CHAPTER 15 COMPARATIVE STRATEGIC MANAGEMENT AND ORGANIZATION DESIGN: UNDERSTANDING COMPETITORS AND COLLABORATORS

ORGANIZATIONS ALIKE: GLOBALIZATION AND CONVERGENCE

CONVERGENCE The increasing similarity of management practices

EXHIBIT 15.1 The Effects of Globalization on the Convergence of Strategy and Structure

WHY CONVERGENCE? Global customers and products Growing levels of industrialization and economic development Global competition and global trade

Why convergence? (continued) Cross-border mergers, acquisitions, and alliances Cross-national mobility of managers Internationalization of business education

WHY DO MANAGEMENT PRACTICES DIFFER? National context - includes national culture, the country’s available labor and other natural resources

COMPARATIVE STRATEGY FORMULATION: EXAMPLES FROM AROUND THE WORLD US model: used as basis for comparison –represents the attempt of a rational decision making process

THE US MODEL OF STRATEGY FORMULATION 1 -Define the business and its mission 2- Define objectives 3- Assess the company's situation: SWOT, competitors' actions 4- Craft strategy content

DEFINING THE BUSINES AND ITS MISSION The mission statement tells the organizational members and outsiders what the company does and why it exists

US MISSION STATEMENTS Often emphasize market issues closely related to key elements of success in their respective industries

FRENCH AND BRITISH MISSION STATEMENTS British mission statements –focus on strategic issues, emphasize shareholder returns French mission statements –reflect a national context in a social democracy

EX 15.3

DEFINING OBJECTIVES National differences exist mostly in priorities financial or strategic

EXHIBIT 15.4 FINANCIAL AND STRATEGIC OBJECTIVES OF U.S., JAPANESE, AND BRITISH SUBSIDIARIES

ASSESSING THE COMPANY'S SITUATION Management's assessment of the situation faced by their companies US managers favor techniques such as the SWOT and competitive analyses

GERMAN AND BRITISH EXAMPLES Successful companies from both countries identified the same key success factors Differences: the organizational characteristics that managers believe achieve the key success factors

NATIONAL DIFFERENCES IN STRATEGY CONTENT: KEIRETSU NATIONAL DIFFERENCES IN STRATEGY CONTENT: KEIRETSU Compete with a high ratio of products where the company can add value with knowledge Emphasize production to improve productivity Use the resources of networks

COMPARATIVE ORGANIZATION DESIGN Multinational managers must deal with organizations from different societies Each society provides a unique national context for the design of organizations

BASIC CONCEPTS IN COMPARATIVE ORGANIZATIONAL DESIGN Vertical differentiation Horizontal differentiation Span of control Integration Standardization

Formalization Mutual adjustment Basic concepts in comparative organizational design, continued

EXHIBIT 15.6 PREFERRED ORGANIZATIONAL HIERARCHIES

CONTROL MECHANISMS Link the organization vertically Five broad types of control: –personal –output –bureaucratic –decision making –cultural

NATIONAL CULTURE AND ORGANIZATIONS Hofstede: power distance and uncertainty avoidance the most important –influence basic problems of organizational design-- differentiation and integration F See Exhibit 15.7 next

ADHOCRACY Low power distance + low uncertainty avoidance = adhocracy Fits cultures where people can tolerate ambiguity and have less need for formalized rules and regulations

THE ADHOCRACY DESIGN Vertical and horizontal differentiation: fewer levels and wider span of control Control mechanisms: mutual adjustment Decision making: Participative or consultative

PROFESSIONAL BUREAUCRACY Small power distance + high uncertainty avoidance norms = professional bureaucracy

THE PROFESSIONAL BUREAUCRACY DESIGN Vertical and horizontal differentiation: moderate levels Control mechanisms: standardization of skills. Decision making: centralized decision making

FULL BUREAUCRACY High power distance + high uncertainty avoidance = full bureaucracy Full bureaucracy is the most formalized of the Hofstede organization types

FULL BUREAUCRACY DESIGN Vertical and horizontal differentiation: Tall pyramids and narrow spans of control Control mechanisms: Standardization and a high degree of formalized rules Decision making: Highly centralized

FAMILY BUREAUCRACY Occurs in countries with large power distance norms and low uncertainty avoidance norms. It most parallels an extended family with a dominant patriarch or father figure.

FAMILY BUREAUCRACY DESIGN Vertical and horizontal differentiation: small and low specialization Control and coordination mechanisms: direct contact Decision making: highly centralized See key relationships in Exhibit 15.9 next

THE JAPANESE CONSENSUS BUREAUCRACY: A SPECIAL CASE? Should favor the full bureaucracy Unique style of group orientation = consensus bureaucracy

JAPANESE CONSENSUS BUREAUCRACY DESIGN Vertical differentiation: little job specialization for individuals Control mechanisms: favor cultural control over bureaucratic control Decision making: consensual - see Exhibit next

SOCIAL INSTITUTIONS ANDTHE KOREAN CHAEBOL

DISTINCT ORGANIZATIONAL FEATURES Family-dominated and multi-industry conglomerates Extensive family control Paternalistic leadership Centralized planning - reports directly to the chairman Dominated much of Korean business

INSTITUTIONAL CHANGE AND THE CHAEBOL Coercive isomorphism - government support fostered the growth of the Korean chaebol –Close relationships with banks for financing –Protection by the government

Institutional change and the chaebol, continued Recent government policies –reduced support –breaking networks –allowed to fail

CONCLUSIONS Understanding different approaches to strategy and organization design: –helps to deal with international competitors –helps a company become better collaborators –facilitates local operations

Conclusions, continued Pressures for convergence National cultural and social institutional lead to differences