Organization
Acer’s Organizational Evolution
Stage 1: CentralizationStage 2: DecentralizationStage 3: Global MatrixStage 4: Global Business UnitsStage 5: Separation of DMS from
ABO
Stage 2: Decentralization
• Separation SBUs and RBUs
• Client-Server model
• Fast food model
• “21 in 21”
Pros and Cons of Stage 2
Pros: • More local initiative • Better adaptation to local marketsCons:• Lack of vertical coordination• Lack of horizontal coordination• Duplication• Competition
Stage 3: Global Matrix
Effort at solving coordination problems of stage 2
But slow decision making
Lines of Business
PCs PeripheralsSBU/RBU
AA
AE
ACLA
ACI
Semiconductors
IPG
AP
Other Business
Stage 4: Six GBUs
• AIPG (IP + Europe and US RBUs)• Acer Peripherals• Acer International Service Group (ACI
+ ACLA RBUs)• Acer Sertek• Acer Digital Services• XBUs
Pros and Cons of GBUs
• Better vertical and horizontal coordination
• Interference between OEM and branded operations
Stage 5
• Acer Brand Operations
• Acer Design, Manufacturing and Service
• Holding and Investment Business
Adaptation/Standardization dilemma
Adaptation = duplication = high cost but high price
Standardization = poor fit = low cost but low price
Decentralization
• Good when locals know more than HQ
• Encourages initiative
But
• Suboptimization– Duplication
– Competition
Centralization
• Good when HQ knows better than the locals
But
• Low incentives
• Poor local adaptation
Choice between centralization and decentralization depends onProduct
Target Market
Experience
Four interdependent levers
• Organizational structure
• Management processes
• HRM policies
• Corporate culture
Fundamentals of Organization Design
• Decomposition principle
• Match between strategy and structure
Decomposition principles
The way the firm is organized determines what employees see and do
Group together strongly interacting units and separate them from weakly interacting units
Link weakly interacting units with soft structures (committees, task forces)
Three dimensions of organizational structure
• Functions
• Areas
• Products
Four structural templates
• Functional
• Area
• Global
• Matrix
• (Mixed)
Organizational Dimensions
Function
Bu
siness/ p
rod
ucts
Management/se
rvices
R&D
Marketing
Manufacturing
A
B
C
D
EuropeAmerica
Others
Asia Geography
Fragmented Structure
A CB D
Products
Countries
France
Netherlands
Belgium
Germany
Fragmented Structure
• Result from frequent acquisitions
• Little coordination at area level
• Little coordination at product level
Functional Structure
A CB D
Functions
Countries
France
Netherlands
Belgium
Germany
Functional Structures
• Single product manufactured and sold the same way in all countries
• High economies of scale
• Low volume
Area Structure
A CB D
Products
Countries
France
Netherlands
Belgium
Germany
Area Structure• Advised if..
– products have similar technologies and similar end users in a given area
– need to adapt all products to each area– potential product scale economies are low
• Pros and cons– good adaptation to local conditions– good interface with local stakeholders– lack of inter-country coordination– give up product scale economies
Product Structure
A CB D
Products
Countries
France
Netherlands
Belgium
Germany
Product Structure
• Advised if..– Products require different
technologies and have different end users
– No need to adapt products to a given area
– Potential scale economies are large
Product Structure
• Pros and cons...– Captures scale economies– Worldwide product consistency– Ethnocentric bias– Not responsive to local-only opportunities– Lack of coordination and potential duplication
within a country– Poor interface with local stakeholders
Mixed Structure
A CB D
Products
Countries
France
Netherlands
Belgium
Germany
Mixed Structure
• Advised if...–Some products require adaptation
to areas while others do not
Matrix Structure
A CB D
Products
Countries
France
Netherlands
Belgium
Germany
Lines of Business
PCs PeripheralsSBU/RBU
AA
AE
ACLA
ACI
Semiconductors
IPG
AP
Other Business
Matrix Structure
• Advised if..– Products benefit at the same time from
adaptation to areas and rationalization across areas
• Pros and cons– Makes it possible to choose for each
product the precise mix of adaptation and rationalization
– Confusion, conflict and paralysis as some managers have two bosses
Strategy and Structure
Strategy
Standardization
Adaptation
Standardization for some products, adaptation for others
A bit of both for all
Structure
Product divisions
Area divisions
Mixed
Matrix
Management Processes
• Information systems–E.g. Citibank
• Strategic Plan
• Budgeting
• Compensation
HRM policies
• Local vs. Expatriate Managers
• National or Multicountry careers
Culture
• Language
• Values
Organizational Evolution of MNEs
• Ethnocentric
• Polycentric
• Geocentric
Conclusion
• Everything is a tradeoff
• Organization must change –as conditions change
–as strategies change