1. © 2008 Pearson Prentice Hall 8-1 Chapter 8: Organization Structure and Control Systems PowerPoint by Hettie A. Richardson Louisiana State University

2. © 2008 Pearson Prentice Hall 8-2 Organizational Structure Must evolve to accommodate internationalization Must “fit” with strategy Should be contingency based

3. © 2008 Pearson Prentice Hall 8-3 Evolution and Change in Structures Stages model Alcoa Created smaller units Linked geographically dispersed, but similar businesses (e.g., Brazil and Australia)

4. © 2008 Pearson Prentice Hall 8-4 Domestic Structure Plus Foreign Subsidiary

5. © 2008 Pearson Prentice Hall 8-5 International Division Organized along functional, product, or geographic lines IBM World Trade Pepsi Cola International

6. © 2008 Pearson Prentice Hall 8-6 Global Functional Structure Designed on the basis of the company’s functions Allows for functional specialization and economies of scale

7. © 2008 Pearson Prentice Hall 8-7 Global Product (Divisional) Structure

8. © 2008 Pearson Prentice Hall 8-8 Global Geographic (Area) Structure

9. © 2008 Pearson Prentice Hall 8-9 Organizing for Globalization Need for differentiation Need for globalization IBM Rationalization Development of alliances

10. © 2008 Pearson Prentice Hall 8-10 Comparative Management in Focus: The Overseas Chinese Global Network “Chinese commonwealth” Overseas Chinese Control $2 trillion in liquid assets Contribute 80% of the capital for the PRC Contribute 70% of the private sector in Malaysia, Thailand, Indonesia, and the Philippines

11. © 2008 Pearson Prentice Hall 8-11 Comparative Management in Focus: The Overseas Chinese Global Network The Overseas Chinese business culture Business largely confined to family and trusted friends—guanxi Adherence to patriarchal authority Thrift and a high savings level Investment in tangible goods Wary outlook

12. © 2008 Pearson Prentice Hall 8-12 Organizing to “Be Global, Act Local” Colgate-Palmolive Primary structure is geographic CEO oversees centralized operations Levi Strauss Allows managers to act independently Keeps some centralized control, but decentralizes control of foreign subsidiaries

13. © 2008 Pearson Prentice Hall 8-13 Management Focus: Proctor and Gamble’s Structure P&G/Gillette merger: Gillette adopts P&G’s organizational structure P&G’s structure: Global Business Unit (GBU) Market Development Organization (MDO) Global Business Services (GBS)

14. © 2008 Pearson Prentice Hall 8-14 Emergent Structural Forms Interorganizational networks Royal Philips Electronics Intel Global e-corporation network structure

15. © 2008 Pearson Prentice Hall 8-15 Emergent Structural Forms

16. © 2008 Pearson Prentice Hall 8-16 Emergent Structural Forms

17. © 2008 Pearson Prentice Hall 8-17 Emergent Structural Forms Transnational corporation (TNC) network structure Asea Brown Boveri (ABB)

18. © 2008 Pearson Prentice Hall 8-18 Choice of Organizational Form

19. © 2008 Pearson Prentice Hall 8-19 Assignment Compare fig 8.6 above with fig 8.7 in the book Prepare a plan for differentiation / integration for each of the 5 alternatives in fig 8.6 Use the PowerPoint slides about differentiation and integration to support your reflections

20. © 2008 Pearson Prentice Hall 8-20 When is Change Needed? Clashes among divisions, subsidiaries, or individuals over territories or customers Duplication of administrative or personnel services, sales offices, account executives An increase in overseas customer service complaints

21. © 2008 Pearson Prentice Hall 8-21 When is Change Needed? A shift in operational scope Conflict between overseas and domestic staff Centralization leads to excessive and, thus, misused or misunderstood data Unclear reporting relationships

22. © 2008 Pearson Prentice Hall 8-22 Locus of Decision Making

23. © 2008 Pearson Prentice Hall 8-23 Monitoring Systems

24. © 2008 Pearson Prentice Hall 8-24 Direct Coordinating Mechanisms McDonald’s in Moscow Problem: Quality control Solution: Built processing plant in Moscow and provided managerial training Other options: Visits by head-office personnel and regular meetings

25. © 2008 Pearson Prentice Hall 8-25 Indirect Coordinating Mechanisms Examples: sales quotas, budgets, and financial tools and reports Three financial statements One for accounting standards in host country One for the standards in the home country One for consolidation

26. © 2008 Pearson Prentice Hall 8-26 The Appropriateness of Systems Where are top managers from? US individualism vs. Japanese collectivism

27. © 2008 Pearson Prentice Hall 8-27 The Role of Information Systems US MNCs monitor via specific functional reports Inaccurate information, different norms, MIS adequacy Noncomparability of performance data

28. © 2008 Pearson Prentice Hall 8-28 Evaluation Variables across Countries Adjust statements to reflect variables unique to each country Take nonfinancial measures into account