chapter 14: the organization of international business Flashcards
Expanding scope of IB
implementing increasingly sophisticated strategies requires increasingly sophisticated organizations
the internet as design standard
the internet, in developing new workplace arrangements, calls for managing new structural formats
managerial standards
managing new workplace standards calls for managing new forms of coordination and control
social contract
changes in the market environment and nature of work push managers to evaluate the effectiveness of their organization
change and challenge: MNES respond
- Designing an organization’s structure requires fitting it to conditions in the external environment. These conditions involve, among many others, legal regulations on ownership structures, degree of economics and expectations of alliance partners
- Organizing is the process of building the structure, systems, and culture that implement the MNE’s strategy
- The MNE specifies its organization to arrange its domestic and international units and activities, and the relationships among units
what is vertical differentiation
- Centralization (how high up) versus decentralization (how low down) decision making is
- Differentiation means that the company is composed of different units that work on different kinds of tasks with different degrees of authority
- Centralization is the degree to which high-level managers usually above the country level, make strategic decisions and delegate them to lower levels for implementation
- Decentralization is the degree to which lower-level managers, usually at or below the country level, make and implement strategic decisions
- In principle, decision-making should occur at the level of those who (1) are most directly affected by its outcome and (2) have the most direct knowledge of the situation
what is horizontal differentiation
- Vertical differentiation deals with the chain of chain of command that runs from the “top to the bottom” of the organization. Horizontal differentiation deals with the separate tasks or skills that run “sideways” in the organization
- A classical structure uses explicit vertical and horizontal differentiation to organize the workplace
functional structure
- group people based on common expertise and resources
- fit the organizationak demands of MNE’s that have narrow product lines
divisional structures
- they divide employees based on the product type, customer segment or geographical location
- duplicate functions and resources across divisions
- fit the organizational demands of the MNE that manages conventionally differentiated activities
- international division: MNE prefers this format when its international activities represent a small share of its total activity
what does an international division
- creates a critical mass of international
- competes with powerful domestic divisions for resources
- fits the demands of the MNE that generates most sales in a single nation
what is a worldwide product division
structure centralize decision-making authority
limits of the divisional structures…
the autonomy of each product division means that different subsidiaries from different product divisions within the same foreign country often report to different executives at headquarters
what is the global matrix structure
- Institutes overlap among functional and divisional forms
- Gives functional, product, and geographic groups a common focus
- Has dual-reporting relationships rather than a single line of command
- Fits the demands of MNE’s that cannot easily reconcile competing market pressures
limits of the global matrix structure
may short-limit the knowledge-generating and decision-making relationships that were the original promise of the matrix
what does MNE’s structure reflect
- the market circumstances
- strategic choice
- value chain configuration
- administrative legacy
- executive preference
