Organizational Development and Change Management

Organizational Development and Change Management
Lecture 10: Designing International Organization Structures

Objectives To discuss the different structures that MNCs can adopt
To discuss the advantages and disadvantages of those structures

MOTHER-DAUGHTER STRUCTURE

MNCs WITH AN INTERNATIONAL DIVISION

WORLDWIDE FUNCTIONAL STRUCTURE

Questions What are the advantages of a world-wide functional structure? What are the disadvantages of a world-wide functional structure?

WORLDWIDE FUNCTIONAL STRUCTURE
Similar advantages and disadvantages to domestic functional structures (economies of scale within functions, skill development, but slow response and decision-making). But less effective in many MNCs: inability to adapt readily to the greater local diversity of business environments. Typically found in firms with narrow product ranges in relatively stable technical environments where technical excellence is crucial.

WORLDWIDE GEOGRAPHIC GROUPS

Question What sort of industry characteristics might lead MNCs to establish world-wide geographic groups?

WORLDWIDE GEOGRAPHIC GROUPS
Typically found in low technology industries where sales and marketing are key functions and vary regionally. Product range diversity tends to be limited in such MNCs and products are often modified extensively to suit local markets.

WORLDWIDE GEOGRAPHIC GROUPS An Example: Unilever
Unilever Executive is responsible for managing profit and loss, and delivering growth across our regions, categories and functions. Paul Polman - Chief Executive Officer James A Lawrence - Chief Financial Officer Sandy Ogg - Chief HR Officer Professor Geneviève Berger - Chief Research & Development Officer Manvinder Singh (Vindi) Banga - President Foods Douglas Anderson Baillie - President of Western Europe Harish Manwani - President, Asia Africa Michael B. Polk - President, Americas

Worldwide Product Structure

Questions When do you think that a world-wide product structure would be appropriate? Why do you think that it might be appropriate under those conditions?

Worldwide Product Structure
Often found in large MNCs that have a variety of diverse product ranges that need little adaptation for different markets, and where technological scale economies are important.

Worldwide Product Structure An Example: Lafarge
Chairman and Chief Executive Officer Chief Financial Officer Vice-President Organization and Human Resources Vice-President Strategy, Business Development and Public Affairs Vice-President Communications Co-President of the Cement Business * 3 Co-President of the Aggregates and Concrete Business * 2 President of the Gypsum Business

Worldwide Matrix

Proctor and Gamble – A Matrix?
Chairman of the Board President and Chief Executive Officer Chief Financial Officer Senior Vice President and Treasurer Chief Technology Officer Global Product Supply Officer Vice Chair - Global Operations President - Global Prestige Products Group President - Global Hair Care Group President - Global Fabric Care Vice Chair - Global Health and Well-Being Group President - Global Home Care President - Greater China President - Western Europe Group President - North America Group President - Asia Group President - Central and Eastern Europe, Middle East and Africa President - Latin America President - Global Wal*Mart Team President - Special Assignment Corporate Officer - Special Assignment

Questions What information on the preceding slide suggests that Proctor and Gamble has a matrix structure? What reasons lie behind this choice of structure?

Proctor and Gamble – A Matrix?
Chairman of the Board President and Chief Executive Officer Chief Financial Officer Senior Vice President and Treasurer Chief Technology Officer Global Product Supply Officer Vice Chair - Global Operations President - Global Prestige Products Group President - Global Hair Care Group President - Global Fabric Care Vice Chair - Global Health and Well-Being Group President - Global Home Care President - Greater China President - Western Europe Group President - North America Group President - Asia Group President - Central and Eastern Europe, Middle East and Africa President - Latin America President - Global Wal*Mart Team President - Special Assignment Corporate Officer - Special Assignment

Question Take a look at the next two slides on Google and Microsoft.
Why do they appear to have different organizational structures?

Google’s Executive Officers
Eric Schmidt, Chairman of the Board and Chief Executive Officer Sergey Brin, Co-Founder and President, Technology Larry Page, Co-Founder and President, Products Nikesh Arora, President, Global Sales Operations and Business Development Shona L. Brown, Senior Vice President, Business Operations David C. Drummond, Senior Vice President, Corporate Development and Chief Legal Officer Alan Eustace, Senior Vice President, Engineering and Research Patrick Pichette, Senior Vice President and Chief Financial Officer Jonathan Rosenberg, Senior Vice President, Product Management

Microsoft’s Senior Leaders
Steve Ballmer Chief Executive Officer Lisa Brummel Senior Vice President, Human Resources Jean-Philippe Courtois President, Microsoft International Kurt DelBene President, Microsoft Office Division Peter Klein Chief Financial Officer Andrew Lees President, Mobile Communications Business Qi Lu President, Online Services Division Mich Mathews Senior Vice President, Central Marketing Group Don A. Mattrick President, Interactive Entertainment Business Bob Muglia President, Server and Tools Business Craig Mundie Chief Research and Strategy Officer Ray Ozzie Chief Software Architect Rick Rashid Senior Vice President, Research Eric Rudder Senior Vice President, Technical Strategy Steven Sinofsky President, Windows and Windows Live Division Brad Smith (LCA) General Counsel and Senior Vice President, Legal and Corporate Affairs B. Kevin Turner Chief Operating Officer Hank Vigil Senior Vice President, Consumer Strategy and Partnerships

Question Look at the next slide on Subway.
What does the information tell us about Subway?

Subway’s Departments Franchise Sales New Business Development
Subway Real Estate Corp Store Design Franchisee Services Operations Creative Services Customer Care Public and Community Relations Publications Profit Building & Local Marketing Meetings and Events Research & Development International

Subway Stores Locations – Selected Countries
Country # of Stores AUSTRALIA 1301 MEXICO 541 BRAZIL 740 NEW ZEALAND 239 CANADA 2704 RUSSIAN FEDERATION 298 CHINA 262 SAUDI ARABIA 46 FRANCE 303 SINGAPORE 94 GERMANY 613 UNITED KINGDOM 1426 INDIA 242 UNITED STATES 24728 JAPAN 293 TOTAL 35874 US as a percentage of Total 69%

ERNST AND YOUNG’S PRE-2008 ORGANIZATIONAL STRUCTURE: MOTHER-DAUGHTER (FRANCHISING)

Questions Why did Ernst and Young (and other auditors) have this company structure? What are the disadvantages of such a structure?

ERNST AND YOUNG’S 2008 ORGANIZATIONAL STRUCTURE: WORLDWIDE GEOGRAPHIC GROUPS

Intended Consequences of New Structure
Facilitate greater consistency in service quality Meet the demands of multi-national customers better Streamline processes and programmes within Ernst and Young Promote learning between partnerships Bring ‘smaller country practices together with larger ones’ to allow for ‘greater sharing of resources and knowledge.

First Solar Quick Facts and Figures Formed in 1999
Largest manufacturer of thin film solar modules Fastest energy payback time of any PV technology Common stock is traded on the NASDAQ Stock Market Number of employees: 5,500+ Headquarters: Arizona, US Manufacturing facilities: Germany, Malaysia, and the US Sales and Marketing: Australia, France, Germany, Spain, and the US Project development: Canada, China, and the US Government affairs: Belgium, Germany, and the US

Questions How might first Solar be structured?
What are your reasons for thinking this?

First Solar – Executive Management
Executive Chairman Chief Executive Officer President Executive Vice President, Human Resources Executive Vice President, General Counsel Corporate Secretary Executive Vice President, Marketing and Product Management Executive Vice President, Public Affairs President, Utility Systems and Chief Financial Officer Chief Accounting Officer Chief Technology Officer Vice President for Sales, Managing Director of First Solar GmbH

FORMS OF INTERNATIONAL CO-ORDINATION IN FOUR TYPES OF PROFESSIONAL SERVICES FIRMS
Reciprocity-Based International Networks of Firms Collegially Co-ordinated International Firm Financially Controlled International Firm Hierarchically Controlled International Firm Type of International Governance N/A Committee Public limited company Private company Strength and Type of Control Mechanisms Weak (social) Weak, (bureaucratic) Relatively strong, financial Relatively strong, bureaucratic Focus of Training Very limited training, if any Consistency Limited training Firm-specific technical and behavioural standards Degree of Standardization of Routines Very limited Limited Relatively high Career systems Specific to individual firms in network Firm specific, ‘up or out’ system Industry specific, high mobility across firms Aims of Employees Become a partner Short-term financial rewards

Conclusions There are similarities between the advantages and disadvantages associated with international organizational structures and corresponding national organizational structures that we examined earlier However, international structures are likely to be more complex as the organization faces a wider range of challenges (different product markets, governments, and regulations).

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