© 2008 Pearson Prentice Hall 8-1 Chapter 8: Organization Structure and Control Systems PowerPoint by Hettie A. Richardson Louisiana State University

© 2008 Pearson Prentice Hall 8-2 Opening Profile: Changing Structures in Emerging Markets Expansion modes in emerging markets may not fit the mainstream MNC model Many are “born global” Competition is limited in niche businesses They thrive in old-economy industries abandoned by established MNCs

© 2008 Pearson Prentice Hall 8-3 Opening Profile: Changing Structures in Emerging Markets Family based governance structures and rigid control systems must be redefined Hybrid structures and fast-growth entities will emerge

© 2008 Pearson Prentice Hall 8-4 Organizational Structure Must evolve to accommodate internationalization Must “fit” with strategy Should be contingency based

© 2008 Pearson Prentice Hall 8-5 Evolution and Change in Structures Stages model Alcoa Created smaller units Linked geographically dispersed, but similar businesses (e.g., Brazil and Australia)

© 2008 Pearson Prentice Hall 8-6 International Division Organized along functional, product, or geographic lines IBM World Trade Pepsi Cola International

© 2008 Pearson Prentice Hall 8-7 Global Functional Structure Designed on the basis of the company’s functions Allows for functional specialization and economies of scale

© 2008 Pearson Prentice Hall 8-8 Organizing for Globalization Need for differentiation Need for globalization IBM Rationalization Development of alliances

© 2008 Pearson Prentice Hall 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

© 2008 Pearson Prentice Hall 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)

© 2008 Pearson Prentice Hall 8-13 Emergent Structural Forms Interorganizational networks Royal Philips Electronics Intel Global e-corporation network structure

© 2008 Pearson Prentice Hall 8-14 Emergent Structural Forms Transnational corporation (TNC) network structure Asea Brown Boveri (ABB)

© 2008 Pearson Prentice Hall 8-15 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

© 2008 Pearson Prentice Hall 8-16 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

© 2008 Pearson Prentice Hall 8-17 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 8-18 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 8-19 The Appropriateness of Systems Where are top managers from? US individualism vs. Japanese collectivism

© 2008 Pearson Prentice Hall 8-20 The Role of Information Systems US MNCs monitor via specific functional reports Inaccurate information, different norms, MIS adequacy Noncomparability of performance data

© 2008 Pearson Prentice Hall 8-21 Evaluation Variables across Countries Adjust statements to reflect variables unique to each country Take nonfinancial measures into account