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International Business
Environments & Operations
14e
Daniels ● Radebaugh ● Sullivan
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Chapter 15
The Organization of International Business
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Learning Objectives Profile the evolving process of organizing a
company for international business Describe the features of classical
structures Describe the features of neoclassical
structures Discuss the systems used to coordinate
and control international activities Profile the role and characteristics of
organization culture
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IntroductionLearning Objective 1:Profile the evolving process of organizing a company for international business
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Introduction The goal of MNEs is to standardize
activities to maximize global efficiency and at the same time adapt activities to maximize local effectiveness
To achieve this goal the MNE must establish the right structure to implement it
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IntroductionFactors Affecting Organizing Operations
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Changing Situations, Changing Organizations
Environmental trends, industry conditions, and market opportunities are forcing change Expansion of international business The Internet as a design standard Managerial standards Social contracts Building a ‘magical’ organization
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Organization StructureLearning Objective 2: Describe the features of classical structures
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Organization Structure Organizational structure
the formal arrangement of roles, responsibilities, and relationships in the MNE
Vertical differentiation the balance between the centralization and
decentralization of authority Horizontal differentiation
involves specifying which people do which jobs in which units
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Vertical Differentiation Centralization versus Decentralization
Centralization degree to which high-level managers make
strategic decisions and delegate them to lower levels for implementation
Decentralization degree to which lower-level managers make
and implement strategic decisions
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Horizontal Differentiation Horizontal differentiation
Specifies the set of tasks to accomplish Divides the tasks among SBUs, divisions,
departments, committees, teams, jobs, and individuals
Stipulates superior and subordinate relationships
Classical structures used to achieve this functional, area or divisional, matrix or mixed
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Functional Structure The functional structure
groups people based on common expertise and resources
is popular among companies with narrow product lines
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Functional StructureThe Functional Structure
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Divisional Structure The divisional structure
divides employees based on the product, customer segment, or geographical location
duplicates functions and resources across divisions
International division Global product structure Worldwide area structure
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Divisional StructureThe International Division Structure
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Divisional StructureProduct Division Structure
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Divisional StructureGeographic (area) Division Structure
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Matrix Structure The matrix structure
Institutes overlaps among functional and divisional forms
Gives functional, product, and geographic groups a common focus
Violates the unity of command principle has dual reporting relationships rather than
a single line of command
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Matrix Structure Matrix Division Structure
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Mixed Structure The mixed structure
Combines elements of the functional, area, and product structures
Allows the firm to better adapt to market conditions worldwide
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Neoclassical StructuresLearning Objective 3: Describe the features of neoclassical structures
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Neoclassical Structures Neoclassical structures
emphasize coordination and cultivation not command and control
Network structure arranges differentiated elements in
patterned flows of activity that allocate people and resources to problems and projects in a decentralized manner
keiretsu, sogo shosha, chaebol Virtual organization
dynamic arrangement among partners that efficiently adapts to market change
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Neoclassical StructuresA Simplified Network Structure
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Coordinated SystemsLearning Objective 4: Discuss the systems used to coordinate and control international activities
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Coordinated Systems Coordination by
Standardization relies on objectives and schedules to set
rules and regulations Plan
requires interdependent units to meet common deadlines and objectives
Mutual adjustment depends on managers interacting
extensively with their counterparts
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Control Systems Control systems
define how managers compare performance to plans, identify differences, and where found, assess the basis for the gap and impose corrections
Bureaucratic control Market control Clan control
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Control Mechanisms Control tools include
Reports Visits to subsidiaries Evaluative metrics Information systems
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Organization Culture Learning Objective 5: Profile the role and characteristics of organization culture
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Organization Culture Organization culture
the coherent set of assumptions about an MNE and its goals and practices shared by its members
management values and principles work climate and atmosphere ‘how we do things around’ here patterns traditions ethical standards
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Organization Culture and Strategy
An organization’s culture shapes its strategic moves varies with the strategy the MNE
pursues
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Organization Culture and Strategy
Strategy and Organizational Culture in International Business
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The Rise of Corporate Universities
Corporate universities Expanding mission Integrating diversity Crucible of change Filling gaps
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