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Chapter 14 - 1
Chapter 14
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
International Organization Design
and Control
Chapter 14 - 2
Learning Objectives• Explore international organization design• Discuss the impact of international
business activity on organization design• Review five forms of international
organization design and discuss hybrid global designs
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Chapter 14 - 3
Learning Objectives• Identify and describe related issues in
global organization design• Explain the purpose of control and the
levels of control in international business• Describe how international firms manage
the control function
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Chapter 14 - 4
The Nature of International
Organization Design
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Chapter 14 - 5
How Do Firms Use Organization Design?
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AllocateResources
Assign Tasks
ProvideInformation
ObtainInformation
Chapter 14 - 6Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
International Business Activity and Organization Design
• Corollary Approach
• Export Department
• International Division
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Summary of Discussion
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Chapter 14 - 8
Advanced and Hybrid Forms of International Organization Design
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Chapter 14 - 9
The Global Design
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•Area Knowledge
•Product Knowledge
•Functional Knowledge
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• Product Design
• Area Design
• Functional Design
• Customer Design
• Matrix Design
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Common Forms of Global Organization Design
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• Ethnocentric
• Polycentric
• Geocentric
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Managerial Philosophy
Chapter 14 - 12Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Related Products Unrelated Products
M-Form
Multidivisional
H-Form
Holding
Global Product Design
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Global Product Design
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Advantages Disadvantages
Management Skill Duplication of Efforts
Efficient Production Coordination Levels
Global Marketing Corporate Learning
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Global Area Design
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Marketing-Driven Strategy
Brand-Name Reputation
Local Market Expertise
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Disadvantages of Global Area Design
• May sacrifice cost efficiencies
• May slow diffusion of technology
• Results in duplication of resources
• Raises costs of coordination
• Impedes global product planning
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Chapter 14 - 16
Global Functional Design
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•Transfer Expertise
•Centralize Control
•Focus on Functions
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Disadvantages of Global Functional Design
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Limited Products or Customers
Difficult to Coordinate
Duplication of Resources
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Global Customer Design
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Opportunities Challenges
Serve DiverseCustomers
Focus MarketingApproach
Duplication ofEfforts
Coordination Issues
Chapter 14 - 19Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Global Matrix Design
Communication
Coordination
Expertise Flexibility
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• Limited use in firm with few products
• Limited use in fairly stable markets
• Involves more than one manager
• Creates a paradox in authority
• Tends to promote compromises
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Disadvantages of Global Matrix Design
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Hybrid Global Designs
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•Size•Strategy•Technology•Environment•Culture
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Summary of Discussion
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Chapter 14 - 23
Related Issues in Global Organization Design
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Chapter 14 - 24
Centralization versus Decentralization
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Decision Making Focus
Corporate Headquarters
Local Subsidiary
Local MarketResponse
Overall Needs of the Firm
Lower Higher
Higher Lower
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Board of Directors
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Little Formal Power
Substantial Authority
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Empowering the Subsidiary Board of
Directors
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Decentralization
Local Business and Politics
Ethical and Social Responsibility
Level of Accountability
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Coordination in the Global Organization
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Organizational Hierarchy
Rules and Procedures
Ad Hoc Techniques Informal Mechanisms
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Summary of Discussion
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Chapter 14 - 29
The Control Function in International Business
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Chapter 14 - 30
The Control Function
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•Strategic
•Organizational
•Operational
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Strategic Control
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International Business
Formulate Strategy
Implement Strategy
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The Role of Strategic Control
• Financial Resources
• Inventory Management
• Exchange Rate Fluctuations
• Joint Ventures and Strategic Alliances
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Foreign-Market Entry and Expansion
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Organizational Control
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•Responsibility Center•Generic Control•Planning Process
Chapter 14 - 34Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Operations Control
• Processes• Performance
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Summary of Discussion
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Chapter 14 - 36
Managing the Control Function in International
Business
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Chapter 14 - 37
Establishing International Control
Systems
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1. Define Control Standards
2. Develop Performance Measures
3. Compare Performance and Standards
4. Respond to Deviations
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Control Techniques
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Accounting Systems
Policies and Procedures
Rules and Regulations
Performance Ratios
Chapter 14 - 39Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Behavioral Aspects
RecognizingResistance
MinimizingResistance
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What Causes Resistance?
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•Reaction to Over-Control
•Inappropriate Focus
•Increased Accountability
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Reducing Resistance
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CultureDiagnostics
AccountabilityParticipation
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Summary of Discussion
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Chapter 14 - 43
Chapter 14
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
International Organization Design
and Control
Chapter 14 - 44Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
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