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International Business > chapter 14 - organization of international business > Flashcards

chapter 14 - organization of international business Flashcards

1
Q

what is organizational architecture

A

the totality of a firms organization, including formal organization structure, control systems and incentives, processes, organizational culture, and people.

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2
Q

what are the 3 conditions regarding organizational architecture that must be fulfilled for an enterprise to have superior performance

A

-the different elements of a firms organizational architecture must be internally consistent with each other
-the organizational architecture must fit the strategy of the firm
-the strategy and architecture of the firm must not just be consistent they must make sense given the competitive conditions prevailing in the firms markets

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3
Q

what is organizational structure referring to (3)

A

-first the formal division of the organization into subunits such as product divisions, national operations and functions
-second is the location of decision making responsibility within that structure ( centralized or decentralized )
-third is the establishment of integrating mechanisms to coordinate the activities of subunits with eachother

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4
Q

what are control systems

A

refer to the metrics used to measure the performance of subunits, and to make judgements about how well managers are running those subunits (profitability of each subunit)

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5
Q

what are incentives

A

ways to reward good managerial behaviour after positive performance metrics

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6
Q

what are processes

A

the manner in which decisions are made and work is performed within the organization (processes for formulating strategy, allocating resources, and evaluating performance)

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7
Q

what is organizational culture

A

refers to the norms and value systems that are shared among the employees of an organization. Just as societies have cultures, so do organizations. Organizations can be viewed as societies of individuals who come together to perform collective tasks

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8
Q

organizational structure can be thought of in terms of three dimensions, they are

A

vertical differentiation
horizontal differentiation
and integrating mechanisms

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9
Q

what is vertical differentiation

A

which refers to the location of decision-making responsibilities within a structure, Hierarchy

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10
Q

what is horizontal differentiation

A

which refers to the formal division of the organization into subunits

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11
Q

what are integrating mechanisms

A

which are mechanisms for coordinating subunits. The integrating mechanisms are especially critical for the effective operations of a company in the peer-to-peer sharing economy.

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12
Q

what are the arguments for centralization

A
  • First, centralization can facilitate coordination and integration of operations
  • Second, centralization can help ensure that decisions are consistent with organizational objectives. When decisions are decentralized to lower-level managers, those managers may make decisions at variance with top management’s goals. Centralization of important decisions minimizes the chance of this occurring
    -Third, by concentrating power and authority in one individual or a management team, centralization can give top-level managers the means to bring about needed major organizational changes
  • Fourth, centralization can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization
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13
Q

what are the arguments for decentralization

A

-First, top management can become overburdened when decision-making authority is centralized, and this can result in poor decisions, slow decision-making, and not the best decision being made
-Second, motivational research favours decentralization. Behavioural scientists have long argued that people are willing to give more to their jobs when they have a greater degree of individual freedom and control over their work.
-Third, decentralization permits greater flexibility—more rapid response to competitive markets and environmental changes—because decisions do not have to be “referred up the hierarchy” unless they are exceptional in nature.
-Fourth, decentralization can result in better decisions. In a decentralized structure, managers who are located closer to the customers—or at least closer to where the products and services are developed—often have a better grasp of what decisions need to be made than top-level executives
-Fifth, decentralization can increase control. Decentralization can be used to establish relatively autonomous, self-contained subunits within an organization The more responsibility subunit managers have for decisions that impact subunit performance, the fewer excuses they have for poor performance

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14
Q

the choice between centralization and decentralization is not

A

absolute, frequently its best to centralize some decisions and decentralize others

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15
Q

firms pursuing a globalization strategy should

A

centralize some investment and operating decisions. this is because They must decide how to disperse the various value creation activities around the globe so location and experience economies can be realized. The head office must make the decisions about where to locate R&D, production, marketing, and so on. In addition, the globally dispersed set of value creation activities that facilitates a global strategy must be coordinated.

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16
Q

is a firm experiences high local responsiveness and they are pursuing a localization strategy they should

A

decentralizing operating decisions to subsidiaries

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17
Q

firms pursuing an international strategy tend to maintain

A

centralized control over their core competencies and to decentralize other decisions to foreign subsidiaries.
Typically, such firms centralize control over R&D in their home country but decentralize operating decisions to foreign subsidiaries.

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18
Q

firms pursuing a transnational strategy should maintain

A

a centralized control over global production centers because they need to realize location and experience curve economies
-the need for local responsiveness requires decentralization of many operating decision, like marketing
-so in transnational strategy some operating decisions are centralized while other are relatively decentralized
-global learning based on multi directional transfer of knowlegde between subsidiaries is a central feature for transnational strategy, so subsidiaries of multinational firms must have enough freedom to develop their knowledge and skills, so transnational strategy requires high degree of decentralization

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19
Q

what is horizontal differentiation

A

concerned with how the firm divides itself into subunits ,decision made on the basis of function, type of business or geographic area.

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20
Q

most new firms start with what structure

A

they have no formal structure and are run by a single entreprenuer or a small team of individuals

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21
Q

as firms grow and demands of management become too great for a small group, the organization, is it centralized or decentralized

A

is split into functions reflecting the firms value creation activities, such as production , marketing, R&D and sales, or centralized

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22
Q

is a firm significantly diversifies its product offering it will

A

need to horizontally differentiate further

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23
Q

when a firm diversifies its product offering and switches to a very horizontally differentiated structure a —— can be clumby because —

A

a functional structure may be clumsy,
because there will be problems with coordination and control
-it will be difficult to asses the profitability of each business area, and it will be difficult to run a functional department, such as production or marketing, if it is supervising the value creation activities of multiple business areas.

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24
Q

to solve the problems arising from functional structure when there is a high degree of horizontal differentiation and diversified product ranges , the firm switches to —- and because —

A
  • a product divisional structure
    -each division is responsible for a distinct product line (business area) and it is an autonomous entity with its own functions
    -operating decisions are decentralized to product divisions , and they are held accountable for their performance
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25
Q

what is an international division

A

when a firm groups all their international activities into an international division

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26
Q

international divisions exists in firms that are organized on the basis of their

A

basis of functions and for basis of product divisions

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27
Q

the international division is split into

A

-different countries
-each country has a general manager
-each country divided into functional units

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28
Q

what are the problems that arise from international division structure

A

-dual structure creates inherent potential for conflict and coordination problems between domestic and foreign operations
-the lack of coordination can inhibit the introduction of new products, transfer of core competencies and the consolidation of global production as key locations as to realize location and experience curve economies.
-

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29
Q

who tends to adopt a worldwide product divisional structure

A

tends to be adopted by diversified firms that have a domestic product divisions

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30
Q

who tends to adopt a worldwide area structure

A

which tends to be adopted by undiversified firms whose domestic structure are based on functions

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31
Q

having a worldwide area structure facilitates

A

-local responsiveness, because decision making responsibilities are decentralized and each area can customize its product offerings, marketing strategy and business strategy
-encouraging fragmentation of the organization into high autonomous entities which makes transfer of core competencies bw areas which makes it difficult to realize location and experience economies

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32
Q

the worldwide area structure is consistent with —– , but makes it difficult to realize gains associated with —–

A

localization strategy , globalization strategy

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33
Q

firms that follow a worldwide area structure might encounter problems

A

if local responsiveness is less critical than reducing costs or transferring core competencies for establishing a competitive advantage

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34
Q

what is a worldwide product divisional structure

A

-each division is self contained and largely autonomous with full responsibility for its own value creation activities , but headquarters remain responsible for overall strategy development and financial control

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35
Q

worldwide product divisional strategy is adopted by

A

firms that are reasonably diversified, and originally had domestic structures based on product divisions

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36
Q

what is underpinning

A

underpinning the organization means that the value creation activities of each product division should be coordinated by that division worldwide

37
Q

what is the worldwide product divisional structure strategy designed to overcome

A

help overcome the coordination problems that arise with the international division and worldwide area structures
because this structure helps consolidation of value creation activities at key locations necessary for location and experience curve economies
facilitates the transfer of core competincies and stimulates introduction of new products world wide

38
Q

world wide area structure for what strategy, and worldwide product divisional structure for what strategy

A

world wide area structure- localization strategy
-worldwide product divisional strategy for global standardization or international strategies

39
Q

transnational strategy is when firms

A

must focus on realizing location economies, experience curve economies, local responsiveness and internal transfer of core competencies

40
Q

who adopts a global matrix structure

A

firms that have to deal with the conflicting demands of a transnational strategy

41
Q

how is horizontal differentiation work in global matrix structure

A

-proceeds along 2 dimensions, product division and geographic area

42
Q

what is the philosophy behind the horizontal differentiation in global matrix structure

A

it has 2 dimensions, product division and geographic area.
this is because operating decisions about a specific product should be shared by the product division and the various areas of the firm that are involved in this product too

43
Q

how does the dual decision making in global matrix structure benefit the firm

A

enables the firm to simultaneously achieve its particular objectives

44
Q

in practice, the global matrix structure can be

A

clumsy and bureaucratic, and it requires many meetings which slows decision making which means they cannot respond quickly to market shifts

45
Q

the dual hierarchy structure in the global matrix structure can lead to

A

conflict and perpetual power struggles between the areas and the product divisions, and it makes it difficult to assert accountability cause one side can always blame the other

46
Q

the need for coordination us the lowest in firms that are pursuing a — strategy, and higher in firms—-, and higher in —, and highest of all in —–

A

-localization, international, global companies, and highest of all in transnational companies

47
Q

why do companies with a localization strategy not need as much coordination

A
  • localization strategy means they operate with a worldwide area structure in which each area has high autonomy and sets its own value creation functions, so there is minimal need for coordination
48
Q

why is the need for coordination higher in international strategy firms than in localization strategy firms

A

they want to profit from the transfer of core competencies and skills between units at home and abroad, so coordination is needed for the transfer of skills and product offering

49
Q

why is the need for coordination in firms pursuing a global standardization strategy

A

they want to profit from location and experience curve economies through their global web, so they need to coordinate activities to ensure a smooth flow of inputs into the value chain

50
Q

why do transnational strategy firms require the highest level of coordination

A

because they want to achieve multi directional transfer of competencies , and they need to coordinate between foreign subunits and the firms globally dispersed value creation activities to ensure that any product offering and marketing strategy is sufficiently customized to local conditions

51
Q

what are the impediments to coordination

A

-managers of different subunits have different orientations, because they focus on achieving different tasks,
-lack of respect between subunits
-lack of communication between subunits
-

52
Q

when is direct contact not effective

A

when managers have differing orientations that act to impede coordination

53
Q

what is the most simple integrating system

A

direct contact between managers, they contact eachother when they have a common concern

54
Q

how are teams used for coordination

A

firms tend to use temporary or perma- nent teams composed of individuals from the subunits that need to achieve coordination.

54
Q

what are liaisons for

A

liaisons are when we give a person in each subunit responsibility for coordinating with another subunit on a regular basis.

Liaison roles are a bit more complex. When the volume of contacts between subunits increases, coordination can be improved by giving a person in each subunit responsibility for coordinating with another subunit on a regular basis. Through these roles, the people involved establish a permanent relationship. This helps attenuate the impediments to coor- dination discussed in the previous subsection

55
Q

what method is used when the need for integration is very high

A

matrix structure, in which all roles are viewed as integrating roles.

The most common matrix in multinational firms is based on geographic areas and worldwide product divisions. This achieves a high level of integration between the product divisions and the areas so that, in theory, the firm can pay close attention to both local responsiveness and the pursuit of location and experience curve economies.

56
Q

what is the problem with using a matrix structure when integration is highly needed

A

-can be bureaucratic and create as many problems as it solves,
the matrix structure tends to be inflexible and characterizied by conflict

57
Q

what are the formal integrating mechanisms

A

-direct contact
-liaisons
-teams
-matrix structure

58
Q

what are the informal integrating mechanisms

A
59
Q

what is a knowledge network

A

A knowledge network is a network for transmitting information within an organization that is based not on formal organizational structure, but on informal contacts between managers within an enterprise and on distributed information systems.

60
Q

what is the benefit of using a knowledge network as an integrating mechanism

A
61
Q

for a knowledge network to work effectively as an integrating mechanism

A

the network must embrace as many managers as possible.

62
Q

a major task of a firms top leadership is to control the various activities of subunits, they achieve this through

A

various control and incentive systems

63
Q

what are the 4 main types of control systems

A
  • personal controls
    -bureaucratic controls
    -output controls
    -cultural controls
64
Q

how are personal controls enforced

A

-Personal control is control achieved by personal contact with subordinates and coworkers.
-This type of control tends to be most widely used in small firms, where it is seen in the direct supervision of subordinates’ actions
-However, it also structures the relationships between managers at different levels in multinational enterprises

65
Q

what is bureaucratic control

A

-Bureaucratic control is control achieved through a system of rules and procedures that directs the actions of subunits

66
Q

what are the 2 most important bureaucratic controls in a firm

A

budgets and capital spending rules

67
Q

how is bureaucratic control enforced

A

-Headquarters uses budgets to influence the behavior of subunits
-Most budgets are set by negotiation between headquarters management and subunit management.
-Headquarters management can encourage the growth of certain subunits and restrict the growth of others by manipulating their budgets.
-Capital spending rules require headquarters management to approve any capital expenditure by a subunit that exceeds a certain amount
-Headquarters can be expected to deny approval for capital spending requests that are at variance with overall firm objectives and to approve those that are congruent with firm objectives.

68
Q

what are output controls

A

Output control involves setting goals for subunits to achieve and expressing those goals in terms of relatively objective performance metrics such as profitability, productivity, growth, market share, and quality.

69
Q

how are output controls enforced

A

-If goals are met or exceeded, subunit managers will be rewarded. If goals are not met, top management will normally intervene to find out why and take appropriate corrective action.
-Thus, control is achieved by comparing actual performance against targets and intervening selectively to take corrective action
-Output controls foster a system of “management by exception,” in that so long as subunits meet their goals, they are left alone.

70
Q

what are cultural controls

A

Cultural control exists when employees “buy into” the norms and value systems of the firm. When this occurs, employees tend to control their own behavior, which reduces the need for direct supervision.

71
Q

what are incentive systems

A

Incentives refer to the devices used to reward appropriate employee behavior

72
Q

how are incentive systems enforced

A

-sometimes as bonus pay
-closely tied with performance metrics used for output controls

73
Q

how do we pick which incentive systems to use

A

-the type of incentive used often varies depending on the employees and their tasks, The basic principle is to make sure the incentive scheme for an individual employee is linked to an output target that he or she has some control over and can influence
- the successful execution of strategy in the multinational firm often requires significant cooperation between managers in different subunits.The goal is to encourage employees to improve the efficiency of their unit and to cooperate with other units in the organization.

-Third, the incentive systems used within a multinational enterprise often have to be adjusted to account for national differences in institutions and culture.

Finally, it is important for managers to recognize that incentive systems can have unintended consequences

74
Q

what is performance ambiguity

A

Performance ambiguity exists when the causes of a subunit’s poor performance are not clear.

75
Q

what is the performance ambiguity in a firm with a localization strategy

A

each national operation stands alone so there is less performance ambiguity

76
Q

what is the performance ambiguity in an international firm

A

the level of interdependence is higher than in a localization strategy, and integration is required to facilitate transfer of core competencies and skills, so there is some performance ambiguity

77
Q

what is the performance ambiguity in a firm with a standardization strategy

A

the goal of achieving a global web leads to many interdependent activities therefore performance ambiguity is high

78
Q

when are levels of performance ambiguity the highest of all

A

in transnational firms, this is because of the global web (location economies and experience curve effects) and the emphasis on multi directional transfer of core competencies lead to lots of interdependency which causes performance ambiguity

79
Q

what are the interdependence levels, performance activity levels, and costs of control in localization strategy

A

low interdependence, low performance ambiguity, and low costs of control

80
Q

what are the interdependence levels, performance activity levels, and costs of control in international strategy

A

moderate interdependence, moderate performance ambiguity, and moderate costs of control

81
Q

what are the interdependence levels, performance activity levels, and costs of control in global strategy firms

A

high interdependence, high performance ambiguity, and high costs of control

82
Q

what are the interdependence levels, performance activity levels, and costs of control in transnational firms

A

very high interdependence, very high performance ambiguity, and very high costs of control

83
Q

what are processes

A

Processes, defined as the manner in which decisions are made and work is performed within the organization, can be found at many different levels within an organization

84
Q

efficient and effective processes can reduce and add

A

costs of value creation and add additional value to a product.

85
Q

what are the 2 most important remarks about managing processes in the context of international business

A

in multinational enterprise, many processes include many subunits, so the chances of pulling the processes off are enhanced if they are embedded in an organizational culture that promotes cooperation among people from different subunits

second, it is important for firms to recognize that the processes they practice might lead to a competitive advantage

86
Q

what are the sources of an organizations culture

A

the founders and leaders of the organization have a big impact of the organizations culture,
and the culture of the organization is also affected by the broader social culture of a nation

87
Q

what are the 7 spiritual values

A

(1) national service through industry, (2) fairness,
(3) harmony and cooperation,
(4) struggle for betterment,
(5) courtesy and humility,
(6) adjustment and assimilation, and
(7) gratitude.

International Business (7 decks)

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