Download Chapter 1: The Global Manager`s Environment

Chapter 8:
Organization Structure and
Control Systems
PowerPoint by
Hettie A. Richardson
Louisiana State University
© 2008 Pearson Prentice Hall
8-1
Organizational Structure
 Must evolve to accommodate
internationalization
 Must “fit” with strategy
 Should be contingency based
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8-2
Evolution and Change in
Structures
 Stages model
 Alcoa
Created smaller units
 Linked geographically dispersed, but
similar businesses (e.g., Brazil and
Australia)

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8-3
Domestic Structure Plus Foreign
Subsidiary
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8-4
International Division
 Organized along functional, product, or
geographic lines
 IBM World Trade
 Pepsi Cola International
© 2008 Pearson Prentice Hall
8-5
Global Functional Structure
 Designed on the basis of the company’s
functions
 Allows for functional specialization and
economies of scale
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8-6
Global Product (Divisional)
Structure
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8-7
Global Geographic (Area)
Structure
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8-8
Organizing for Globalization
 Need for differentiation
 Need for globalization
IBM
 Rationalization
 Development of alliances

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8-9
Comparative Management in Focus:
The Overseas Chinese Global Network
 “Chinese commonwealth”
 Overseas Chinese
 Control $2 trillion in liquid assets
 Contribute 80% of the capital for the PRC
 Contribute 70% of the private sector in
Malaysia, Thailand, Indonesia, and the
Philippines
© 2008 Pearson Prentice Hall
8-10
Comparative Management in Focus:
The Overseas Chinese Global Network
 The Overseas Chinese business culture
Business largely confined to family and
trusted friends—guanxi
 Adherence to patriarchal authority
 Thrift and a high savings level
 Investment in tangible goods
 Wary outlook

© 2008 Pearson Prentice Hall
8-11
Organizing to “Be Global, Act
Local”
 Colgate-Palmolive
Primary structure is geographic
 CEO oversees centralized operations

 Levi Strauss
Allows managers to act independently
 Keeps some centralized control, but
decentralizes control of foreign subsidiaries

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8-12
Management Focus: Proctor and
Gamble’s Structure
 P&G/Gillette merger: Gillette adopts P&G’s
organizational structure
 P&G’s structure:
Global Business Unit (GBU)
 Market Development Organization (MDO)
 Global Business Services (GBS)

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8-13
Emergent Structural Forms
 Interorganizational networks
Royal Philips Electronics
 Intel

 Global e-corporation network structure
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8-14
Emergent Structural Forms
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8-15
Emergent Structural Forms
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8-16
Emergent Structural Forms
 Transnational corporation (TNC) network
structure

Asea Brown Boveri (ABB)
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8-17
Choice of Organizational Form
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8-18
Assignment
 Compare fig 8.6 above with fig 8.7 in the
book
 Prepare a plan for differentiation / integration
for each of the 5 alternatives in fig 8.6
 Use the PowerPoint slides about
differentiation and integration to support your
reflections
© 2008 Pearson Prentice Hall
8-19
When is Change Needed?
 Clashes among divisions, subsidiaries, or
individuals over territories or customers
 Duplication of administrative or personnel
services, sales offices, account executives
 An increase in overseas customer service
complaints
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When is Change Needed?
 A shift in operational scope
 Conflict between overseas and domestic staff
 Centralization leads to excessive and, thus,
misused or misunderstood data
 Unclear reporting relationships
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Locus of Decision Making
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Monitoring Systems
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Direct Coordinating
Mechanisms
 McDonald’s in Moscow
Problem: Quality control
 Solution: Built processing plant in Moscow
and provided managerial training

 Other options: Visits by head-office
personnel and regular meetings
© 2008 Pearson Prentice Hall
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Indirect Coordinating Mechanisms
 Examples: sales quotas, budgets, and
financial tools and reports
 Three financial statements
 One for accounting standards in host
country
 One for the standards in the home country
 One for consolidation
© 2008 Pearson Prentice Hall
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The Appropriateness of Systems
 Where are top managers from?
 US individualism vs. Japanese collectivism
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The Role of Information Systems
 US MNCs monitor via specific functional
reports
 Inaccurate information, different norms, MIS
adequacy
 Noncomparability of performance data
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Evaluation Variables across
Countries
 Adjust statements to reflect variables unique
to each country
 Take nonfinancial measures into account
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