1. Copyright © 2015 Pearson Education, Inc.16-1 International Business Environments & Operations 15e Daniels ● Radebaugh ● Sullivan

2. Copyright © 2015 Pearson Education, Inc.16-2 Chapter 16 The Organization of International Business

3. Copyright © 2015 Pearson Education, Inc.16-3 Learning Objectives  Profile the evolving process of organizing a company for international business  Describe the features of classical structures  Describe the features of neoclassical structures  Compare and contrast the idea of the hierarchy versus the hyperarchy

4. Learning Objectives  Discuss the systems used to coordinate international activities  Discuss the systems used to control international activities  Profile the role and characteristics of organizational culture  Profile the role and characteristics of corporate universities Copyright © 2015 Pearson Education, Inc.15-4

5. Copyright © 2015 Pearson Education, Inc.16-5 Introduction Learning Objective: Profile the evolving process of organizing a company for international business

6. Copyright © 2015 Pearson Education, Inc.16-6 Introduction  The goal of MNEs is to standardize activities to maximize global efficiency and at the same time adapt activities to maximize local effectiveness  To achieve this goal the MNE must establish the right structure to implement it

7. Copyright © 2015 Pearson Education, Inc.16-7 Introduction Factors Affecting Organizing Operations

8. Copyright © 2015 Pearson Education, Inc.16-8 Changing Situations, Changing Organizations  Environmental trends, industry conditions, and market opportunities are forcing change Expansion of international business The Internet as a design standard Managerial standards Social contracts Building a ‘magical’ organization

9. Copyright © 2015 Pearson Education, Inc.16-9 Organization Structure Learning Objective: Describe the features of classical structures

10. Copyright © 2015 Pearson Education, Inc.16-10 Organization Structure  Organizational structure the formal arrangement of roles, responsibilities, and relationships in the MNE Vertical differentiation  the balance between the centralization and decentralization of authority Horizontal differentiation  involves specifying which people do which jobs in which units

11. Copyright © 2015 Pearson Education, Inc.16-11 Vertical Differentiation  Centralization versus Decentralization Centralization  degree to which high-level managers make strategic decisions and delegate them to lower levels for implementation Decentralization  degree to which lower-level managers make and implement strategic decisions

12. Copyright © 2015 Pearson Education, Inc.16-12 Horizontal Differentiation  Horizontal differentiation Specifies the set of tasks to accomplish Divides the tasks among SBUs, divisions, departments, committees, teams, jobs, and individuals Stipulates superior and subordinate relationships  Classical structures used to achieve this functional, area or divisional, matrix or mixed

13. Copyright © 2015 Pearson Education, Inc.16-13 Functional Structure  The functional structure groups people based on common expertise and resources is popular among companies with narrow product lines

14. Copyright © 2015 Pearson Education, Inc.16-14 Functional Structure The Functional Structure

15. Copyright © 2015 Pearson Education, Inc.16-15 Divisional Structure  The divisional structure divides employees based on the product, customer segment, or geographical location duplicates functions and resources across divisions  International division  Global product structure  Worldwide area structure

16. Copyright © 2015 Pearson Education, Inc.16-16 Divisional Structure The International Division Structure

17. Copyright © 2015 Pearson Education, Inc.16-17 Divisional Structure Product Division Structure

18. Copyright © 2015 Pearson Education, Inc.16-18 Divisional Structure Geographic (area) Division Structure

19. Copyright © 2015 Pearson Education, Inc.16-19 Matrix Structure  The matrix structure Institutes overlaps among functional and divisional forms Gives functional, product, and geographic groups a common focus Violates the unity of command principle  has dual reporting relationships rather than a single line of command

20. Copyright © 2015 Pearson Education, Inc.16-20 Matrix Structure Matrix Division Structure

21. Copyright © 2015 Pearson Education, Inc.16-21 Mixed Structure  The mixed structure Combines elements of the functional, area, and product structures Allows the firm to better adapt to market conditions worldwide

22. Copyright © 2015 Pearson Education, Inc.16-22 Neoclassical Structures Learning Objective: Describe the features of neoclassical structures

23. Copyright © 2015 Pearson Education, Inc.16-23 Neoclassical Structures  Neoclassical structures emphasize coordination and cultivation not command and control Network structure  arranges differentiated elements in patterned flows of activity that allocate people and resources to problems and projects in a decentralized manner  keiretsu, sogo shosha, chaebol Virtual organization  dynamic arrangement among partners that efficiently adapts to market change

24. Copyright © 2015 Pearson Education, Inc.16-24 Neoclassical Structures A Simplified Network Structure

25. Neoclassical Structures  Virtual Organization  A virtual organization is a temporary arrangement among independent companies, suppliers, customers and rivals that “works across space time and organizational boundaries with links strengthened by webs of communication technology” Copyright © 2015 Pearson Education, Inc.16-25

26. Copyright © 2015 Pearson Education, Inc.16-26 Coordinated Systems Learning Objective: Discuss the systems used to coordinate international activities

27. Copyright © 2015 Pearson Education, Inc.16-27 Coordinated Systems  Coordination by: Standardization - relies on objectives and schedules to set rules and regulations Plan - requires interdependent units to meet common deadlines and objectives Mutual adjustment - depends on managers interacting extensively with their counterparts

28. Control Systems  Learning Objective: Discuss the systems used to control international activities Copyright © 2015 Pearson Education, Inc.15-28

29. Copyright © 2015 Pearson Education, Inc.16-29 Control Systems  Control systems define how managers compare performance to plans, identify differences, and where found, assess the basis for the gap and impose corrections  Bureaucratic control  Market control  Clan control

30. Copyright © 2015 Pearson Education, Inc.16-30 Control Mechanisms  Control tools include Reports Visits to subsidiaries Evaluative metrics Information systems

31. Copyright © 2015 Pearson Education, Inc.16-31 Organization Culture Learning Objective: Profile the role and characteristics of organizational culture

32. Copyright © 2015 Pearson Education, Inc.16-32 Organization Culture  Organization culture the coherent set of assumptions about an MNE and its goals and practices shared by its members  management values and principles  work climate and atmosphere  ‘how we do things around here’ patterns  traditions  ethical standards

33. Copyright © 2015 Pearson Education, Inc.16-33 Organization Culture and Strategy  An organization’s culture shapes its strategic moves varies with the strategy the MNE pursues

34. Copyright © 2015 Pearson Education, Inc.16-34 Organization Culture and Strategy Strategy and Organizational Culture in International Business

35. Copyright © 2015 Pearson Education, Inc.16-35 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.