Term Project

A. BEYOND STRUCTURAL FIT

Matching organizational strategy to internationalization strategy

1. John Stopford’s Stages Model (see Fig. 4-1):

a. Overview of model

i. Organization structure used varies with level of internationalization.

ii. Uses 2 variables:

· Foreign product diversity

· Foreign sales as % of total sales

b. Types of structures

i. International Division:

· Foreign product diversity – low

· Foreign sales as % of total sales – low

· Used at early stage of expansion

ii. Area Division:

· Foreign product diversity – low

· Foreign sales as % of total sales – moderate to high

iii. Worldwide Product Division:

· Foreign product diversity – moderate to high

· Foreign sales as % of total sales – low

iv. Global Matrix:

· Foreign product diversity – moderate to high

· Foreign sales as % of total sales – moderate to high

· Managers report to 2 bosses

c. Challenges of Global Matrix – reasons for failure:

i. Differences in managers’ priorities and perspectives

ii. Gridlock and logjams caused by dual reporting

iii. Turf battles caused by overlapping responsibilities

iv. Loss of accountability

B. ADMINISTRATIVE HERITAGE

1. Concept: An organization’s ability and willingness to change is influenced by its history and embedded management culture

2. Types of Organizational Models

a. Decentralized Federation

Characteristics:

· Uses a multinational strategy

· Typically European MNEs

· Products and marketing strategies modified to suit individual country market needs

· Subsidiaries operate independently of each other

· Knowledge diffusion: developed and retained in each foreign subsidiary

b. Coordinated Federation

Characteristics:

· Uses an international strategy

· Typically US MNEs

· Foreign subsidiaries free to modify products, etc but dependent on parent company for new products, ideas, etc

· Ethnocentric management attitude

· Knowledge diffusion: developed at parent (center) and transferred overseas

c. Centralized Hub

Characteristics:

· Uses a global strategy

· Typically Japanese MNEs

· Centralized control over quality, product development and manufacturing

· Export-based

· Knowledge diffusion: developed and retained at center.

Continued

C. THE TRANSNATIONAL ORGANIZATION – Organizational Characteristics

Transnational organization should have:

1. Multidimensional Perspective, including

a. Strong national subsidiary management – to keep up with changing local tastes, etc.

b. Global business management – to keep up with global competitors

c. Worldwide functional management – for effective use and transfer of corporate knowledge and expertise.

2. Distributed, Interdependent Capabilities

a. Centralization of expertise is not critical.

b. Subsidiaries allowed to become company’s source of expertise

3. Flexible Integrative Process

a. Flexibility needed to quickly adapt decision-making roles to changes in product, local tastes, etc.