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Organization of the Multinational Firm

Organization of the Multinational Firm. VK Int. Unternehmensführung SS 2005 Elmar Kiesling, 0008665 Irmgard Krebner, 9804601 Padmini Ranawat, 9905070. Outline. Introduction Structural Designs for Global Operations Home-based vs. heterarchical MNC Multidivisional & Network Form (M&N)

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Organization of the Multinational Firm

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  1. Organization of the Multinational Firm VK Int. Unternehmensführung SS 2005 Elmar Kiesling, 0008665 Irmgard Krebner, 9804601 Padmini Ranawat, 9905070

  2. Outline • Introduction • Structural Designs for Global Operations • Home-based vs. heterarchical MNC • Multidivisional & Network Form (M&N) • The Transnational form • Case Study: Acer • A glimpse at the future: 2 scenarios • Discussion Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  3. Global trends and developments • Intense competition among developed countries • Increasing competition through newly industrialized Asian countries • Shift towards market economies (e.g. Eastern Europe, China) • Power blocks (e.g. European Union, Yen-Block, NAFTA) Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  4. Today´s Challenges To enable organizations to compete effectively in this global environment MNC´s have to: • be at least as good as a local firm providing similar products or services • approach new organization design possibilities Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  5. Stages of International Development Global Multinational International Domestic Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  6. Global Transnational International explorer Multidomestic International corporate structure model High Economies of global standard-ization and size Low High need for localization Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  7. Structural Designs for Global Operations Global product structure • Product divisions responsible for global operations • Uses globally based advantages • Overlook of locally advantages Geographic area structure • Each region has functional activities • Exploits local advantages Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  8. Structural Designs for Global Operations Matrix structure • balances global product and local market concerns • Problems: • complexity • dual reporting structure • confusion over responsibility and decision making • Solution: 3 C’s • clarity of firm’s basic objectives • continuity in commitment to those objectives • consistency in the work of divisions together Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  9. Structural Designs for Global Operations Horizontal organization • Structured around workflows and processes • Flat vertical hierarchy • Management tasks delegated to lowest level • Customer-driven Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  10. Horizontal organization structure Decision making: • lateral decision processesdirect contact, temporary task forces, self-directed teams, … • horizontal network flexible responding to external changes • common decision premises shared set of values Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  11. Horizontal organization structure Differentiation from matrix structure: • Coordination more mixed and flexible • Internal flexible processes link system elements • Latterly resolution of conflicts Advantages: • Simultaneously achieving global and local advantages • reduced barriers among departments Problems: • Time intensive coordination of decisions • „Being stuck in the middle“ Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  12. Home-based vs. heterarchical MNC • Home-based: • Core functions (strategic decision making, R&D etc.) in a limited geographic area • Links to • other firms • local research and education facilities • governmental bodies • Heterarchical: • many centers of different kinds • combining diverse technologies worldwide Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  13. Home-based MNC • „Simple“ home-based MNC • Home base of all businesses in home country • Selective tapping • Core technology in home base • Selective tapping of international environment for support • Multi-home-based MNC • Separate bases for individual lines of businesses • Often connected to mergers and acquisitions Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  14. Heterarchical MNC • Many centers: traditional HQ functions geographically dispersed • Holographic structure: information stored in each part of the organization • Interdependencies: tasks of any unit complexly related to the tasks of other units • „firm as a brain“: thinking not only restricted to one exclusive center, but goes in whole enterprise => global competitive advantage Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  15. Multidivisional & Network Form (M&N) Contrasts between the multidivisional and the network : Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  16. The Transnational form • Network form:philosophy of responsiveness, flexibility and ability to learn of a MNC in a borderless world • Objective: respond to the MNC´s central dilemma of having to be globally integrated but locally responsive at the same time Multidomestic form Global form Transnational form Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  17. The Transnational form Asymmetricalorganizational form: • Multilateral communications between all levels and layers • Resources, responsibilities and decision-making dispersed across all types of units Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  18. Case Study: Acer Group • Taiwanese company founded 1979 • PC and computer component manufacturer • 1992: „global brand, local touch“ • First corporate re-engineering • Decentralized its organization towards network structure Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  19. Client-server organization (1994) RBUs SBUs Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  20. Restructuring 1997-1998 • External challenges: • Direct vendors, price cuts of market leaders • New price war (sub-$1000 PCs) • Internal problems: • Service and support • Serious coordination problems • Redundant functions • Duplicate investments • Inefficient use of enterprise resources. • Lack of IT infrastructure • No common information system Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  21. Organizational structure 1998 1997-98: simplification of organization structure restructuring into 5 core businesses: Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  22. Organizat. structure since 2001 • Flexible, cell based organization structure • Interaction of semi-autonomous firms Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  23. A glimpse at the future: 2 scenarios for 2015 • Elaborated by MIT Scenario Working Group between 1994 and 1997 • Main focus: size of companies Two extreme scenarios for 2015: • Small companies, large networksnearly every task is performed by autonomous teams • Virtual countriesdominance of keiretsu-style alliances Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  24. 1. Small companies, large networks • Linked by fluid networks • Temporary combinations for each project • Importance of electronic markets • Rapid innovation in dynamically changing markets e.g. radical outsourcing in producing athletic shoes, computer displays and software Autonomous and self-organizing teams of 1-10 Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  25. 1. Small companies, large networks Stable communities providing: • health insurance • protection against unemployment and income fluctuation • professional development • sense of belonging Comparable to guilds of pre-industrial times e.g. guilds in film industry Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  26. 2. Virtual countries • Providing job-security, health care etc. • Pervasive role of firms in employees‘ lives • Employee ownership of firms • Employee selection of firm management • Oligopolistic structure in most sectors • Minimal national allegiance e.g. Merger wave Large vertically- and horizontally-integrated firms each with operating companies in almost every industry Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios

  27. Discussion Thank you for your attention!

  28. References • Daft, R. (1998), Organization Theory and Design, Chicago, Chap. 7. • White, R. E., T. A. Poynter (1991), Organizing for World-wide Advantage, in: C. A. Bartlett, Y. Doz, G. Hedlund (eds.), Managing the Global Firm, London, 95- 113. • Söllvell, Zander (1995) Organization of the Dynamic Multinational Enterprise, Int. Studies of Organization and Mangement, 25. 17 - 38. • Segal-Horn & Falkner (1999), The Dynamics of International Strategy, Ch. 9. • Laubacher, R. J., T. W. Malone (1999), Two Szenarios for 21st Century Organizations: Shifting Networks of Small Firms or All-Encompassing ‚Virtual Countries‘, Working Paper, MIT. • Dedrick, J., K. L. Kraemer, T. Tsal (1999), Acer: an IT company learning to use Information Technology to compete, Center for research on IT and organization, University of California

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