1、Chapter 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.8Organizational Designs for Multinational Companies 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to
2、a publicly accessible website,in whole or in part.Learning Objectives(1 of 2)Understand the components of organizational design.Know the basic building blocks of organization structure.Understand the structural options for multinational companies.Know the choices multinationals have in the use of su
3、bsidiaries.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Learning Objectives(2 of 2)See the links between multinational strategies and structures.Understand the basic mechanisms of organizational coord
4、ination and control.Know how multinational companies use coordination and control mechanisms.Understand the need for knowledge management systems within organizations.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole
5、 or in part.Organizational Design The best multinational strategies do not guarantee success.Managers must design their organizations with the best mechanisms to carry out domestic and international strategies.Organizational Design:How organizations structure subunits and use coordination and contro
6、l mechanisms to achieve their strategic goals 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.The Nature of Organizational Design(1 of 2)Two basic questions involved in designing an organization:How shal
7、l we divide the work among the organizations subunits?How shall we coordinate and control the efforts of the units we create?In small organizations,there is little reason to divide work.Everyone does the same thing and everything 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or
8、 duplicated,or posted to a publicly accessible website,in whole or in part.The Nature of Organizational Design(2 of 2)As organizations grow,there is a need to divide work into specialized jobs and the organization into specialized subunits.Once an organization has specialized subunits,managers must
9、develop measures to coordinate and control their efforts.Decision-making may be centralized or decentralized.There is no one best organizational design.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.The
10、 Basic Functional Structure(1 of 2)In a Functional Structure,departments perform separate business functions such as marketing or manufacturing.The functional structure is the simplest organization.Most smaller organizations have functional structures.Even large organizations have functional subunit
11、s.Organizations choose a functional structure for its efficiency.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.The Basic Functional Structure(2 of 2)Efficiencies arise from economies of scale in each f
12、unction because of cost savings when a large number of people do the same job in the same location.Coordination is difficult,as functional units are separated from each other and serve functional goals.The functional structure works best when the firm has few products,locations,and types of customer
13、s.Works best in a stable environment,with minimal need for adaptation.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.1:A Basic Functional Structure 2013 Cengage Learning.All Rights Reserved.Ma
14、y not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.The Basic Product and Geographic Structures(1 of 2)Product Structure:Building departments or subunits around a particular product.Geographic Structure:Building departments or subunits based on a part
15、icular geographic region.Product and Geographic units must still perform all of the functional tasks of a business.Functional tasks are duplicated for each unit,leading to loss of economies of scale,and loss of efficiency.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplica
16、ted,or posted to a publicly accessible website,in whole or in part.The Basic Product and Geographic Structures(2 of 2)But,such inefficiencies disappear as customer groups and products proliferate.And even for small organizations,a product or geographic unit may offer competitive advantages:It allows
17、 a company to serve customer needs that vary by region or product.Managers can quickly identify customer needs and adapt products.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.2:Basic Product
18、 Structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.3:Basic Geographic Structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly
19、 accessible website,in whole or in part.Hybrid Structures Few organizations adopt purely organizational forms.Each organization has unique trade-offs based on efficiency,product types,and customers needs.Companies design organizations with mixtures of structures that will best implement their strate
20、gies.Mixed-form organizations are called Hybrid Structures.A Hybrid Structure mixes functional,geographic,and product units.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Organizational Structures to Im
21、plement Multinational Strategies When a company first goes international(as a passive exporter),it seldom changes its structure.Even though exporting,it prefers to rely on EMCs and ETCs rather than change organizational structure.Similarly,a licensing strategy has little impact on domestic structure
22、.However,when international sales become more central,the structure needs to be changed.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.The Export Department The Export Department coordinates and control
23、s a companys export operations.The Export department:Is created when exports become significant Deals with international sales of all products Sales representatives in other countries may report to the Export Department manager.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or d
24、uplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.4:A Functional Structure with an Export Department 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Foreign Subsidiaries(
25、1 of 3)Foreign Subsidiaries are subunits of the multinational company that are located in another country Types of foreign subsidiaries:A Minireplica Subsidiary is a scaled down version of the parent firm.It uses the same technology and produces the same products as the parent firm.A Transnational S
26、ubsidiary supports a multinational firm strategy based on location advantages.It has no firm wide form or function.Each subsidiary contributes what it does best or most efficiently anywhere in the world.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a
27、publicly accessible website,in whole or in part.Foreign Subsidiaries(2 of 3)Most subsidiaries are neither pure minireplicas nor pure transnationals.Foreign subsidiaries take many forms and have many functions.Foreign subsidiaries are the structural building blocks for running multinationals.2013 Cen
28、gage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Foreign Subsidiaries(3 of 3)Multinationals choose the mix of functions for their foreign subsidiaries based on:The firms multinational strategy or strategies;The s
29、ubsidiaries capabilities and resources;The economic and political risk of building and managing a subunit in another country;How the subsidiaries fit into the overall multinational organizational structure.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to
30、 a publicly accessible website,in whole or in part.International Division(1 of 3)The International Division differs from the export department in several ways:It is larger and has greater responsibilities.It has more extensive staff with international expertise.It is responsible for managing exports
31、,international sales,negotiating contracts,and managing foreign subsidiaries.It is the usual step after the export department.It deals with all products.It manages overseas sales force and manufacturing sites.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted
32、 to a publicly accessible website,in whole or in part.International Division(2 of 3)The International Division has declined in popularity among large multinationals.It is not considered effective for multiproduct companies operating in many countries.However,for companies of moderate size with limit
33、ed numbers of products or country locations,the International Division remains a popular and effective structure.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.5:International Division in a Do
34、mestic Product Structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.International Division(3 of 3)There are several structural options to deal with the shortcomings of the International Division:Wor
35、ldwide product structure Worldwide geographic structure Matrix structure Transnational network structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Worldwide Geographic Structure(1 of 2)In the World
36、wide Geographic Structure,regions or large-market countries become the geographic divisions of the multinational company.The primary reason to adopt this structure is to implement a multidomestic or regional strategy.Differentiation of products or services requires an organizational design with maxi
37、mum geographic flexibility.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Worldwide Geographic Structure(2 of 2)In the Worldwide Geographic Structure,regions or large-market countries become the geograp
38、hic divisions of the multinational company.(contd)The semiautonomous subunits provide flexibility to meet local needs.Country-level divisions usually exist only when a countrys market size is sufficiently large to support its own organization.Separate divisions make sense for large market countries.
39、2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.6:Royal Vopaks Worldwide Geographic Structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a pu
40、blicly accessible website,in whole or in part.Worldwide Product Structure Product divisions form the basic units of the Worldwide Product Structure:Each product division is responsible for producing and selling its products or services throughout the world.It may be the ideal structure to implement
41、an international strategy in which the firm gains economies of scale by selling worldwide product activities based at home.This type of structure sacrifices the regional or local adaptation strengths derived from a geographical structure.2013 Cengage Learning.All Rights Reserved.May not be scanned,c
42、opied or duplicated,or posted to a publicly accessible website,in whole or in part.Exhibit 8.7:Worldwide Product Structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Hybrids Both Worldwide Product S
43、tructure and Worldwide Geographic Structure have advantages and disadvantages:A Product Structure supports global products.A Geographic Structure emphasizes local adaptation.Multinationals often want both abilities.To achieve this,most multinationals use a Hybrid form of structure,which combines bot
44、h.2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Worldwide Matrix Structures (1 of 3)To balance the benefits of geographic and product structures,and to coordinate their subunits,some multinationals cre
45、ate a Worldwide Matrix Structure:Unlike hybrids,it is a symmetrical organization with equal lines of authority for worldwide product groups and geographical divisions.The Geographic Divisions focus on national responsiveness.The Product Divisions focus on finding global efficiencies.2013 Cengage Lea
46、rning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Worldwide Matrix Structures (2 of 3)A Worldwide Matrix Structure:Balances the benefits produced by area and product structures Works best with near equal demands from both
47、 sides Requires extensive resources for communication and coordination Requires middle and upper level managers with good human relations skills In theory,produces quality decisions 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible w
48、ebsite,in whole or in part.Exhibit 8.8:Worldwide Matrix Structure 2013 Cengage Learning.All Rights Reserved.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.Worldwide Matrix Structures (3 of 3)Problems with Worldwide Matrix Structures:Slow decisi
49、on making process Too bureaucratic Too many meetings and too much conflict Result:Some companies have abandoned their matrixes and returned to product structures.Others have redesigned their matrix structures to be more flexible with speedier decision making.2013 Cengage Learning.All Rights Reserved
50、.May not be scanned,copied or duplicated,or posted to a publicly accessible website,in whole or in part.The Transnational Network Structure(1 of 3)Unlike the symmetrical matrix structure,The Transnational Network has no basic form,symmetry or balance between geographic and product divisions.Instead,
