Lecture 7: Organization

Question 1

What are the four key elements of organizational architecture?

Answer 1

• Organizational structure- structure & coordination of roles,
responsibilities & relationships
• Organizational control systems and incentive mechanisms
• Organizational culture
• Processes

Question 2

def. organizational structure

Answer 2

The formal arrangement of roles, responsibilities, and relationships in the firm

Question 3

describe the relationship between strategy and structure

Answer 3

• Strategy and structure have a reciprocal
relationship:
– Structure flows from or follows the selection of
the firm’s strategy – structure aids strategy
implementation

but …
– Once in place, structure can influence current strategic actions as well as choices about future strategies

Question 4

describe org. structure in int’l business

Answer 4

– allows specialization (division of labour)

– requires integration (coordination) across specialized knowledge

Question 5

what do international business firms seek?

Answer 5

– to standardize and integrate activities to maximize global
efficiency, and
– to adapt activities to achieve local effectiveness

Question 6

to achieve their strategic goals, what must international business firms do and why?

Answer 6

the firm must establish the appropriate structure
– organizational structure helps implement strategy by integrating types of knowledge: functional, product, geographical.

Question 7

What are two categories of organization structures?

Answer 7

• vertical differentiation

- horizontal differentiation (classical org structures)

Question 8

what are the two vertical differentiation structures?

Answer 8

centralization

decentralization

Question 9

what are the four kinds of horizontal differentiation structures

Answer 9

– Functional
– Divisional
– Global Matrix
– Mixed Structure (structure differs by region
and/or product)

Question 10

describe centralization

Answer 10

• degree to which high-level managers make strategic
decisions and delegate them to lower levels for
implementation
– Gives top-level managers the means to bring about
organizational change
– Seeks to avoid duplication of activities

Question 11

describe decentralization

Answer 11

• degree to which lower-level managers make and
implement strategic decisions
– Motivates mid- and lower- level managers
– Allows greater flexibility & responsiveness
– May be more challenging to coordinate

Question 12

describe horizontal differentiation

Answer 12

– Specifies the set of tasks to accomplish
– Divides the tasks among SBUs, divisions, departments,
committees, teams, jobs, and individuals
– Stipulates superior and subordinate relationships

Question 13

what are the 3 types of knowledge that org structure helps implement?

Answer 13

• Functional knowledge: Access to coworkers with expertise
in basic business functions such as production, marketing,
finance, accounting, HR management, IT
• Product knowledge: Understanding technological trends,
customer needs, competitive forces affecting the goods the
firm produces & sells
• Geographical (area) knowledge: Understanding cultural,
commercial, social, economic conditions in each host
country

Question 14

what do org structures do with regards to the different kinds of information?

Answer 14

• Each form allows firms to integrate one type of knowledge,
• but also makes it difficult to integrate the other types of
knowledge

Question 15

First choice: function vs. product

describe this

Answer 15

If focus on inputs, then structure by function –functional structure

If focus on outputs, then structure by product divisions–divisional structure

Question 16

What structure has an upstream centre of gravity (raw materials focus/ “core business”)

Answer 16

functional structure

Question 17

what structure has a downstream centre of gravity (retailer focus)

Answer 17

divisional structure

Question 18

describe functional structure

Answer 18

• Structure by inputs
• Standardized products
• Operational efficiency
• Cost leadership

Question 19

describe divisional structure

Answer 19

• Structure by outputs
• Different products
• Flexibility
• Differentiation strategy

Question 20

what is divisional structure and what are its subtypes and disadvantage?

Answer 20

• Groups employees based on product, customer
segment, or geographic location
• Subtypes
– International division structure
– World wide geographic (area) structure
– World wide product division structure
• Disadvantage
– Involves duplication of functions and resources across
divisions

Question 21

describe product division

Answer 21

• Diverse product portfolio
• Differences between
products
• Similarities between
regions

Question 22

describe geographic division

Answer 22

• No dominant product market
• Similarities between
products
• Differences between regions

Question 23

what structure would the global strategy follow?

Answer 23

worldwide product division structure

• reasonable agree of diversification
• Facilitates location and experience curve economies, transfer of core competencies

Question 24

what structure would the transnational strategy follow?

Answer 24

global matrix structure or worldwide product divisional structure

Global Matrix:
• Overlays functional and/or divisional forms via dual reporting structure
• Challenge – reporting to two superiors, violates unity of command
principle ‐

Question 25

what structure would the international strategy follow?

Answer 25

international division

Question 26

what structure should the localization strategy follow?

Answer 26

worldwide geographic (area) structure because it has a low degree of diversification -functional structure within each geographic area/division

Question 27

describe global matrix structure

Answer 27

• Overlays functional and/or divisional forms via dual reporting structure • Challenge – reporting to two superiors, violates unity of command principle ‐

Question 28

describe neoclassical structures

Answer 28

– emphasize coordination and cultivation rather than | command and control

Question 29

describe network structure

Answer 29

– arranges differentiated elements in patterned flows of activity that allocate people and resources to problems and projects in a decentralized manner

Question 30

describe virtual organization structure

Answer 30

– “work across space and time” | – dynamic arrangement among partners that efficiently adapts to market change

Question 31

what is a heterarchy?

Answer 31

a structure in which any pair of items is likely to be related in two or more differing ways (generally nonhierarchical)

Question 32

describe Philips in terms of their strategies

Answer 32

``` • Philips – IB strategy • Strategy: Localization since 1930s & WW II – Goal: transnational strategy • Organization structure – World-wide geographic area structure (key: National Organizations:N.O.s) – New matrix structure but highly decentralized weak product dimension & strong geographic (N.O.) dimension • Central R&D but weak in bringing product to market • Low global integration across countries. Lower efficiency ```

Question 33

describe Matsushita and their strategies

Answer 33

``` – Strategy: Global since 1930s – Goal: transnational strategy • Organization structure – World-wide product division structure since 1930s • Highly centralized – Management, R&D, manufacturing in Japan – Japan accounts for 90% of manufacturing value (1982) • International subsidiaries only implement strategy set by HQ – Weak market responsiveness ```

Question 34

what are the key points to consider about organizational architecture?

Answer 34

• Architectural elements must be internally consistent • Architecture must fit the strategy of the firm – Strategy is implemented through architecture • Strategy and architecture must be consistent with prevailing competitive conditions

Question 35

def. org culture

Answer 35

The shared meaning and beliefs that shape how employees interpret information, make decisions and implement actions

Question 36

What are the elements of org culture?

Answer 36

``` – Leadership style and philosophy – Values and principles of management – Work climate and atmosphere – “How we do things around here” – Ethical standards ```

Question 37

can org culture be a source of competitive advantage?

Answer 37

yes, it can be a key source of competitive | advantage

Question 38

what is a coordination system?

Answer 38

ways of linking people and processes in activities across organization

Question 39

what is coordination by standardization?

Answer 39

formal rules and procedures

Question 40

what is coordination by plan?

Answer 40

goals, guidelines, sequences, schedules, milestones

Question 41

what is coordination by mutual adjustment

Answer 41

social networking, shared understandings, | collaboration

Question 42

what is a control system?

Answer 42

ways of guiding, | monitoring, correcting performance

Question 43

what are three different control systems?

Answer 43

– Bureaucratic (Administrative) Control – Market Controls – Clan Control

Question 44

what are control mechanisms?

Answer 44

– formal (plans, diagnostic reports, incentives), informal (beliefs, shared objective, agendas, boundaries, face-to-face) – Outcome control vs – Behaviour control

Question 45

What are the main levers of corporate control and coordination (Collis)?

Answer 45

-Organization Structure -Human Resource Management -Culture & Style -Planning & Control

Question 46

describe outcome control

Answer 46

 Organization structure: autonomous SBUs or divisions  Corporate office: tiny, main function to look at financials  Rewards & incentives: bonus large part of compensation & linked to quantifiable targets  Personnel: few lateral transfers across divisions, hiring from within each industry  Resource allocation: tight capital expenditure controls  Information systems: geared to aggregate financial reporting

Question 47

describe behaviour control

Answer 47

 Organization structure: less autonomous business units  Corporate office: knows the business, acts as coach  Rewards & incentives: longterm career progression, multiple qualitative measures, operating processes evaluated  Personnel: internal career paths & lateral transfers  Culture: common corporate culture to ease cross division transfer  Information systems: many common systems & prescribed procedures

Question 48

What are Simons' levers of control? ***MORE IMPORTANT THAN COLLIS

Answer 48

* Belief Systems (org.culture) * Interactive Control Systems * Boundary Systems * Diagnostic Control Systems

Question 49

describe belief systems

Answer 49

``` – Core values – Shared beliefs • Basic values • Purpose • Direction ```

Question 50

describe interactive control systems

Answer 50

– Focusing attention on strategic uncertainties – Modes of managerial involvement in decision activities of subordinates • Recurring agendas • Face-to-face meetings • Debate on data, assumptions & action plans

Question 51

describe boundary systems

Answer 51

``` – Risks to be avoided – Allow creativity within defined limits • Clear rules, limits • Codes of conduct • Strategic planning systems • Capital budgeting systems ```

Question 52

describe diagnostic control systems

Answer 52

``` – Critical performance variables – Provide motivation, resources & information • Profit plans & budgets • Project monitoring systems • Brand revenue monitoring systems ```

Question 53

What are the 3 levels of International control and describe them?

Answer 53

``` -strategic control: • Foreign market entry • Business Expansion, JV, Alliances • Financial Control • Managing foreign exchange ``` -organizational control: • Design of the organization, how the firm can redesign in response to changes • Evaluate each product, geographic, functional SBU – responsibility center • Use a generic control system for all units • Evaluate the planning process ``` -Operations control: • Evaluates operating processes • Components of performance that need to be analyzed daily or hourly • Daily sales, productivity ```

Question 54

describe processes

Answer 54

• Manner in which decisions are made and work is performed – Cut across national boundaries as well as organizational boundaries – Can be developed anywhere within the firm’s global operations network

Question 55

In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: global strategy

Answer 55

geocentric

Question 56

In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: transnational strategy

Answer 56

geocentric

Question 57

In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: international strategy

Answer 57

ethnocentric

Question 58

In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: localization strategy

Answer 58

polycentric