale efficiencies- Save costs- Faster introduction of products- Coordinating prices- Eliminating overlapping facilities
- Services are less suitable for globalization (advertising, marketing)- Different customs and habits throughout the countries- Economic and social changes
Multidomestic StrategyMultidomestic Strategy
Strategy and operating decisions are decentralized.
Products and services are tailored to local markets.
Differentiation and Customizatione.g. Pizza Hut
Designing Structure to Fit Designing Structure to Fit Global StrategyGlobal Strategy
Forces forGlobal
Integration
Forces forNational
Responsiveness
International DivisionInternational Division
International Division = Other major departments
Export department International division Product/Geographic Matrix Structure
Domestic Divisions International Divisions- Organized along functional or product lines- Lines of functional hierarchy tends to extend too long- Therefore, subdivide the org. into smaller units
- Organized according to geographic interests- Own hierarchy to handle business
Global Product Division Global Product Division StructureStructure
Standardization & Centralized
Division manager’s responsibility- Planning, organizing, and controlling functions and distributions of productions throughout the world
Global Product Division Global Product Division StructureStructure
Advantages Disadvantages
- Economies of scale- Effective way to manage a variety of business and products- A broad perspective on competition- Respond more rapidly to a changing global environment- Can save the cost by standardizing activities and products
- Compete instead of cooperating - Some countries are ignored by product managers- Doesn’t know what each customer wants throughout the world
Globalization Strategy
Global Geographic Division Global Geographic Division StructureStructure
Local responsiveness & Decentralized- Divides world into geographic region- Each division has full control of functional activities within its geographic area- Local managers (regional manager) have authority
Global Geographic Division Global Geographic Division StructureStructure
Advantages DisadvantagesIt’s good for a company which has…
- Mature product lines and stable technologies- Low-cost manufacturing within countries- A strategy to customize the products to meet specific needs(for marketing and sales as well)
It is difficult to…
- Plan on a global scale (R&D)- Transfer new domestic tech. and products to int’l markets- Rapidly introduce products developed offshore into domestic markets- Track and maintain control of costs- Duplication of line and staff managers across regions
Multidomestic Strategy
Global Matrix StructureGlobal Matrix Structure
Both Globalization and Multidomestic Strategy
It works best….- When pressure for decision making balances the interests of both product standardization and geographic localization
- When coordination to share resources is important
Building Global CapabilitiesBuilding Global Capabilities
The Global Organizational The Global Organizational ChallengeChallenge
Com
plexity and D
ifferentiationNeed for
IntegrationTransfer of
Knowledge and
Innovation
Increased Complexity and Increased Complexity and DifferentiationDifferentiation
• Greater level of internal and external complexity than on the domestic front
• Differentiation – new positions and departments to cope with specific sectors in the environment
• Meet local needs and preferences
Need for IntegrationNeed for Integration
Integration – the quality of collaboration across organizational units
Operating units can be divided by: goals, work attitudes, geographic distance, time differences, cultural values, language.
Transfer of Knowledge and Transfer of Knowledge and InnovationInnovation
• Learn from their international experiences by sharing knowledge and innovations across the enterprise
• Systems for sharing knowledge and innovation
Main problems creating systems for sharing knowledge and innovation:
• Language, culture• Managers don’t appreciate value of
organizational integration, or views knowledge as power to gain influential position in firm
• Knowledge is in the minds of employees
Global Coordination Global Coordination MechanismsMechanisms
Expanded Coordination Roles
Global Teams
Headquarters Planning
Global TeamsGlobal Teams
Global Teams – cross border work groups made of multi skilled, multinational members whose activities span multiple counties.
Two main types: intercultural and virtual global teams.
Same problems as making systems for knowledge and innovations sharing.
Headquarters PlanningHeadquarters Planning
• Headquarters take an active role in planning, scheduling and controlling of global organization.
• Control through centralized systems
Expanded Coordination Expanded Coordination RolesRoles
• Managers responsible for coordinating across countries
• More responsibilities for functional managers
Three National Approaches to Three National Approaches to Coordination and ControlCoordination and Control
Centralized Coordination in
Japanese Companies
European Firms: Decentralized Approach
The United States: Formalization
Centralized Coordination in Centralized Coordination in Japanese CompaniesJapanese Companies
• Coordination mechanisms that rely on centralization
• Activities centralized in home country
• Strong structural linkages
• Comon to all Asia countries
European FEuropean Firirmsms:: DecentralizedDecentralized
• Units have a high level of independence
• Rely on strong mission, shared values and informal personal relationships
• Each international unit focuses on its local market
The United States: The United States: FormalizationFormalization
• Responsibility is delegated international divisions
• Management control systems (policies, standarts, procedures)
• Limited flexibility
The Transnational Model of Organization
Brands of European carsBrands of European carsVolkswagen GroupVolkswagen GroupSkoda autoSkoda auto
A bit of historyA bit of history
• Established in 1895 as bike manufacture (Laurin & Klement)
• 1905 first car produced• 1924 Skoda and Laurin & Klement merged• 1991 become brand of Volkswagen group• 1996 “Big change”• 2008-2009 growing during financial crisis
Skoda cars todaySkoda cars today
SummarySummary
What gave 19 years of being part of global organization?
• 8 factories around world (Czech Republic, Ukraine, India, Bosnia and Herzegovina, Kazakhstan, China and Russia)
• Recovered good name of company• Growing sales, despite economical
crisis in Europe
Thank You
Thank You
We hope it was interestin
g
We hope it was interestin
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