Chapter 8:

Organization Structure
and Control Systems

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 Chapter Learning Goals

1. Understand the importance of appropriate

organizational structures to effective
strategy implementation.
2. Become familiar with the types of
organizational designs suitable for the level
and scope of internationalization of the
firm.
3. Be able to recognize why and when
organizational restructuring is needed.

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 Chapter Learning Goals

4. Understand the role of technology in the

evolution of the networked structure; and
to appreciate the role of “human networks”
in achieving business goals.
5. Realize how organizational design affects
manager’s job, for example, on the level
and location of decision making.
6. Emphasize the role of control and
monitoring systems suitable for specific
situations in the firm’s international
operations.

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 Opening Profile: Samsung Electronics
Recognizes to Fight Downturn
 Badly hit by the global economic downturn
 Implemented a radical reorganization in
2009
 Consolidating business operations into two
operating divisions
 Replaced the heads of five of its eight
overseas operations

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 Organizational Structure

Organizationa
l Structure

Must evolve to
Should be
accommodate Must “fit” with
contingency
internationalizati strategy
based
on

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 Evolution and Change in
MNC Organizational Structures
Structural evolution/stage model
Alcoa
Created smaller units
Linked geographically dispersed, but similar
businesses (e.g., Brazil and Australia)

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 Evolution and Change in
MNC Organizational Structures

* Domestic structure plus export * Domestic structure plus foreign

department subsidiary

Typical ways to
structure
international
activities

* Global functional structure * Global product structure

*International division * Matrix structure

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 Domestic Structure Plus Foreign
Subsidiary

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 Integrated Global Structures
Global Functional
International Division
Structure
 Organized along  Designed on the basis of
functional, product, or the company’s functions
geographic lines
 IBM World Trade  Allows for functional
specialization and
 Pepsi Cola International economies of scale

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 Integrated Global Structures:
Global Product (Divisional) Structure

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 Integrated Global Structures:
Global Geographic (Area) Structure

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 Organizing for Globalization

• Focusing on and specializing in

specific markets
Differentiation

• Coordinating those same

Integratio markets
n

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 Organizing for Globalization

• Moved away from its traditional

geographic structure to a global
ROA structure

• ABB is legendary in changing its

organizational structure to fit its
new strategic directions and its
competitive environment.

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 Organizing for Globalization

• Responding to local
Be Global— market structures and
consumer preferences,
Act Local along the globalization-
regionalization continuum

• Allows managers to act

independently
• Keeps some centralized
control, but decentralizes
control of foreign subsidiaries

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 Management Focus: Proctor & Gamble’s
“Think Globally—Act Locally” Structure
P&G’s Global/Local
Philosophy
Structure
 Global business units  Think globally

 Market Development
Organizations (MDO)  Act locally

 Global Business Services  Enabling P&G to win with

(GBS) customers and consumers

 Corporate functions  Be the smartest/best

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 Interorganizational Networks

I-Form:
Platformisati
Acer–Taiwan on
Royal Philips Intel
Electronics

Relational/
Global
e-Networks

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 Global E-Corporation Network Structure
EXHIBIT 8-6 The Global E-Corporation Network Structure

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 Transnational Corporation (TNC)
Network Structure
EXHIBIT 8-7 Dell’s Value Web Model

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 Matrix Structure and Transnational
Company: Coordination and Control System
Attempts to combine:
 The capabilities and resources of a
multinational corporation
 The economies of scale of a global corporation
 The local responsiveness of a domestic company
 The ability to transfer technology efficiently
typically of the international structure

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 Choice of Organizational Form
EXHIBIT 8-8 Organizational Alternatives and Development for Global Companies

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 Organizational Change and Design
Needed When:
Clashes among Duplication of
divisions, subsidiaries, administrative or An increase in
or individuals over personnel services, overseas customer
territories or sales offices, account service complaints
customers executives

Centralization leads to
Conflict between
A shift in operational excessive and, thus,
overseas and domestic
scope misused or
staff
misunderstood data

Unclear reporting
relationships

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 Locus of Decision Making in an
International Organization
EXHIBIT 8-11 Locus of Decision Making in an International Organization

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 Control Systems for Global Operations
Direct Coordinating Indirect Coordinating
Mechanism Mechanism
 McDonald’s in Moscow  Examples: sales quotas,
Problem: quality budgets, and financial
tools and reports
control
 Three financial statements
Solution: built
One for accounting
processing plant in
standards in host
Moscow and provided country
managerial training One for the standards in
 Other options: visits by the home country
head-office personnel and One for consolidation
regular meetings
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 Managing Effective Monitoring Systems

Evaluation
Variables
Across Appropriatenes
Countries s of Monitoring
and Reporting
Systems

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