Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four chapter twenty Strategic Planning, Organizational Design, and Control of the Firm Strategic Planning, Organizational Design, and Control of the Firm Concept Preview After reading this chapter, you should be able to 1. describe the steps in the global planning process. 2. understand the importance of corporate mission statements, objectives, quantified goals, and strategies. 3. describe the new directions in strategic planning. 4. discuss the various organizational forms. 5. understand the concept of the virtual corporation. 6. explain why decisions are made where they are among parent and subsidiary units of an international company. 7. understand how an IC can maintain control of a joint venture, or of a company in which the IC owns less than 50 percent of the voting stock. 8. list the types of information that an IC needs to have reported to it by its units around the world. 9. explain why successful managers must sometimes relinquish control in a world out of control, as exemplified by the Internet. 20-1

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Global Strategic Planning  Why plan globally? –standardization and planning  Process –analyze the company’s external environments –analyze the company’s internal environments –define the company’s business and mission –set corporate objectives –quantify goals –formulate strategies –make tactical plans  Global and domestic planning processes similar 20-2

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Analyze Domestic, International, and Foreign Environments  Present values of forces  Trends  Continuous  Uncontrollable 20-3

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Analyze Corporate Controllable Variables  Situational analysis and forecast  recently this analysis was updated by Porter—value chain  In the 1960’s—transvection analysis  What are the strengths and weaknesses?  What are our human and financial resources?  Where are we with respect to our present objectives?  Should we delete goals, alter them, or add new ones? 20-4

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Formulate Corporate Strategies  Alternate corporate strategies (action plans) that seem plausible given the environment  Strategies may be general  Scenarios are multiple, plausible stories for probable futures  Contingency plans for worst- and best-case scenarios and critical events as well  Tactical (operational) plans spell out the details of how to reach the objectives 20-5

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Management Tools Percent Most Used Tool used Mission statement90 Customer Satisfaction Survey90 Total Quality Management76 Competitor Profiling74 Percent Least Used Tool used Value chain analysis27 Five forces analysis24 Mass customization20 Dynamic simulations

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Plan Implementation Facilitators  Policies –broad guidelines issued by management –to assist lower-level managers in handling recurring problems –permit discretionary action and interpretation –economizes managerial time –promotes consistency among the operating units  Procedures –procedures prescribe how certain activities will be carried out –ensures uniform action on part of all corporate members –example—budgets and annual reports for subsidiaries 20-7

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Strategic Plans  Kinds of strategic plans –time horizon –organizational level  Methods of planning –Top-down –Bottom-up –Iterative  New directions in strategic planning –who does the planning –how it is done –contents of the plan 20-8

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four 3M Strategic Planning Cycle 20-9 Figure 20.2 Business Market Divisions Groups Markets Corporate Dec.Jan.Feb.Mar.Apr.MayJuneJulyAug.Sept.Oct.Nov.Dec. Strategic reviews Call for plans Operating reviews Feedback and direction Operating plans and budgets Plan development Inputs

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Summary of the Planning Process  Top management must assume a more explicit strategic decision-making role  The nature of planning must undergo a fundamental change from an exercise in forecasting to an exercise in creativity  Planning processes and tools that assume a future much like the past must be replaced by a mind-set that is obsessed with being the first to recognize change and turn it into a competitive advantage.  The role of the planner must change from being a purveyor of incrementalism to being a crusader for action and an alter ego to line management.  Strategic planning must be restored to the core of line management responsibilities

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Organizational Design  Find the most effective way to departmentalize to take advantage of the efficiencies gained from the specialization of labor.  Coordinate the activities of those departments to enable the firm to meet its overall objectives 20-11

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four International Division Figure 20.3 International Latin America Latin America Asia Africa Europe Product Division C Product Division C Product Division B Product Division B Product Division A Product Division A CEO

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Global Corporate Form—Product Figure 20.4 Corporate Staff— includes International Division with area experts Corporate Staff— includes International Division with area experts CEO Worldwide Product Division A Worldwide Product Division A Worldwide Product Division B Worldwide Product Division B Worldwide Product Division C Worldwide Product Division C

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Global Corporate Form— Geographical Regions Figure 20.5 North American Division Asia/Pacific Division Asia/Pacific Division Europe/Africa/ Mideast Division Europe/Africa/ Mideast Division Corporate Staff—includes Product Specialists Corporate Staff—includes Product Specialists CEO Latin American Division Latin American Division

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Global Corporate Form—Function Figure 20.6 Marketing Administration Engineering Manufacturing CEO Finance

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Hybrid Organizational Form Figure 20.7 Corporate Staff Domestic Division A Domestic Division A Domestic Division B Domestic Division B International Division International Division CEO Original Equipment (Products A & B) Original Equipment (Products A & B) Pacific Division (Products A & B) Pacific Division (Products A & B) Worldwide Product Division C Worldwide Product Division C Serves Products A & B in locations other than in the Pacific

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Other Organizational Designs  Matrix –multiple organizational dimensions –multiple reporting responsibilities –overlapping responsibilities  Virtual corporation –network corporation –resources outside traditional organizational boundaries  Horizontal corporation –utilizes teams drawn from different areas of the organization –removes the constraints of traditional corporate structure –empowerment at middle management levels 20-17

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Control  Subsidiaries, 100 % owned  Where are decisions made? –product and equipment –competence of the subsidiary management –reliance of the subsidiary management by the international corporation headquarters –detriment of a subsidiary for the benefit of the enterprise –subsidiary frustration  Joint ventures and subsidiaries, less than 100% owned  Where are decisions made?  Headquarters does not have as much freedom in this ownership situation –management contract –control of the finances –control of the technology –placing people from the IC headquarters in important executive positions

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four “De-jobbing”  Jobs created by mass production and large organizations are disappearing  Technology enables automation  Project-specific tasks versus jobs  Hierarchy implodes  Traits of companies  Encourage workers to make kinds of operating decisions that used to be reserved for managers –give employees the information they need to make such decisions –give employees lots of training to create the kind of understanding of business and financial issues that used to concern only an owner or executive. –give employees a stake in the fruits of their labor—a share of profits

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Section four Managing in a World Out of Control  Do simple things first  Learn to do them flawlessly  Ad new layers of activity over the results of the simple task  Don’t change the simple things  Make the new layer work as flawlessly as the simple  Repeat ad infinitum 20-20