Unit VII GSM

BUS 6320, Global Strategic Management 1

Course Learning Outcomes for Unit VII At the end of this unit, you should be able to:

1. Compare and contrast evolving global strategic business models. 1.4 Examine various structures for organizational firms. 1.5 Explain how organizational culture may change. 1.6 Recommend actions to increase revenue or market share for a global firm.

2. Analyze the processes for formulating sustainable corporate business strategies.

2.3 Examine how sustainable competitive advantage drives corporate business strategies.

3. Summarize the role of innovation in strategic business planning. 3.2 Analyze the role of leadership in driving innovation.

4. Explain methodologies in the overall evaluation of business strategies.

4.2 Recognize opportunities and problems of competing globally. 4.3 Conduct a strengths, weaknesses, opportunities, and threats (SWOT) analysis for a global firm.

5. Assess ethical parameters related to global strategic business models.

5.1 Compare and contrast the options that multinational enterprises (MNEs) have for entering foreign markets.

5.2 Apply the cost-responsive framework to evaluate strategies multinational enterprises (MNEs) can pursue when competing globally.

5.3 Identify ethical parameters of a global firm. Required Unit Resources Chapter 11: Organizational Design: Structure, Culture, and Control (ULOs 1.4 and 1.5) This chapter explores organizational cultures and various structures of a firm. Unit Lesson Lesson: Organizational Design: Structure, Culture, and Control (ULOs 1.4 and 1.5) As we look at developing competitive advantage in a firm, an organization can be designed using three elements: structure, culture, and control. Essentially, the intention of leadership is to coordinate the work of the organization and ensure that all employees are motivated to achieve the goals of the organization.

Organizational Design and Competitive Advantage

Rothaermel (2024) defines organizational design as “the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization” (p. 420). Unfortunately, many organizations do see a level of inertia or “resistance to change the status quo” (Rothaermel, 2024, p.276). As new challenges face organizations, change represents an important challenge—and an important opportunity for firms. The factors of change—both internal and external—are illustrated in Exhibit 11.2: Organizational Inertia and the Failure of Established Firms to Respond to Shifts in the External or Internal Environments. One example of an internal factor of change is the aging nature of the workforce. To avoid inertia and enhance the opportunity for success in the organization, the structure of the firm must be flexible and able to adapt to change. The fundamental component of organizational structure includes

UNIT VII STUDY GUIDE Organizational Design: Structure, Culture, and Control

BUS 6320, Global Strategic Management 2

UNIT x STUDY GUIDE Title

specialization, formalization, centralization, and hierarchy (Rothaermel, 2024). Specialization relates to the degree to which work is divided into component parts—the division of labor. Formalization is the degree to which operations are standardized and codified. For example, pilots use a formal check list prior to take-off as a part of a formal system. Centralization is the degree to which decision-making is centralized versus decentralized. For example, in decentralized organizations, decision-making is often pushed down to operational levels whereas in centralized organizations, decisions are generally made at a higher level within the organization. Finally, hierarchy outlines reporting lines—who reports to whom. A component of this concept is span of control. Span of control refers to the actual number of employees who report to a supervisor or manager (Rothaermel, 2024). Two key types of organizations are mechanistic and organic as seen in Exhibit 11.3: Mechanistic vs. Organic Organizations: Building Blocks of Organizational Structure. Which model do you see as the more modern option? As noted by Rothaermel (2024) the best option between these models depends on the context, “structure must follow strategy” (p. 428).

Strategy and Structure The type of structure selected for a firm must, in part, consider the size and complexity of the firm. Smaller firms tend to adopt a simple structure that are relatively flat with limited specialization and formalization. Another structural type that is very common is the functional model. This model groups employees by function—for example, human resources. This model enables an increased level of specialization in the firm. One disadvantage of the functional system is the silo effect or lack of coordination between individual units. Refer to the course textbook, Exhibit 11.5: Typical Functional Structure for an example. As a firm considers strategic options, such as low cost or differentiation, it is important to balance trade-offs. For example, at times it may not assist the firm to have too many formal systems in place, and flexibility may be appropriate. For larger more complex firms, a multidivisional structure may be fitting. Another model that firms use is a mix of the functional structure and the multidivisional structure—the matrix model. An overview of the advantages and disadvantages of different models of organizational structures is presented in the course textbook in Exhibit 11.11: Advantages and Disadvantages of Different Organizational Structures.

Organizing for Innovation As firms assess their organizational structure, they are often looking for ways to improve the effectiveness of their innovation initiatives to stay competitive. There are two methods identified that firms may consider for advancing innovation—the open innovation model and the closed innovation model. Essentially, the open model recognizes the importance of innovation both inside and outside of the organization, whereas the closed model looks more inward at internal talent and control to support innovation.

Organizational Culture: Values, Norms, and Artifacts Organizational culture is defined by Rothaermel (2024) as “the collectively shared values and norms of an organization’s members; a key building block of organizational design” (p. R-2). One key value that has increased in both organizations and within employee groups is related to sustainability. Many firms have identified their commitment to increased attention to sustainability. From a global perspective, Geert Hofstede (n.d.) has identified a series of cultural dimensions that are important for organizations looking to expand globally. The cultural dimensions identified by Hofstede can be compared—one country to another—which can be instructive for firms looking to expand globally.

Strategic Control and Reward Systems Strategic control and reward systems are defined as “internal governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees)” (Rothaermel, 2024, p. 450). Organizationally, strategic control can be implemented by input controls and output controls. Input controls include rules and operating procedures, and output controls include, for example, merit-based or performance pay.

BUS 6320, Global Strategic Management 3

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Summary In this unit we have seen the importance of organization design, structure, culture, and controls in developing and sustaining competitive advantage. These elements are contextual, and each firm must adapt to the circumstances that impact them. Leaders must recognize that structure and culture are both important drivers of success in an organization.

References Geert Hofstede. (n.d.). The 6-D model of national culture.

https://geerthofstede.com/culture-geert-hofstede-gert-jan-hofstede/6d-model-of-national-culture/ Rawpixel. (n.d.). Character illustration of people with global network concept [Image]. Freepik.

https://www.freepik.com/free-vector/character-illustration-people-with-global-network- concept_3585190.htm#query=strategy%20global%20business%20planning&position=2&from_view= search&track=ais&uuid=eab5dd3f-267d-4ae8-9a3a-5381e987b5ac

Rothaermel, F. T. (2024). Strategic management (6th ed.). McGraw Hill.

https://online.vitalsource.com/#/books/9781265954574 Vector4stock. (n.d.). Business process illustration infographic of business structure from idea to successful

business [Image]. Freepik. https://www.freepik.com/free-vector/business-process-illustration-infographic-business-structure-from- idea-successful-business- project_26195295.htm#query=strategy%20global%20business%20planning&position=34&from_view =search&track=ais&uuid=eab5dd3f-267d-4ae8-9a3a-5381e987b5ac

Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid you in your course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. Activity: Cultural Dimensions (Optional) Conduct an internet search for Hofstede’s cultural framework. Compare the differences between countries using the website tools provided. Why do you think it is useful for companies to understand cultural dimensions in global business? Note your thoughts in a personal journal.