international business, 5th edition

chapter 14
international organization design and control

Chapter Objectives 1
Define and discuss the nature of international organization design and identify and describe the initial impacts of international business activity on organization design
Identify and describe five advanced forms of international organization design and discuss hybrid global designs

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Chapter Objectives 2
Identify and describe related issues in global organization design
Explain the general purpose of control and the levels of control in international business Describe how international firms manage the control function

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Organization Design
Organization design (or organization structure) is the overall pattern of structural components and configurations used to manage the total organization.

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Factors Affecting Design

Country culture

Size

Environment Technology

Strategy

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Functions of Firm Design

Allocates organizational resources
Assigns tasks to its employees Informs employees about firms rules, procedures, and expectations Collects and transmits information

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Types of Knowledge Affecting Design

Area knowledge Product knowledge

Functional knowledge
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Forms of Global Organization Design

Product

Matrix

Area

Customer

Functional

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Managerial Philosophies Affecting Design

Ethnocentric

Polycentric

Geocentric

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Global Product Design

The global product design assigns worldwide responsibility for specific products or product groups to separate operating divisions within a firm.

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Figure 14.1 Samsungs Global Product Design

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Global Product Design

Advantages
Managerial expertise Production efficiencies

Disadvantages
Unnecessary duplication

Production flexibilities
Flexible response to change Marketing flexibility

Coordination and cooperation difficult

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The Danone Group uses a global product design.

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Global Area Design

The global area design organizes the firms activities around specific areas or regions of the world.

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Figure 14.2 Global Area Design

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Disadvantages of Global Area Design

Firm may sacrifice cost efficiencies
Diffusion of technology is slowed Design unsuitable for rapid technological change Duplication of resources

Coordination across areas is expensive

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Global Functional Design

The global functional design calls for a firm to create departments or divisions that have worldwide responsibility for the common organizational functionsfinance, operations, marketing, R&D, and human resources management.

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Figure 14.3 Global Functional Design

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Global Functional Design

Advantages
Transference of expertise

Disadvantages
Practical only when firm has few products or customers Coordination difficult Duplication of resources

Highly centralized control

Focused attention of key functions

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Global Customer Design

The global customer design is used when a firm serves different customers or customer groups, each with specific needs calling for special expertise or attention.

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Figure 14.4 Eastman Kodaks Global Customer Design

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Global Matrix Design

A global matrix design, the most complex of designs, is the result of superimposing one form of organization design on top of an existing, different form.

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Global Matrix Design

Advantages
Brings together the functional area and product expertise

Disadvantages
Appropriate for firms with many products and unstable environments Employees accountable to multiple supervisors Decisions may take longer

Promotes organizational flexibility

Provides access to all advantages of other designs

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Figure 14.5 A Global Matrix Design

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Global Hybrid Design

Most firms create a hybrid design, rather than pure design, that best suits their purposes, given the firms size, strategy, technology, environment, and culture, and blends elements of all the designs discussed.

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Figure 14.6 Nissans Hybrid Design

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Coordination
Coordination is the process of linking and integrating functions and activities of different groups, units, or divisions.

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Control
Control is the process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals.

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Control Function
Process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals
Three levels
Strategic

Organizational
Operations
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Figure 14.7 Levels of International Control

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Figure 14.8 Steps in International Control

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Essential Control Techniques

Accounting systems

Procedures

Performance ratios

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Reasons for Resistance to Control

Overcontrol

Inappropriately focused control

Increased accountability

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