Chapitre 14 Flashcards
organizational architecture
all aspects of a firm organization; organizational structure, control system, incentives, processes, people and organizational culture.
organizational structure
(3 components)
1) horizontal differentiation: formal division of organization into sub-units ex; production division, national operation, function
2) vertical differentiation: location of decision making Ex: decentralized/centralized
3) integrating mechanisms: coordinate sub-units, cross-functional and pam-regional teams
centralization
Decisions are in the hands of upper-level managers, fewer people make important decisions
pros of centralization
(4)
- Facilitates coordination and integration of operations.
- Helps ensure that decisions are consistent with
organizational objectives. - Gives top-level managers the means to bring change.
- Avoids the duplication of activities that occurs when
similar activities are carried on by various subunits.
what is Typically centralized:
overall firm strategy, major financial
expenditures, financial objectives, and legal issues.
what is decentralization
Decisions are in the hands of micro-level/subunit managers, more people make important decisions
pros of decentralization
(5)
- time savings for top manager: Gives top management time to focus on critical issues by
delegating more routine issues to lower-level managers. - Motivational research favors decentralization.
- Permits greater flexibility: more rapid responses
- Can result in better decisions. (on the field)
- Can increase control by holding micro-level individuals
accountable for performance.
what may be decentralized
operating decisions, such as those
relating to production, marketing, R&D(for more creativity), and human
resource management.
Organizational Structure strategies:
Localization strategy
subsidiaries make operating decisions.
* Cost pressures low: low need for coordination
* Local responsiveness high
* Focus on local responsiveness.
* Operating decisions are decentralized to functionally self-
contained country subsidiaries.
* Need for coordination or integrating mechanisms is low.
Organizational Structure strategies:
international strategy
subsidiaries make operating decisions
(e.g., sales).
* Cost pressures low: moderate need for coordination
* Local responsiveness low
typically centralized r and d to avoid redundancy
* Firms attempt to create value by transferring core
competencies from home to foreign subsidiaries.
* Headquarters maintains centralized control over firm’s
core competency, other decisions are decentralized.
Organizational Structure strategies:
Global standardization strategy
Very centralized org.
* Cost pressures high – thus location of production matters, HQ decides.
focus on location and experience economies and on coordinating activities
* Local responsiveness low
* Firms focus on the realization of location and experience
curve economies.
* Headquarters typically maintains ultimate control over
most operating decisions.
* The need for integration and a strong organizational
culture are high.
* Incentive systems are typically linked to performance
metrics at the corporate level.
Organizational Structure strategies:
transnational strategy
- Cost pressures are high
thus location of production matters, HQ decides.
try to focus on location and experience economies
operation centralized (for lower cost). high need of coordination - Local responsiveness high
thus marketing is decentralized - Focus is on simultaneous attainment of location and
experience curve economies, local responsiveness, and
global learning. - Some operating decisions are centralized (production,
R&D). - Need for coordination is high.
- Need a strong culture and incentives to promote
cooperation.
(Horizontal Differentiation)
name 2 Structure of DOMESTIC Firms.
- Functional structure – functions reflect the firm’s value creation activities (for example, production, marketing, R&D, sales).
good when firm sells a specific product - Product divisional structure – each division is
responsible for a distinct product line (business area).
good when firm sell lots of different product
Characteristics of International Division
-Tends to be organized by geography.
-Typically replicates the structure in the home market
as Dual structure can create conflict and coordination, limit transfer of core competenties and create
problems between domestic and foreign operations. (Iimite consolidation at best place, thus limit location and experience econom ikes
Worldwide Area Structure
fonction structure
* Favored by firms with a low degree of diversification and a
domestic structure based on functions.
* The world is divided into geographic areas
* Good for local responsiveness (allows for customization)
- autonomous within the area
- good for low cost pressure
appropriate for firm persuing localization strategy
Worldwide Product Divisional Structure
-Favored by firms that are reasonably diversified and originally with high cost pressure and low pressure for local responsivness
had domestic structures based on product divisions.
* Helps overcome coordination problems.
Autonomous Entity
appropriate for firm persuing global standardization or international strategy
pros and cons of Worldwide Product Divisional Structure
pros:
* Location economies
* Experience curve
economies
* Transfer core
competencies
cons:
Local responsiveness (same division for every area)
Global Matrix Structure
Horizontal differentiation proceeds along 2 dimensions:
product division and geographic area.
* Dual decision-making and dual responsibility.
* Often clumsy and bureaucratic: slow decision making; difficulty to adapt
specific manager for each division and area
appropriate for firms pursuing transnational strategy
What is an integrating mechanism?
a way to achieve effective coordination between subunits
coordination allows for…? (3)
and in what strategies is it the most needed
-location/experience economies
-transfer of core competencies between sub-units,
-smooth flow within the global value chain
demands is highest in transnational> global> international> location strategies
impediment/obstacle to coordination
(2)
-differences in subunits’ orientation coming from their different goals. may cause a lack of communication and coordination. ex. prod unit focuses on cost reduction and marketing units focus on sells
-May be lack of respect between subunits, inhibiting
communication.
characteristics of Formal Integrating Mechanisms.
and 4 different types
The greater the need for coordination, the more complex the formal integrating mechanisms need to be. From low to high:
1) direct contact: Managers get in touch whenever there is a concern
2) liaisons roles: rep in a subunit coordinates with another rep in another subunit regularly
3) teams: Staff from different departments form a team to ensure coordination
ex; team between r&d and prod. dep. to ensure reasonable cost of future products.
4)matrix structure: manager for each specific area-division
characteristics of Informal Integrating Mechanism (5)
on what is it based?
how can you build it?
-knowledge networks = informal communication via chains of connections between managers.
- can be built by doing activities between managers (to build connections)
1) more efficient/ less time-consuming/reduced cost
2) Transmitting information based on informal contacts
between managers.
3) Can be used as a non-bureaucratic conduit for knowledge
flows within a multinational enterprise.
4) Makes use of distributed computer and telecommunications information systems.
5) Managers must share a strong commitment to the same
goals, norms, and values (need a common culture)
what is a control systems
metrics used to control performance of subunits
Personal Controls
4
- Control via personal contact with subordinates.
- One-on-one meetings
- Most widely used in small firms.
- Structures relationships between managers at different levels in multinational enterprises
Bureaucratic Controls
2
- Rules and procedures that direct actions of subunits.
- Most important are budgets and capital spending rules.
Output Controls
4
- Relatively objective performance metrics such as
profitability, productivity, growth, market share, and quality. - Managers judged by their ability to achieve these goals.
- Goals are normally established through negotiation
between subunits and headquarters. - Fosters management by exception; freedom as long goals are meet
Cultural Controls
3
- Employees “buy into” the norms and value systems of the
firm and control their own behavior. - Can reduce the need for other control systems.
- Example: If your group has an unwritten rule of
silence regarding unethical practices
what are incentive systems
Devices used to reward appropriate employee behavior ex; bonuses.
Usually closely tied to performance metrics used for output
controls.
4 characteristics of incentive systems
1) The type of incentive varies depending on employees/tasks. (managers vs floor workers (team performance incentives))
2) Requires significant cooperation between managers in
different subunits to be successful.
3) Often adjusted to account for national differences in
institutions and culture. (certain incentives don’t work in some countries)
4) Can have unintended consequences. ( ex: reduced quality to produce more…)
one limitation of incentive/control systems
performance ambiguity
what is performance ambiguity, and its consequence
and in what international strategy is it predominant
Occurs when causes of good or bad performance are not identifiable. and when a subunit’s performance depends on another.
consequence: people may get demotivated/reduce inputs
Strategy, Interdependence, and Ambiguity; the more coordination is needed the more perf. ambiguity as each firm’s division blames another thus
* Localization strategy: performance ambiguity is low.
* International strategy: higher level, integration mechanism is necessary.
* Global standardization strategy: higher still, many activities are interdependent.
* Transnational: highest level of performance ambiguity due to high degree of joint decision-making and interdependence
perf. ambiguity Implications for Control and Incentives (cost of control)
cost of control:
* Costs defined as amount of time top management devotes
to monitoring and evaluating subunits’ performance.
* Costs are greater when performance ambiguity is
greater.
* Management must devote time to resolving problems
arising from performance ambiguity.
degrees of coordination needed, integrating mechanisms, performance ambiguity and cost of control in each international business strategies
the more coordination is needed, the more integrating mechanisms are needed, the more performance ambiguity arises from workings with different subunits, the more cost of controls.
location< international< global< transnational
what are processes
How decisions are made, and work performed
examples of processes
- Formulating strategy.
- Allocating resources.
- Evaluating new-product ideas.
- Handling customer inquiries and complaints.
- Improving product quality.
- Evaluating employee performance, etc.
advantages of good processes
-Efficient and effective processes can lower the costs of
value creation and add additional value to a product
why network between subunits is important with regards to processes
Managing Processes in an International Business
-Valuable new processes that might lead to a
competitive advantage can be developed anywhere
within the organization’s global network of operations
(importance is to recognize and communicate good processes)
- Many processes cut across organizational boundaries,
embracing several different subunits, or across national
boundaries.
what is Organizational Culture
Culture is a system of values and norms that are shared
among people
what influences culture 3
-Founders or leaders have a profound impact.
* The broader social culture of the nation.
* The history of the enterprise.
how culture is maintained? 4
- Hiring and promotional practices of the organization.
- Reward strategies.
- Socialization processes – formal or informal.
- Communication strategy – corporate mission statements,
stories, and symbols.
Self Study
Strong cultures.
- All managers share a consistent set of values and norms
that have a clear impact on work performance. - Strong doesn’t necessarily mean good (nazi, gm(lack initiative)
Adaptive cultures.
- Most managers care deeply about and value customers,
stockholders, and employees. - People and processes that create useful change are
valued.
Self Study
ex: 3M
2 condition for a firm to succes internationally
- The firm’s strategy must be consistent with the
environment in which the firm operates. - The firm’s organizational architecture must be consistent
with its strategy.
how to change an organization (3)
1) unfreeze org
2) move to new state
3) refreeze org
reason why organization is difficult to change
Organizational Inertia ( cause to keep old architecture)
what causes organizational inertia (4)
- Existing distribution of power and influence within an
organization. - Existing culture expressed in norms and value systems.
- Senior managers’ preconceptions about the appropriate
business model or paradigm. - Institutional constraints, such as national regulations.
how to Unfreeze an Organization?
- May require bold action ex: closure of unprofitable plants
- Senior management must articulate need for change and
take steps (reprimand old cultural behavior)
how to move to a new state
move to a new state:
* Requires substantial change; reorganising components of org’s architecture)
* Requires sufficient speed, solution; delegate ; makes subunits happy
how to refrezze an org.
- Long-term endeavor.
-using management education prog - New culture must be established while old is dismantled
ensure consistent hiring processes.
