International Business, 8th Edition Griffin & Pustay Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Learning Objectives Define and discuss the nature of international organization design, and identify and describe the initial influence of international business activity on organization design Identify and describe five advanced forms of international organization design and discuss hybrid global designs Identify and describe key related issues in global organization design Explain the general purpose of control and the levels of control in international business Describe how international firms manage the control function Copyright © 2015 Pearson Education, Inc.

The Nature of International Organization Design Allocate Organizational Resources Assign Tasks Provide Information Collects and Transmits Information Copyright © 2015 Pearson Education, Inc.

Global Organization Designs Global Design Area Knowledge Product Knowledge Functional Knowledge Copyright © 2015 Pearson Education, Inc.

Global Organization Designs (Cont.) Common Forms Product Design Area Design Functional Design Customer Design Matrix Design Managerial Philosophy Ethnocentric Polycentric Geocentric Copyright © 2015 Pearson Education, Inc.

Related Products Unrelated Products Global Product Design M-Form (Multidivisional) Unrelated Products H-Form (Holding) Copyright © 2015 Pearson Education, Inc.

Global Product Design (Cont.) Advantages Expertise Efficiencies Global Marketing Geocentric Corporate Philosophies Disadvantages Expensive Duplication Knowledge Development Coordination Levels Corporate Learning Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Global Area Design Advantages Marketing-Driven Strategy Brand-Name Reputation Expertise about the Local Market Disadvantages May sacrifice cost efficiencies May slow diffusion of technology Results in duplication of resources Raises costs of coordination Impedes global product planning Copyright © 2015 Pearson Education, Inc.

Global Functional Design Advantages Transfer Expertise Centralize Control Focus on Functions Disadvantages Limited Products or Customers Difficult to Coordinate Duplication of Resources Copyright © 2015 Pearson Education, Inc.

Global Customer Design Opportunities Serve Diverse Customers Focus Marketing Approach Challenges Duplication of Efforts Coordination Issues Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Global Matrix Design Copyright © 2015 Pearson Education, Inc.

Global Matrix Design (Cont.) Advantages Organizational Flexibility Coordination and Comunication Disadvantages Limited use in firm with few products Limited use in fairly stable markets Involves more than one manager Creates a paradox in authority Tends to promote compromises Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Hybrid Global Designs Size Strategy Technology Environment Culture Copyright © 2015 Pearson Education, Inc.

Related Issues in Global Organization Design Centralization versus Decentralization Role of Subsidiary Boards of Directors Coordination in the Global Organization Copyright © 2015 Pearson Education, Inc.

Centralization versus Decentralization Decision Making Focus Local Market Response Overall Needs of the Firm Corporate Headquarters Lower Higher Local Subsidiary Copyright © 2015 Pearson Education, Inc.

Coordination in the Global Organization Organizational Hierarchy Rules and Procedures Ad Hoc Coordination Techniques Informal Coordination Mechanisms Informal Management Network Copyright © 2015 Pearson Education, Inc.

The Control Function in International Business Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Strategic Control Strategic Control Formulate Strategy Implement Strategy Role of Strategic Control Financial Resources Inventory Management Exchange Rate Fluctuations Joint Ventures and Strategic Alliances Copyright © 2015 Pearson Education, Inc.

Organizational Control Responsibility Center Control Generic Organizational Control Planning Process Control Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Operations Control Processes Performance Copyright © 2015 Pearson Education, Inc.

Managing the Control Function in International Business Effectively Manage Control Establishing International Control Systems Essential Control Techniques Behavioral Aspects of International Control Copyright © 2015 Pearson Education, Inc.

Establishing International Control Systems Copyright © 2015 Pearson Education, Inc.

Essential Control Techniques Accounting Systems Policies, Procedures, Rules and Regulations Performance Ratios Copyright © 2015 Pearson Education, Inc.

Behavioral Aspects of International Control Resistance to Control Reaction to Over-Control Inappropriate Focus Increased Accountability Overcoming Resistance to Control Participation Accountability Diagnostics Culture Copyright © 2015 Pearson Education, Inc.