c hapter 14

1. chapter 14 international organization design and control

2. Chapter Objectives 1 • Define and discuss the nature of international organization design and identify and describe the initial impacts of international business activity on organization design • Identify and describe five advanced forms of international organization design and discuss hybrid global designs 14-2

3. Chapter Objectives 2 • Identify and describe related issues in global organization design • Explain the general purpose of control and the levels of control in international business • Describe how international firms manage the control function 14-3

4. Organization Design Organization design (or organization structure) is the overall pattern of structural components and configurations used to manage the total organization. 14-4

5. Factors Affecting Design Country culture Size Environment Strategy Technology 14-5

6. Functions of Firm Design • Allocates organizational resources • Assigns tasks to its employees • Informs employees about firm’s rules, procedures, and expectations • Collects and transmits information 14-6

7. Types of Knowledge Affecting Design Area knowledge Product knowledge Functional knowledge 14-7

8. Forms of Global Organization Design Product Area Matrix Functional Customer 14-8

9. Managerial Philosophies Affecting Design Ethnocentric Polycentric Geocentric 14-9

10. Global Product Design The global product design assigns worldwide responsibility for specific products or product groups to separate operating divisions within a firm. 14-10

11. Figure 14.1 Samsung’s Global Product Design 14-11

12. Advantages Managerial expertise Production efficiencies Production flexibilities Flexible response to change Marketing flexibility Disadvantages Unnecessary duplication Coordination and cooperation difficult Global Product Design 14-12

13. The Danone Group uses a global product design. 14-13

14. Global Area Design The global area design organizes the firm’s activities around specific areas or regions of the world. 14-14

15. Figure 14.2 Global Area Design 14-15

16. Firm may sacrifice cost efficiencies Diffusion of technology is slowed Design unsuitable for rapid technological change Duplication of resources Coordination across areas is expensive Disadvantages of Global Area Design 14-16

17. Global Functional Design The global functional design calls for a firm to create departments or divisions that have worldwide responsibility for the common organizational functions—finance, operations, marketing, R&D, and human resources management. 14-17

18. Figure 14.3 Global Functional Design 14-18

19. Advantages Transference of expertise Highly centralized control Focused attention of key functions Disadvantages Practical only when firm has few products or customers Coordination difficult Duplication of resources Global Functional Design 14-19

20. Global Customer Design The global customer design is used when a firm serves different customers or customer groups, each with specific needs calling for special expertise or attention. 14-20

21. Figure 14.4 Eastman Kodak’s Global Customer Design 14-21

22. Global Matrix Design A global matrix design, the most complex of designs,is the result of superimposing one form of organization design on top of an existing, different form. 14-22

23. Advantages Brings together the functional area and product expertise Promotes organizational flexibility Provides access to all advantages of other designs Disadvantages Appropriate for firms with many products and unstable environments Employees accountable to multiple supervisors Decisions may take longer Global Matrix Design 14-23

24. Figure 14.5 A Global Matrix Design 14-24

25. Global Hybrid Design Most firms create a hybrid design, rather than pure design, that best suits their purposes, given the firms’ size, strategy, technology, environment, and culture, and blends elements of all the designs discussed. 14-25

26. Figure 14.6 Nissan’s Hybrid Design 14-26

27. Coordination Coordination is the process of linking and integrating functions and activities of different groups, units, or divisions. 14-27

28. Control Control is the process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals. 14-28

29. Control Function • Process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals • Three levels • Strategic • Organizational • Operations 14-29

30. Figure 14.7 Levels of International Control 14-30

31. Figure 14.8 Steps in International Control 14-31

32. Essential Control Techniques Accounting systems Procedures Performance ratios 14-32

33. Reasons for Resistance to Control Overcontrol Inappropriately focused control Increased accountability 14-33