Unit VII Discussion Board

DBA 8710, International Business and Global Strategy 1

Course Learning Outcomes for Unit VII Upon completion of this unit, students should be able to:

7. Critique the process of change in organizations. 7.1 Explain what impact centralization can have on international strategies.

Course/Unit Learning Outcomes

Learning Activity

7.1 Unit Lesson Chapter 14, pp. 403–438

Required Unit Resources Chapter 14: The Organization of International Business, pp. 403–438

Unit Lesson In previous units, we have examined global strategies through the lens of formal planning, operations, change, and buyer and supplier power. In this unit, we will examine organizational architecture and how international business changes the way a business conducts its operations to the core. Without a doubt, cultural shock is inevitable when you travel to and from any country in the world. It requires cultural adjustment—recognizing and acknowledging cultural differences. Culture shock can be defined as how individuals react and feel when the cultural cues they know well are lacking (Hill, 2021). The same can be said for companies and management. Companies will experience culture shock when moving from a domestically run business to an internationally run business. How can you properly prepare? For starters, prepare carefully, consider alternatives, have a desire to learn, realize that the culture shock is temporary as your company adjusts, have an open mind, maintain flexibility, do not judge, avoid stereotypes, listen and observe, be aware of the feelings of local people, and reflect. Change within an organization starts with the design of the company. Some people may jump to thinking that the design of a company is referring to the organizational design (i.e., the hierarchy of how a business is set up). On the contrary, the design of a company is referring to the strategies, processes, structure, abilities, and culture. When moving into an international environment, some challenges may be more obvious. For instance, determining incentives for employees or considering employee training needs may be less challenging. Other decisions may prove to be more challenging. For example, will decision-making processes remain the same? Making decisions on a marketing strategy in the United States is one thing, but what about creating a marketing strategy in Japan? Are you going to use the exact same process and steps? You must also consider the culture of the business. Will the values of the company be the same when entering different markets? We know that just as people have cultural norms, so do companies. What are companies willing to change? For example, if your company is about to expand on an international scale, who are you planning on hiring? Would you hire someone without any international business experience or an individual who has the skillset to work within a global operation? As this tone is being set, difficult decisions must be made, which can affect core competencies. How much vertical integration is going to take place? Tesla’s Chief Executive Officer (CEO) Elon Musk has a strong level of vertical integration, which means that the decision-making power is within a tight structure. When a new Tesla vehicle is designed, Musk has a lot to say about its design and functionality, and he is center stage for the company. Is this the same for an international company like Pepsi? Unlike Tesla, Pepsi uses horizontal differentiation, which means that Pepsi has subunits. In fact, Pepsi has a centralized operation. Research and

UNIT VII STUDY GUIDE

The Organization of International Business

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development (R&D), an important component in the process of change for international companies, typically is centralized to a location so there is no duplication of work. The same could be said for production. Tesla builds vehicles in only two locations: Fremont, California, and Shanghai, China. The centralization of production allows the carmaker to focus on R&D improvements at the aforementioned locations, while selling their vehicles globally. The opposite of centralization is decentralization. This can work for other types of international companies where managerial decisions cannot be made by just a few individuals in one location (Hill, 2021). This style is trending in the international marketplace because it offers tremendous flexibility; someone who is aware of the situation at hand and close to the concerns can make a better decision because there are feet on the ground. One might think that a company must either be centralized or decentralized. That is actually not true! As a company that is beginning to conduct operations on an international scale, some decisions may be made centrally, and others may be decentralized, depending on strategy. Much of this depends on the horizontal structure of a company. For domestic companies, you usually have management and employees who work in departments within the company. However, when a company goes international, the company must decide how to set up the international marketplace. Companies can create an international division. This section of the company would determine its decision-making structure. Since most domestic companies have top management making decisions, can the international division wait for the decisions to be made by top management? While this may flow the decision-making process in a centralized system, this can create significant problems. Remember, the architecture of your company revolves around people, structure, and culture. How are most people going to feel if one division that is domestic can make decisions without asking for top management feedback, while the international operation must always request approval for decisions to be made? This can create issues with coordination between the domestic and international operations. There are many structures for conducting international business, but the type of structure you choose comes down to the type of change you want within the organizational culture. As discussed in Unit IV, culture does not only refer to the norms of a society; it also describes companies (Hill, 2021). The same goes for values. A company’s culture and values are going to change, especially when expanding internationally. For example, once a company enters into the global marketplace, how reliant will the company be on the founders and top management to make decisions? Is it possible for just one person to decide whether a company should enter into the international marketplace? Absolutely! Even though Apple was already an international company, Steve Jobs controlled what Apple could do and could not do, including what colors should be on personal computers to sell. A company’s history can also play a major role in how a company maintains its culture regarding expansion. Imagine a 75-year-old company that has only ever sold domestically but is now expanding into the global marketplace. You will have a lot of cultural history embedded in the company’s structure that may not be relevant on a global scale. A company with deep historical roots will not change overnight. Cultural changes on this scale will take time, but as the company becomes more familiar with global behaviors, new cultural norms will take form. In conclusion, companies that are expanding internationally want to create a unique culture that is widely accepted based on their strategies, processes, structure, and abilities. These core competences show that decision makers within a company need to set a consistent set of values and norms for how the business needs to expand on an international scale. Creating a customized culture for international expansion is a new way of ushering in new employees, who generally accept these cultural changes quickly. There is a strong need for companies to change their processes when going global, and revising the norms and values will enhance employee cooperation as the new direction is embraced. The more diverse a company becomes, the more diverse its thinking needs to be in understanding how centralized or decentralized the decision- making process must be for an effective strategy to take place.

Reference

Hill, C. W. L. (2021). International business: Competing in the global marketplace (13th ed.). McGraw-Hill Education.

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Suggested Unit Resources In order to access the resource below, utilize the CSU Online Library to begin your research. The article below reviews a historical case study of the movement of Japanese organizational practices to the United States from the 1970s through the mid-1990s. Westney, D. E., & Piekkari, R. (2020). Reversing the translation flow: Moving organizational practices from

Japan to the U.S. Journal of Management Studies, 57(1), 57–86. https://doi.org/10.1111/joms.12435