Lecture 2 Developing a Global Transnational Organization (TNO) 2 Copyright © 2012 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin
Jan 15, 2016
Lecture 2
Developing a Global Transnational Organization (TNO)
2
Copyright © 2012 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin
Initial questions:
1. Is it possible to apply one standard organizational structure in all global transnational organizations? Why or why not?
2. What factors should be taken into account for developing a global transnational organization?
3. How can cultural differences affect global transnational organization?
2-2Copyright © 2011 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin
Archetypes of Organizational Structure
• Competitive advantage is shaped by country of origin, time of expansion, and nature of leadership
• The challenge is to build new capabilities while protecting existing strengths
• Three archetypes can be identified…
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Pre-WW II European Empires: Dominance of Multinational Model
Decentralized Federation Organization...
…Strategy of National Responsiveness• Expanded abroad in a period of high international
barriers; Preferential access to foreign empire markets• Organization developed as a portfolio of national
companies; heritage of family management, personal control
• Strategy based on understanding and responding to national markets
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Post-WW II American Expansion: Dominance of International Model
…Strategy of Knowledge Transfer
Coordinated Federation Organization...
• Expanded abroad in a time of economic reconstruction: large, advanced home market as knowledge source
• Organization built on strong links to the parent company based on transfer of expertise: heritage of professional management, systems control
• Strategy based on transferring parent company’s leadership in technology, marketing, and other skills
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Late XX-th Century Japanese Challenge: Dominance of Global Model
• Expanded abroad in a period of falling trade barriers: newly added capacity and government industrial policy as assets
• Organization grew as dependent foreign units tightly controlled from the center: heritage of culturally dependent management practices dominated by group processes
• Strategy based on capturing global scale economies
Centralized Hub Organization…
…Strategy of Global Efficiency
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Administrative HeritageMeets Industry Characteristics
Telecom Switching
Matsushita
GE
Philips
NEC
Ericsson
Kao
P&G
Unilever
Forces for Global Integration
Forces for National Responsiveness
ConsumerElectronics
BrandedPackage Goods
Building and Managingthe Transnational Organization
• The transnational organization attempts to resolve the inherent limitations of the three organization archetypes
• Three key characteristics:• Builds and legitimizes multiple internal
perspectives• Dispersed and interdependent physical assets
and capabilities• Robust and flexible integrative process
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Characteristics of the Transnational OrganizationTHREE-DIMENSIONAL MODEL
GlobalEfficiency
GlobalEfficiency
NationalResponsiveness
NationalResponsiveness
Worldwide Innovation& Learning
Worldwide Innovation& Learning
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Organizational Configurations
Decentralized Federation
The Integrated Network
Centralized Hub
Coordinated Federation
ILLUSTRATION: EXAMPLE OF GM STRATEGIC RECONFIGURATION
GM (General Motors) before and after bankruptcy (2008)
Pre-bankruptcy strategy: Decentralized Federation Model (Multinational)- Multiple federated units, relatively loose control, subsidiaries collected through several acquisitions between 1925 - 1931 (Opel, Vauxhall) and 2002 (Daewoo Motors)- Estimated weights of strategic components (Bennett, 2012) National responsiveness 70% Global efficiency 15% Worldwide innovation 15%
Post-bankruptcy strategy (2009 -…): Coordinated Federation Model (Global/Internat)- Reduced number of brands (only four: Chevrolet, Cadillac, GMC and Buick); orientation to joint ventures- Reduced number of executives (by about 35%); globalization of manufacturing- Estimated weights of strategic components (balanced)
National responsiveness 35%Global efficiency 40%Worldwide innovation 25%
Bennett, M., The global strategy of General Motors, MTU Project report BA5780, Houghton 2012
The Transnational:A New Type of Organization
• A new structural anatomy• Redistributing assets and responsibilities
• A new process physiology• Redefining information flows and
relationships
• A new cultural psychology• Readjusting mentalities and beliefs
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Managing the Process of Change: Traditional Model
Change in formal structure/responsibilities
reshapes
redefines
Organizational processes/relationships
Individual attitudes/mentalities
• Classic change process driven by structural reconfiguration
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Managing the Process of Change: Emerging Model
Change in individual attitudes and mentalities
Changes in interpersonal relationships and processes
Change in formal structure and responsibilities
• Change process initiated by changes in attitudes and mentalities
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Building & Maintaining MultipleStrategic Capabilities
BusinessManagement
Area Management
FunctionalManagement
WorldwideInnovation & Learning
Global Efficiency
NationalResponsiveness
Requires Protecting the Legitimacy of Multiple Management Tasks
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Organizational CharacteristicsMultinational Global International Transnational
Configuration of assets and capabilities
Decentralized and nationally self-sufficient
Centralized and globally scaled
Core competencies centralized, others decentralized
Dispersed, interdependent and specialized
Role of overseas operation
Sensing and exploiting local opportunities
Implementing parent company strategy
Adapting and leveraging parent company competencies
Differentiated contributions by national units to integrated worldwide operations
Development and diffusion of knowledge
Knowledge developed and retained within each unit
Knowledge developed and retained at the center
Knowledge developed at the center and transferred to overseas units
Knowledge developed jointly and shared worldwide
SUMMARY
1. Historical view and three archetypes of TNO organizational structures
2. Characteristics of TNO: global efficiency, national responsiveness, worldwide innovation
3. Building multiple strategic capabilities
4. Four types of organizational configuration and strategy