International business

Angela gomez

chapter16.pptx

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International Business

Sixteenth Edition

Chapter 6

The Organization of International Business

Learning Objectives (1 of 2)

16-1 Profile the evolving idea of organization in the MNE

16-2 Interpret classical organization structures

16-3 Interpret neoclassical organization structures

Learning Objectives for the chapter.

Learning Objectives (2 of 2)

16-4 Differentiate the systems used to coordinate international activities

16-5 Differentiate the systems used to control international activities

16-6 Explain the purpose and characteristics of organizational culture

Learning Objectives for the chapter.

Evolving MNE’s

Objective 16-1

Organizing an MNE

Factors to consider

Learning Objective 1: Profile the evolving idea of organization in the MNE.

The hierarchical model has routinely organized MNEs’ operations. For many, it defines work life in the modern-day corporation. Now, market trends, design revolutions, and workplace resets pose both opportunities and challenges.

The growth of global business changes MNEs’ opportunity sets and efficiency frontiers.

The Internet, in developing new workplace arrangements, calls for managing new structural formats.

The evolving nature of work changes the conduct and context of employees’ jobs, whether done at the biggest headquarters or the smallest subsidiary. Change in the nature of work changes the nature of management

Competitive changes and performance expectations alter the social contract between high performance workers and MNEs. Traditional concerns for security, pay, and benefits have expanded to expectations of participating in decision-making, devising solutions to unique problems, and receiving challenging assignments.

Classical Organization Structures

Objective 16-2

Organization Structure

Vertical Differentiation

Centralization

Decentralization

Horizontal Differentiation

Functional

Divisional

Global Matrix

Mixed Structure

Learning Objective 2: Interpret classical organization structures.

The formal arrangement of roles, responsibilities, and relationships in the MNE represents its organization structure.

Centralization (how high up) versus the decentralization (how low down) decisions will be made. The choice of centralization versus decentralization is not an either-or proposition. Some activities spur centralized decision-making, such as configuring value activities worldwide to exploit location economies or rationalize production systems.

Horizontal Differentiation Vertically speaking, MNEs run from top (the CEO) to the bottom (the entry-level worker). Horizontally speaking, MNEs run sideways from function to function, such as research to production to marketing to finance. Horizontal differentiation involves assigning specific tasks to specific people in specific functions.

Functional structure, as depicted in Figure 16.2, arranges the workplace by business functions (i.e., production people work with production people, marketing people work with marketing people, finance people work with finance people.

Divisional Whereas executives specify roles and relationships in a functional structure in terms of inputs (e.g., oil, natural gas, solar, and coal for an energy producer), they use a divisional structure to specify them according to product (e.g., soap, toothpaste, and cosmetics for a consumer products firm) or markets (e.g., North America, Europe, Africa, and Asia).

Global Matrix The worldwide product division structure centralizes decision-making to improve operational efficiencies. Alternatively, the worldwide area structure decentralizes decision-making to improve local responsiveness. The MNE implementing a global strategy, given its emphasis of integration and standardization, would opt for the former, while an MNE implementing a multi-domestic strategy, given its emphasis of adaptation and responsiveness, would opt for the latter. As we saw in Chapter 12, some MNEs implement the transnational strategy, aiming to ingeniously reconcile global integration and local responsiveness. Organizing workflows to implement this strategy directs management’s attention to the global matrix structure.

Mixed Structure Thus, some MNEs combine features of the functional, geographic, and product structures into a mixed structure.

Considerations for Centralization vs. Decentralization

Objective 16-2

Figure 16.1 Factors Affecting Organizing Operations

Learning Objective 2: Interpret classical organization structures.

This figure illustrates the major differences and considerations for a centralization structure versus a decentralized one.

Functional and Divisional Structure

Objective 16-2

Figure 16.2 The Functional Structure

Figure 16.3 The International Division Structure

Learning Objective 2: Interpret classical organization structures.

These figures represent and functional structure and divisional structure.

Matrix Structure

Objective 16-2

Figure 16.6 The Matrix Structure

Learning Objective 2: Interpret classical organization structures.

These figure represents a Matrix structure.

Neoclassical Structures

Objective 16-3

Boundaries versus Boundaryless

Network Structure

Learning Objective 3: Interpret neoclassical organization structures.

Some find the hierarchical architecture of classical structures, designed to maximize command, control, coercion, and compliance, more commonly promotes complexity, bureaucracy, conformity, and inflexibility.

In recourse, some MNEs adopt neoclassical structures to organize different approaches to horizontal and vertical differentiation that broaden relationships, expand communication, and promote collaboration.

Challenge of boundaries In practical terms, boundaries are (1) vertical divisions that separate employees into specific slots, each marked by explicit superior-subordinate roles, in the hierarchy and (2) horizontal divisions that follow from having specific employees do specific jobs in specific units. Boundaryless company, a company where the artificial barriers and walls people are forever building around themselves or each other—for status, security, or to keep change away—are demolished and everyone has access to the same information, everyone pulls in the same direction, and everyone shares in the rewards of winning—in the soul as well as in the wallet.

The network structure, a leading neoclassical format, arranges roles, relationships, and responsibilities in a patterned flow of activity that allocates people and resources to decentralized projects. It t is anchored by a core unit that outsources activities in which it has no core competencies

Network Structure

Objective 16-3

Figure 16.7 A Network Structure

Learning Objective 3: Interpret neoclassical organization structures.

This figure shows an example of a network structure.

Virtual Organizations

Objective 16-3

Virtual Organization

Technology

“Work across space and time”

Learning Objective 3: Interpret neoclassical organization structures.

Virtual organization uses technologies to connect otherwise detached entities (from employees to entire enterprises). The neoclassical arrangement between independent companies, suppliers, customers, and even rivals enables them to “work across space, time, and organizational boundaries with links strengthened by webs of communication technologies.

Coordination Systems

Objective 16-4

What is a coordination System

Coordination by standardization

Coordination by plan

Coordination by mutual adjustment

Learning Objective 4: Differentiate the systems used to coordinate international activities.

Configuring resources, capabilities, and competencies arranges the strategic architecture of the firm. Making it perform requires, as we saw earlier, setting a structure, and as we see now, coordinating how people and processes work. One way to engage this idea is to think of the configuration process as the MNE placing its pieces atop the global game board. An MNE moves its R&D piece to Sweden, factory piece to Vietnam, logistics piece to the United States, marketing piece to Italy, and the service piece to Malaysia. Once configured, executives specify how these pieces link to and relate with each other. In other words, MNEs develop coordination systems to link the people and processes that run its various ‘pieces.’ Coordination ranges from nonexistent (each piece is independent) to comprehensive (all pieces are interdependent).

Standardizing rules and routines to compel operational consistency has a straightforward mandate: do the same thing, the same way, everywhere. Coordination by standardization attains this goal by specifying the way employees do their jobs, work with one another, and deal with customers.

Coordination by Plan Applying general objectives, extensive guidelines, and sequences and schedules to link people and processes implements coordination by plan. Generally, plans set success factors, specify expectations, assign accountability, and formalize deadlines. They regulate how units accept, adopt, and, where legitimate, adjust tactics. Plans identify participating managers and programs, establish timing and format, and set communication schedules. Unlike coordination by standardization, managers of interdependent units have the latitude to mutually adjust goals and schedules—provided they still hit targets.

Coordination by Mutual Adjustment Some MNEs coordinate people and processes with a personal touch, socially engineering their systems to cultivate relationships among workers that, in turn, promote coordination. Rather than rules and routines in the context of standardization, or objectives and schedules in the context of planning, coordination by mutual adjustment relies on social networking outlooks and methods. Promoting collaboration among coworkers, goes the reasoning, builds systems that support sophisticated strategies.

Control Systems

Objective 16-5

What is a control system?

Bureaucratic Control

Market Controls

Clan Control

Control Mechanisms

Learning Objective 5: Differentiate the systems used to control International activities.

A key function of management is making sure workers are doing what must be done. If not, and productivity is sliding, schedules are slipping, and resources are wasting, then managers step in and correct problems. Control systems, the methods and means of problem correction, are part of a well-designed organization.

Explicit rules and routines that govern activities install bureaucratic control. This control system supports operations that lend themselves to universal rules and exact scripts and, importantly, fits workplaces where rules regiment behaviors.

Market Control Establishing performance benchmarks with external market mechanisms, such as Profitability or market share, installs market controls. Objective standards, not subjective interpretations, control activities.

Clan control relies on values, beliefs, shared norms, and informal relationships to regulate employee behaviors. Its goal is socializing employees to personally identify with the MNE’s vision and mission as they go about their day-to-day routines, thereby necessitating minimal.

Control Mechanisms Effective control requires objective mechanisms. A generation ago, the costs of travel, data exchange, and communication technologies endorsed certain control mechanisms. Improving economics, courtesy of expanding infrastructures and revolutionary technologies make control cheaper, faster, and easier. Reports, visiting subsidiaries, and information systems are all control mechanisms.

The role of Organizational Culture

Objective 16-6

Organizational Culture Definition

How organizational culture influences people’s jobs

The Power of a Common Cause

Learning Objective 6: Explain the purpose and characteristics of organizational culture.

Having profiled the roles played by structure and systems in organizing an MNE, we turn to the final design element: organizational culture. In theory, one could profile it from an applied perspective, specifying it as the way things are done in an MNE and evaluating how workers organize around rules, rewards, and punishments.96 Alternatively, we could adopt a philosophical view and assess how organizational culture, as an embedded set of shared values and normative principles, guides actions and sanctions behaviors within the MNE. We opt to integrate these perspectives and define organizational culture as the coherent, consistent system of workplace norms and idealized values that describe the goals and endorse the practice shared by employees.

Everywhere and always, organization culture influences how employees do their job. The importance of organizational culture grows as the rise of emerging economies and maturing growth in the West push managers to rethink strategies and reset operations. Expanding to increasingly diverse markets with increasingly diverse workplace norms calls for boosting the flexibility and versatility of an organization.

The Power of Common Cause Successful MNEs develop a culture that instills in their employees the engagement and enthusiasm beyond that justified solely by economic rewards. Certainly, pay motivates performance. An effective organizational culture, however, stimulates people to identify with the company’s vision, do their jobs well, and collaborate with others while lessening the need to regulate their behaviors with elaborate structures and systems.

Company Culture

Objective 16-6

Key features of company culture

Learning Objective 6: Explain the purpose and characteristics of organizational culture.

Key features of a company’s organization culture include:

Values and principles of management.

Work climate and atmosphere.

Patterns of “how we do things around here,”

Traditions.

Ethical standards.