1. Welcome to class of Impact of Globalization on Organization of Firm’s Activities Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada

3. What does it mean?

4. Why now? Old business model is not competitive ↓ Trade barrier
↑ Trust b/w governments
↑ FDI permitted
↑ Democracy
↑ Emerging markets
↑ Education
↑ Travel
↑ Technology .

5. So, Strategic Mindset is Needed
Activities
Research and Development (R&D)
Production
Marketing
Services
Configured and Coordinated
↑ Sustainable Competitive Advantage (SCA) across countries
Strategic
That is, we need strategies

6. This is not a Strategy

7. The Strategies

8. Strategy and Structure
Sustainable Competitive Advantage
Efficiency and Responsiveness
Structure
International Division Structure
Area Division Structure
Global Product Division
Transnational (Hybrid) Structure
Seamless Organization  team and Internet
Reducing internal and external barrier

9. International Division Structure…
CEO
VP Product A
VP Product B
VP Product C
VP International
Domestic Market
Domestic Market
Domestic Market
International Market
Evolves from export department
Shipping across borders
When successful, add Int’l division
More % of sales coming from overseas

10. International Division Structure
Except sales, all activities are centered at HO
Advantages
Oversee export and foreign investment
Building and cultivating foreign business ↑
Because of dedicated international division
HO gives much support and attention to sales
Share learning across product division
No duplication of activities
Easy to negotiate abroad with governments, suppliers, retailers…
Because of size of company

11. Area Division Structure…
VP International
General Manager
(Far East)
General Manager
(Europe)
General Manager
(Latin America)
Country Manager
(Germany)
Country Manager
(France)
Country Manager
(Italy, etc.)
When International sales grow as a % of total company sales
Success of intl div leads to area div

12. Area Division Structure…
Advantages
↑ Efficiency due to globalization
↑ Effectiveness
↑ Local responsiveness
↑ Communication efficiency
↑ Improved employee morale
↑ Faster delivery
↓ Reduced bureaucracy
↓ Small inventory

13. Area Division Structure…
Strategic decision (↑ responsiveness)
Activities are dispersed or duplicated
GM has assembly plant in each regional market
Product development, purchasing, marketing, sales are regionally coordinated
HO decides which brand to sell, manufacture or market in regions -- Kellogg
However, Regional or Country manager has autonomy and discretionary power over
Marketing, pricing, production, sourcing
To meet the needs of region/country
GM, IBM, Philips

14. Multidomestic Affiliate Structure…

15. Multidomestic Affiliate Structure…
More power to CM acts as parent CEO
CM reports to RM
Manages HO product lines
But has considerable leeway in making production, marketing, service decisions
Affiliate/country is smaller version of parent
Performance is based on profit-centre criteria

16. Multidomestic Affiliate Structure…
Advantages
Disperse activities
Control through local decision making
HO managers do not need to
Travel much
Worry about local issues
Keep abreast with foreign markets, customers
Develop global managers  hire local CM
↓ Management Turnover

17. Multidomestic Affiliate Structure
Disadvantages
Does not do R & D
Transfer technology and adapt it
Does not export  does not bring $
Not competitive because they produce multiple products in small volume – efficiency is low
Production cost is higher than parent
Communication between Home and affiliate product division is more complex
HO does not learn from Affiliates
When self-sufficient, CM challenges RM
Dysfunctional behavior and moral problem

18. Global Product Divisions…

19. Global Product Divisions…
CEO
VP Product A
Worldwide
VP Product B
Worldwide
VP Product C
Worldwide
---R&D
---Production
---Marketing
---Accounting
---Service
---R&D
---Production
---Marketing
---Accounting
---Service
---R&D
---Production
---Marketing
---Accounting
---Service
Evolves from diversity of products

20. Global Product Divisions…

21. Global Product Divisions…
Activities are controlled - product group
HO managers run affiliate – 3/5 yr term
Specialization and global mindset is needed
Affiliates do not have much autonomy
Thus, play no independent strategic role
HO makes decision about products
Input from affiliates is discouraged
Because products are globally standardized
Role of affiliate is to implement strategy, and not to formulate it  Thus it is a cost centre
Highly efficient, but less responsive

22. Global Product Divisions…
Advantages
Chain of vertically integrated activities
Product division managers can configure activities based on costs and skills across countries
Thus efficient  adjust labor costs, political instability, product quality, exchange rate
Flexible – options among countries
Ideal for global strategies
Maximize competitiveness
By identifying competitors clearly

23. Comparison: Global and Area Structure
Global Multidomestic
Product Structure Area Structure
Product-Line Specialized Duplicated
Market Emphasis International National
Transfers Product/Technology Technology/Skills
Affiliate Evaluation Cost Center Profit Center
Affiliate Role Implement Strategy Develop & Implement strategy
Affiliate Autonomy Low High
Affiliate Management Expatriates, Local,
Short-Term Long-Term

24. Transnational (Hybrid) Structure..

25. Transnational (Hybrid) Structure..
Get advantages of both structures
Configuration and coordination of activities are mixed
Affiliates play leadership roles for some activities and supporting roles for others.
Decisions are based on maximizing the use of company skills and competencies, irrespective of activity location or affiliate nationality.
Company acts essentially as a network of activities with multiple headquarters spread across different countries.

26. Transnational (Hybrid) Structure
Affiliate roles shift over time and learning and sharing are emphasized.
Emphasis on extensive horizontal linkages, effective communication and extreme flexibility.

27. Affiliate Competence vs. its Initiative
Low affiliate capability
High affiliate capability
High localization pressures
Form Alliances or make Acquisitions
Take strategic Initiative
High globalization pressures
Follow Parent Instructions
Influence Parent Strategies

28. Seamless Organization
Destroy barriers inside and outside the organization
Barriers prevent learning, produce inefficiencies, and blunt responsiveness
Teams are the primary unit of analysis in the seamless organization
Seamless organizations try to remove boundaries inside the company 
The growth of Internet exchanges now enables companies of all sizes to access global suppliers and buyers without necessarily having a global presence.

29. Configuration and Coordination
Geographic positioning of activities
Concentrated  in one country
Dispersed  in many countries
Coordination
↓ if activity of business is independent
Single country, one place
↑ if we need to integrate across countries