Lec 8 Flashcards
(22 cards)
Organizational structure
Organizational structure should be align with organizational strategy.
The structure of an organization can help the firms with control.
There are two elements of an organizational structure to consider:
- ->Vertical differentiation (control and decision-making power)
- -> Horizontal differentiation (is the company structure divided along product, area or functions).
Organizational structures that are appropriate for the strategic choices:
- 1.1. Initial Division structure –> highest
- 1.2. International Division
- 1.3. Global Product Division
- 1.4. Global Area Division
- 1.5. Global Functional Structure
- 1.6. Global Matrix
- 1.7. Transnational Network Structure–>lowest
Initial division structure
Domestic market is the focus of the company
subsidiaries in other countries
Common first choice among manufacturing firms, especially those with technologically advanced products
If the company has a narrow product line, the export manager usually report directly to the head of
Marketing, and international operations are coordinated by this department.
Allows firms to reduce the risk and size of investment in establishing significant international operations while testing the size of international markets
–> schaubild page 10
International division structure
many domestic divisions (tools, paint etc)+ 1 international divison that does everything–> australia (office operations, marketing, government relations)
redundant work, more men work because many departments
International operations continue to grow and require more control
Structural arrangement that handles all international operations out of a division
Adopted by firms that are in developmental stages of international business operations
takes burden of CEO, international CEO
–> international CEO reports directly to CEO–> international department gets attention of high level management
disadvantages: difficult to handle,
difficult to allocate resources on a global base
research and development–> domestic orientated
–> schaubild page 12
International division structure: ad + disadvantages
Advantages
Ensures that the international focus receives top management’s attention
Allows companies to develop a unified approach to international operations
Disadvantages
Separates the domestic and international managers
Makes difficult for the home office to think and act strategically and to allocate resources on a global basis
Most R&D efforts are domestically oriented
Ideas for new products or processes in the international market often are given low priority
Global Structural Arrangements
Focuses on greater expansion and integration among international operations
Types
- Global product division
- Global area division
- Global functional division
Global Product Division Structure
Structure under which domestic divisions are given worldwide responsibility for product groups
Suitable for companies offering diverse sets of products or services.
Suitable when the need for product specification or differentiation in different market is high.
If a product is in a different life cycle (mature versus growth strategy) across different regions, such structure can ensure that each location responds appropriately.
–> schaubild page 16
Disadvantages: Global Product Division Structure
- Duplication of corporate support functions for each product division
- Possibility that headquarters may favor subsidiaries offering fastest returns
- Potential for excessive focus on products and too little on developments in the firm’s markets
Geographical/global area Division
International operations are put on the same level as domestic operations
Global division managers are responsible for all business operations in their designed geographic area.
Allows managers to make decisions to accommodate environmental changes
Used by companies that in mature business and have narrow product lines that are differentiated by geographic area.
- ->schaubild: page 19
- -> softdrink industry
Disadvantage of global area division
Lack of global orientation for developing and managing products
Limited communications and knowledge sharing with other areas and headquarters
Limited economy of scale (viel produzieren mit viel absats, günstig jproduzieren)
Lack of centralized management and control can result in increased costs and duplication of effort on a region-by-region basis
Difficult to reconcile a product emphasis
with a geographic orientation
Geographical/global Function Division
A structure that organizes worldwide operations primarily based on function and secondarily on product
Emphasis on functional expertise
Tight centralized control
Relatively lean managerial staff
CEO( production–> domestic+foreign production)
–> schaubild: page 24
Disadvantage of Geographical Function Division
Coordination becomes difficult and challenging when firms has multiple product lines
Only the CEO can be held accountable for the profits
May not respond well to specific customer needs in individual markets
Mixed matrix structure
Splits chain of command between product and geographic divisions.
Aims to bring together geographic and product area managers in joint decision-making.
Helps increase local responsiveness, reduce costs, and co-ordinate worldwide operations.
–>schaubild: page 27
Disadvantages of Mixed matrix structure
Dual reporting chain of command with risk of employees receiving contradictory instructions from multiple managers
Can result in conflicts
Network Structure
Proposed structure for Transnational strategy.
Help MNCs make use of global economies of scale while also being responsive to local customer demands
Basic structural framework consists of:
- Dispersed subunits - Specialized operations - Interdependent relationships
Complex and continually changing and are difficult to draw in the form of an organization chart
Entry strategy: export+import
Obvious choice for small and new firms wanting to go international
Permits larger firms to begin international expansion with minimum investment and risk
Paperwork can be turned over to an export management company or handled through the firm’s export department
This entry mode can be transitional in nature
Entry strategy: Licensing
Agreement that allows one party (Licensee) to use an industrial property right in exchange for payment to the owning party (Licensor)
–>Patent, Trademark, Proprietary information
Used when:
- A product is in the mature stage of the product life cycle with strong competition and declining profit
- Foreign countries require newly entering firms to make a substantial direct investment (Avoid high entry barrier)
- Licensor is a small firm lacking financial and managerial resources
–> hello kitty
Entry strategy: Wholly Owned Subsidiary
Overseas operation that is totally owned and controlled by an MNE
Based on the belief that managerial efficiency is better without outside partners (Want control)
Faces high risk with large investments in one area
- Government restrictions: develop local firms
- Political hazards: being an “insider” is much safer
Entry strategy: Mergers and Acquisitions
Cross-border purchase or exchange of equity involving two or more companies
Opted by MNEs to quickly expand resources or construct high-profit products in a new market (access to knowledge, managerial expertise)
Cultural differences and time constraints are the major barriers
Transition costs pose a problem in the postmerger environment
acquistion: wird von anderer fima aufgekauft
merger: zusammenschluss von zwei firmen
–> geely, volvo, ford
Alliances and Joint Ventures
Alliance: Any type of cooperative relationship among different firms
Joint venture (JV): Agreement under which two or more partners own or control a business
Called international join venture(IJV) when the partners are from different countries
Types - Nonequity ventures and equity joint ventures
Advantages of Alliances and Joint Ventures
Improvement of efficiency
Access to knowledge (local expertise)
Mitigating political factors: political risks
Overcoming collusion or restriction in competition: an “insider” group
Disadvantages in joint venture
- Coordination between partners: Hard to manage in different cultures (Misunderstanding)
- Slow process when things happen
- Low control
- Opportunism of partner: Intellectual property protection
- mostly only for a limited time, temporarily or more permanent
