final review
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CH14-OrganizationofInternationalBusiness1.pptxOrganization of International Business
Chapter 14
Organizational architecture
By organizational architecture, we mean the totality of a firm’s organization, including formal organizational structure, control systems and incentives, processes, organizational culture, and people.
Three conditions
the different elements of a firm’s organizational architecture must be internally consistent.
the organizational architecture must match or fit the strategy of the firm—strategy and architecture must be consistent.
the strategy and architecture of the firm must not only be consistent with each other but also make sense given the competitive conditions prevailing in the firm’s markets—strategy, architecture, and competitive environment must all be consistent
Defining the structure
the formal division of the organization into subunits such as product divisions, national operations, and functions
the location of decision-making responsibilities within that structure (e.g., centralized or decentralized)
the establishment of integrating mechanisms to coordinate the activities of subunits, including cross-functional teams and pan-regional committees
Systems to support structure
Control systems are the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits
Incentives are the devices used to reward appropriate managerial behavior. Incentives are very closely tied to performance metrics
Processes are the manner in which decisions are made and work is performed within the organization. Examples are the processes for formulating strategy, for deciding how to allocate resources within a firm, or for evaluating the performance of managers and giving feedback
Organizational culture refers to the norms and value systems that are shared among the employees of an organization. Just as societies have cultures (see Chapter 4 for details), so do organizations.
BENEFITS OF CENTRALIZATION
centralization can help ensure that decisions are consistent with organizational objectives
centralization can give top-level managers the means to bring about needed major organizational change (management control)
Facilitates firm-wide integration and coordination
Reduces costs redundancies – specialized functions such as legal, administrative and accounting
Benefits of de-centralization
decentralization permits greater flexibility—more rapid response to environmental changes— because decisions do not have to be “referred up the hierarchy” unless they are exceptional in nature
motivational research favors decentralization
top management can become overburdened when decision-making authority is centralized (reduces bottlenecks)
decisions are made closer to the spot by individuals who (presumably) have better information than managers several levels up in a hierarchy
Localization
Considerable independence to make local decisions
Local responsiveness
Low need for coordination across markets
Global standardization strategy
Worldwide “product division” structure.
Need for integration is “high“
International division handles all international sales
Transnational strategy
Both Product and Geographic areas have considerable influence. Medical, Aviation, Energy, and transportation.
Matrix
Cross-functional management structure – (considered to be Matrix)
Less hierarchical
Composed of cross-functional teams
Purpose – to maximize innovation
