Mgt 485 CHAPTER 11 ORGANIZING INTERNATIONAL OPERATIONS

Mgt Due Monday, March 29th Case Study Question(s) Due Monday, March 29th  Dan Simson: Project Mgr.  Discuss the cultural dimension(s) of time (e.g. temporal forces, past vs. future orientation, sequential vs. synchronous, orientation and value) and how they apply to this case  Discuss the organizational and strategic impacts, focusing on Dan Simson’s responsibilities to maximize his organization’s effectiveness (Profitabity, developing Human Resources, increasing market exposure)  Make and justify a recommendation as to how Dan Simson can be effective in this environment

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Mgt Organizational Consequence of Internationalization Aircraft Cameras Electronics Computers Telecommunications Aerospace Autos Synthetic fibers Cement Steel Clothing Packaged goods High Low High Pressure for Local Responsiveness Pressure for Globalization

Mgt Goals and Strategy EnvironmentSize Culture Technology Structure 1. Formalization 2. Specialization 3. Standardization 4. Hierarchy of Authority 5. Complexity 6. Centralization 7. Professionalism 8. Personnel Ratios

Mgt Initial Division Structure Used for Initial Entry into International Markets  Exporting  Common first choice for manufacturers of technologically advanced products  Firm can charge premium price due to little competition  Subsidiary  A common for handling finance-related businesses or other operations that require an on-site presence from the start

Mgt Subsidiaries During the Early Stage of Internationalization Home Office Departments Overseas Subsidiaries CEO ProductionMarketingFinancePersonnel V.P. International Operations FranceJapanEgyptAustraliaArgentina

Mgt International Division Structure  Advantages  Takes burden off the CEO  Receives top management attention  Promotes overall unified approach  Develops internationally experienced managers  Disadvantages  Separating domestic and international managers may cause differing objectives  Home office may not be able to allocate resources globally, thereby penalizing growth

Mgt An International Division Structure Home Office Departments Operating Divisions CEO ProductionMarketingFinancePersonnel Domestic Division Domestic Division Domestic Division Domestic Division International Division AustraliaJapanItaly Office Operations Marketing Government Relations

Mgt Global Product Division  Advantages  Helps to manage diversity  Able to cater to local needs  Marketing, production, and finance can be co- ordinated on a product-by-product global basis  Disadvantages  Duplication of facilities and staff personnel  Managers may pursue attractive short-term sites instead of long-term sites  Managers spend to much time trying to tap local instead of international markets Domestic divisions are given worldwide responsibility for product groups

Mgt A Global Product Division Structure CEO ProductionMarketin g FinancePersonnel South Americ a AfricaEurop e AustraliaFar East Product Division A Product Division B Product Division C Product Division D Product Division E Productio n MarketingFinancePersonnel Great Britain France Germany Italy Netherlands

Mgt Global Area Division  Advantages  Reduces cost per unit  Caters to local markets  Makes rapid decisions to accommodate environmental changes  Disadvantages  Difficulty reconciling a product emphasis with geographic orientation  Ignores new research and development by division groups Based on geographic rather than product orientation

Mgt A Global Area Division Structure Home Office Departments Operating Divisions CEO ProductionMarketingFinancePersonnel North America South America EuropeAsiaAfrica Great Britain France Germany Italy Netherlands

Mgt Global Functional Division  Advantages  Emphasizes functional expertise  Tight centralized control  Relatively lean managerial staff  Disadvantages  Difficulty co-ordinating manufacturing and marketing  Difficulty managing multiple product lines  Only CEO can be held accountable for profits Worldwide operations based primarily on function and secondarily on product

Mgt A Global Functional Structure CEO ProductionMarketingFinance Domestic Production Product A Product B Product C Product D Foreign Production Product A Product B Product C Product D Domestic Production Product A Product B Product C Product D Foreign Production Product A Product B Product C Product D

Mgt Mixed Organization Structures  Advantages  Allows organization to create the specific type of design to meet its needs  Disadvantages  Complexity increases  Difficulty arises in co-ordinating personnel Combines global product, area, and functional divisions to supplement its primary structure with a secondary one, and perhaps a tertiary (third) one

Mgt A Multinational Matrix Structure CEO ProductionMarketingFinancePersonnel Manager, Industrial Goods North America Manager, Industrial Goods Europe North AmericaIndustrial GoodsEurope

Mgt Meeting the Challenges of Globalization  Synergy - (2 + 2 = 5)  whole is greater than the sum of its parts  Organizational Synergy  Pooling knowledge across regions  Sharing resources to meet world-wide needs  Pooling purchases for greater negotiating power  Coordinating strategies to become more efficient  Vertically integrating to be more cost effective  Creating new businesses

Mgt Strategies:  Mutual adjustment  Use of direct, technically skilled supervisors  Use of integrative leadership  Technical training provided in-house  Use of standard milestones in work design  Flexible design standards Organizing for Product Integration

Mgt Information Technology Key Questions:  Which information systems are needed?  Are investments are worthwhile?  How does technology fit into management’s strategic thinking ?  How should users and specialists connect within the company?  How do you design systems to improve organizational performance?

Mgt Organizational Characteristics 3 most critical for international operations  Formalization  The use of defined structures used in decision making, communicating, and controlling  Objective - written descriptions  Subjective -informal controls  Specialization  The assigning of individuals to specific, well-defined tasks  Horizontal specialization  Vertical specialization  Centralization  Management system in which important decisions are made at the top

Mgt Symptoms of Structural Deficiency  Decisions are delayed or lacking in quality  Organization does not respond innovatively to a changing environment  Too much conflict from departments being at cross purposes is evident

Mgt Relate “Structure” to “Culture”  How do cultural dimensions affect structural dimensions?  Are some structures inherently more effective in some cultures? Use Hofstede (p ) & Trompenaar’s (p. 126) Option for additional 30 Points