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Chapter 8
Organization Structure and
Control Systems
PowerPoint by
Kristopher Blanchard
North Central University
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Organizational Structure
There is no permanent organization chart for
the world. . . . It is of supreme importance to
be ready at all times to take advantage ofnew opportunities.
Robert C. Goizueta, (Former) Chairman and Ceo, Coca-Cola Company
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Evolution and Change in MNC
Internationalization is the process by which a firmgradually changes in response to internationalcompetition, domestic market saturation, and thedesire for expansion, new markets, and
diversification.Structural Evolution (Stages Model) occurs whenmanagers redesign the organizational structure tooptimize the strategys changes to work, making
changes in the firms tasks and relationships anddesignating authority, responsibility, lines ofcommunication, geographic dispersal of units andso forth
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Typical ways that firms organize
international activities
Domestic structure plus export department
Domestic structure plus foreign subsidiary
International divisionGlobal functional structure
Global product structure
Global Geographic Structure
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Integrated Global Structures
The global functional structure is designed on thebasis of the companys functions production,marketing, finance, and so forth. Foreign
operations are integrated into the activities andresponsibilities of each department to gainfunctional specialization and economies of scale.
Matrix Structure is a hybrid organization of
overlapping responsibilitiesit is used by somefirms but has generally fallen into disfavorrecently
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Organizing for Globalization
If you misjudge the market [by globalizing],
you are wrong in 15 countries rather than
only in one.Ford European Executive
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Organizing for Globalization
Two opposing forces in structural decisions The need for differentiation (focusing on and
specializing in specific markets)
The need for integration (coordinating those same
markets)
Globalizationa specific strategy that treats the
world as one market by using a standardizedapproach to products and markets
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Organizing for Globalization
Organizing to facilitate a globalization strategytypically involves rationalization and thedevelopment of strategic alliances
Organizing for global product standardizationnecessitates close coordination among the variouscountries involved
The problem facing companies in the future is thatthe structurally sophisticated global networks
leave the organization exposed to the risk ofenvironmental volatility from all corners of theworld
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Comparative Management Focus:
Chinese Global Network
The Chinese commonwealth is a form ofglobal network that has become the envy ofWestern multinationals
Network of entrepreneurial relationships inAsia primarily
Includes mainland China, 1.3 billion citizens,and more than 55 million Chinese in Taiwan,Indonesia, Hong Kong, and Thailand
Estimated to control $2 Trillion in liquid assets
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Comparative Management Focus:
Chinese Global Network
Most observers believe that this China-basedinformal economy is the world leader in economicgrowth, industrial expansion, and exports
Comprises most mid-sized, family-run firmslinked by transnational network channels
Channels move information, finance, goods, andcapital
Network alliances bind together and draw fromthe substantial pool of financial capital andresources available in the region
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Emergent Structural Forms
Inter-organizational networks
The global e-corporation network structure
The transnational corporation (TNC)network structure
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Organizational Change and Design
When does a company need to make achange in organizational structure?
Makes a change in goals or strategy
Makes a change in scope of operations
Indications of organizational inefficiency
Conflicts among divisions and subsidiaries
Overlapping responsibilitiesComplaints regarding customer service
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Organizational Change and Design
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Control Systems for Global
Operations
The establishment of a single currency makes
it possible, for the first time, to establish
shared, centralized accounting andadministrative systems.Francesco Caio, CEO, Merloni Elettrodomestici
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Monitoring Systems
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Direct Coordinating Mechanisms
Design of appropriate structures
Use of effective staffing practices
Visits by head-office personnel Regular meetings
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In-Direct Coordinating Mechanisms
Sales quotas
Budgets
Other financial tools Feedback reports
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Appropriateness of Monitoring and
Reporting Systems
Factors likely to affect the appropriateness
of monitoring systems include:
Management practicesLocal constraints
Expectations regarding: Authority, Time, and
Communication
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Managing Effective Monitoring
Systems
In deciding on appropriate monitoring and
reporting systems, additional factors to be
considered include:
The role of information systems (adequacy of managementinformation systems in foreign affiliates, non-
comparability of performance data across countries)
Evaluation variables across countries
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