Solution Manual for Organization Theory and Design 13th Edition Richard L.

Daft

Solution Manual for Organization Theory and Design

13th Edition Richard L. Daft

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 CHAPTER SIX
DESIGNING ORGANIZATIONS FOR THE
INTERNATIONAL ENVIORNMENT

CHAPTER OVERVIEW
LEARNING OBJECTIVES
CHAPTER OUTLINE
LECTURE ENHANCEMENT
DISCUSSION QUESTIONS
WORKBOOK
CASE FOR ANALYSIS

CHAPTER OVERVIEW

This chapter explores how managers design the organization for the international
environment. Reasons for expanding internationally are provided along with the
stages of international development and the use of strategic alliances and
acquisitions. The chapter examines global strategic approaches, the application of
various structural designs for global advantage, and looks at coordination
mechanisms used in global organizations. Finally, the transnational model is
explained, a type of global organization that achieves high levels of the varied
capabilities needed to succeed in a complex and volatile international environment.

Learning Objectives

After reading this chapter you should be able to:

• Compare and contrast the three primary motivations for entering the
global arena.
• Explain the three major challenges global design faces.
• Define globalization, multidomestic, and glocalization strategies.
• Describe how different structural design options for international
operations relate to differences in global strategy.
• Identify mechanisms for global coordination, knowledge transfer, and
resolving the tension between global uniformity and local responsiveness.
• Describe the transnational model of organizing.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 97

CHAPTER OUTLINE

Managing by Design
Before reading the chapter, students will give their opinions on the following
statements:
• The only way an organization can reasonably expect to be successful in
different countries is to customize its products and services to suit the
local interests, preferences, and values in each country.
• It is an especially difficult challenge to work on a global team to coordinate
one’s own activities and share new ideas and insights with colleagues in
different divisions around the world.
• The most advanced multinational corporations have developed systems
for maintaining tight headquarters control over subsidiaries in dozens of
countries.

A LOOK INSIDE
Walmart

Walmart’s attempt to enter the German market was an utter failure, largely due to
cultural and operational differences. German law prevents the sale of goods
below cost, which is one of Walmart’s key differentiators. Additionally, Walmart’s
culture of stationing greeters at the doors and asking salespeople to smile are
completely opposite of what German shoppers and German employees think is
appropriate behavior. After nine years of disappointing performance, Walmart sold
its stores to local rival Metro and exited the German market.

Entering the Global Arena

The world is rapidly developing into a unified global field, and every company and
manager needs to think globally. Emerging economies are growing rapidly as
providers of both products and services to developed countries. At the same time,
these regions are becoming major markets for the products and services of North
American firms. For today’s companies, the whole world is a source of business
threats and opportunities.

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 98 ● chapter six

BOOKMARK
The World Is Flat: A Brief History of the Twenty-First Century
by
Thomas L. Friedman
The global competitive playing field is being leveled. Friedman asserts that the
forces causing accelerated globalization began in the final years of the twentieth
century. Friedman outlines ten forces, called flatteners, that flattened the world
including: Work Flow Software, Supply-Chaining, and the Steroids. Friedman
refers to a variety of new technologies as steroids “because they are amplifying
and turbocharging all the other flatteners.”

Motivations for Global Expansion

By going global companies can realize economies of scale (savings
derived from large volumes of purchasing, production, and sales) and
exploit economies of scope (the number and variety of products and
services it offers, as well as the number of markets it operates in).

IN PRACTICE
Amway

Amway started in 1959 with a direct sales model of independent entrepreneurs

selling to consumers. Sales in China became a $200 million business when the
Chinese government issued regulatory changes that required Amway to revise
its business model. The company established physical stores, manufactured
products in China and changed the compensation system. Amway took the long-
term view, and today, China is the company’s largest market with $4 billion in
annual sales. Amway looks at its experience in China as a valuable lesson in the
importance of continuously questioning an organization’s business model and
adapting to succeed in different markets.

Another reason for moving to global market is to take advantage of low-

cost production factors, especially lower-cost labor. Organizations have
gone international in search of lower costs of capital, sources of cheap
energy, reduced government restrictions, or other factors that lower total
production costs.

Managing the Stages of International Development

As a company evolves toward full-fledged global operations, they tend
to go through four stages:
• Domestic stage means that the company is predominantly
domestically oriented, but managers are developing initial
international involvement, often to increase market potential.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 99

• International (Multidomestic) stage means that exports are

taken seriously and that the company deals with the competitive
issues of each country separately.
• Multinational stage means that it has marketing and production
facilities in many countries, worldwide access to capital, and has
more than one-third of its sales outside the home country.
• Global stage means that the company transcends any single
country and does not identify with a single home country.

As a company evolves, managers and employers have an increasing

need for cultural intelligence, or the ability to use reasoning and
observations skills to interpret unfamiliar gestures and situations and to
devise appropriate behavioral responses.

HOW DO YOU FIT THE DESIGN?

What Is Your Cultural Intelligence

How might you develop greater empathy for people who are different from you?
Cultural intelligence is a manager’s capability to function well in situations
characterized by cultural diversity. Cognitive CQ pertains to the head, emotional
CQ pertains to the heart, and behavioral CQ pertains to the body. Hone your
observational skills, take courses, look for international travel opportunities, and
learn to pick up on clues about how people from a different country respond.

Global Expansion through International Alliances and Acquisitions

International strategic alliances offer one way to get involved in
international operations. Licensing agreements allow a company to use
the technology or name of another. Joint ventures are separate entities
created with two or more active firms as sponsors. Many companies
prefer acquisitions because they offer greater control than joint ventures.

IN PRACTICE
Walmart and Flipkart

With a young population four times that of the U.S., India is an attractive market
for both Amazon and Walmart. Amazon has invested heavily in entering this
market, but Walmart has decided to enter by acquiring India-based online retailer
Flipkart. Already well established, Flipkart offers Walmart a way to enter India with
local managers who understand the local environment.

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 100 ● chapter six

The Challenges of Global Design

There are three primary segments of the global organizational challenge: greater
complexity and differentiation, the need for integration, and the problem of
transferring knowledge across a global firm.

• Movement into the international arena means increased complexity and

differentiation, demanding the development of a structure to fit the numerous
countries in which it operates. Often this means more product differentiation
which also means more internal organizational complexity
• As organizations become more differentiated managers face the increased
need for coordination, the quality of collaboration across the organizational
units. The question is how to achieve the integration necessary for a global
organization to reap the benefits of international expansion.
• Organizations need to learn from their international experiences and exploit
that learning to create and leverage global organizational knowledge.
Knowledge transfer is hindered by language, cultural, and geographic
distances; protection of one’s own division rather than cooperation; viewing
knowledge as power one unit does not want to give up; the reluctance to use
knowledge from elsewhere due to pride; and the fact that much of this
knowledge is not written down. One way some organizations cope is to
engage in reverse innovation, or trickle-up innovation, which refers to
developing low-cost products or services for emerging markets, then
adapting them for developed economies.

Designing Structure to Fit Global Strategy

An organization’s structure must fit its situation by providing sufficient information

processing for coordination and control while focusing employees on specific
functions, products, or geographic regions. Organization design for international
firms follows a similar logic, with special interest in global versus local strategic
opportunities.

Strategies for Global versus Local Opportunities

Managers choose between global standardization and local
responsiveness. A globalization strategy means that product design,
manufacturing, and marketing strategy are standardized, which is less
costly than creating different products for different markets. Economic and
social changes, including a backlash against huge global corporations,
have prompted consumers to favor local products.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 101

ASSESS YOUR ANSWER

The only way an organization can reasonably expect to be successful in
different countries is to customize its products and services to suit the
local interests, preferences, and values in each country.
ANSWER: Disagree. It is the case that people around the world often want
products and services that are tailored to their local needs and interests, and
many organizations are quite successful by responding to local market demands.
However, other international organizations attain competitive advantages by using
the same product design and marketing strategies in many countries throughout
the world.

A multidomestic strategy means that competition in each country is

handled independently of competition in other countries. A multidomestic
strategy would encourage product design, assembly, and marketing
tailored to the specific needs of each country. Different global organization
designs are better suited to either global standardization or national
responsiveness.

A glocalization strategy seeks to achieve both global integration and

local responsiveness simultaneously.

IN PRACTICE
General Electric

In today’s economy, countries such as India and Indonesia want foreign

companies to invest and build locally, train local workers in new skills, and share
technology, rather than just take advantage of lower costs. GE, which has more
than 400 factories around the globe, has embraced this new perspective. For
example, it built a new locomotive factory in a remote village 600 miles southeast
of Delhi. The factory will provide much-needed jobs and skills for local residents.
GE believes that whatever it may lose in terms of efficiency, it will gain in terms of
better relationships and more revenues.

International Division
When a company is low with respect to developing either a globalization
or multidomestic strategy, simply using an international division with the
domestic structure is an appropriate way to handle international business.
The international division has a status equal to other major departments,
and has its own hierarchy to handle international matters such as sales or
opening subsidiary plants.

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 102 ● chapter six

Global Product Division Structure

Global product structure means that the product divisions take
responsibility for global operations in their specific product area.
Managers in each product division can focus on organizing for
international operations and directing employees’ energy toward their own
division’s global problems or opportunities. This structure works best for
worldwide production and sale of standard products. Often product
divisions compete instead of cooperating; and some countries are ignored
by managers. Country coordinators can overcome these problems.

Global Geographic Division Structure

Global geographic structure means that each region reports directly to
the CEO and has full control of functional activities in its geographical
area. Although this structure lends itself easily to exploiting opportunities
for regional competitive advantages, problems may result from the
autonomy of each regional division. It is difficult to plan on a global scale
because each division acts to meet only the needs of its region. It is
difficult to introduce products developed offshore into domestic markets,
and there is often duplication of line and staff managers across regions.

IN PRACTICE
Colgate-Palmolive Company
With more than half of its annual sales coming from outside the U.S., Colgate-
Palmolive has succeeded internationally by using the global geographic structure.
It emphasizes individual autonomy, an entrepreneurial spirit, and the ability to act
locally. To facilitate coordination the company has created an international
development group that has responsibility for long-term company planning and
worldwide product coordination and communication. Now the company has added
two additional coordinating positions to further coordinate its worldwide activities.

Global Matrix Structure

The global matrix structure is similar to the domestic matrix, although
distances are greater and coordination is more complex. This
complicated form would work best when there is balanced pressure for
the interests of both product standardization and geographical
localization and when coordination to share resources is important.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 103

IN PRACTICE
ABB Group
ABB has a global matrix structure to achieve economies of scale combined with
local flexibility and responsiveness. At the top are the chief executive officer and
an executive committee of 10 top managers, who hold meetings around the world.
Along one side of the matrix are product division managers. Along the other side
of the matrix is a regional structure with eight regional managers responsible for
local balance sheets, income statements, and career ladders. Managers who are
multilingual and culturally sensitive have a better chance of succeeding.

Additional Global Coordination Mechanisms

Managers meet the global challenge of coordination and transferring knowledge
and innovation across highly differentiated units in a variety of ways.

Global Teams
Also called transnational teams, global teams are work groups made up
of multinational members whose activities span multiple countries.
Teams are intercultural teams, whose members come from different
countries and meet face to face or virtual global teams, whose members
conduct their work electronically. However, cultural and language
differences can create misunderstandings, and resentments and mistrust
can quickly sidetrack the team’s efforts.

IN PRACTICE
L’Oréal

The cosmetics firm L’Oréal exemplifies the global-local tension because personal-
care needs are unique to each culture. Yet, L’Oréal is very global and very local.
Product development is the firm’s competitive advantage, so L’Oréal recruits
product development teams that report to managers who have mixed cultural
backgrounds. Teams share their ideas. L’Oréal places multicultural managers at
the center of interactions among brands, regions, and functions.

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 104 ● chapter six

ASSESS YOUR ANSWER

It is an especially difficult challenge to work on a global team to
coordinate one’s own activities and share new ideas and insights with
colleagues in different divisions around the world.
ANSWER: Agree. The problems of different languages, locations, cultural values,
and business practices make membership on an international team especially
difficult. Global teams can be effective only if members have the patience and
skills to surmount the barriers and openly share information and ideas. Global
teams made up of people who are culturally astute and genuinely want to
coordinate and communicate with their counterparts in other countries perform
better.

Headquarters Planning
In this approach, the global headquarters takes an active role in
planning, scheduling, and control to keep the global organization
working together and moving in the same direction. Without strong
leadership, highly autonomous divisions can act like independent
companies rather than coordinated parts of a global whole.

Expanded Coordination Roles

Creating specific organization roles can help to integrate all the
pieces. Often the role of top functional manager is expanded to
include responsibility for coordinating across countries. Country
managers can coordinate across functions. The network
coordinator coordinates information and activities related to key
customer accounts. Benefits include: cost savings, better decision
making, greater revenues, and increased innovation.

Benefits of Coordination
The benefits of inter-unit collaboration, such as information and
knowledge sharing, include:
• real, measurable cost savings.
• better decision making.
• greater revenues.
• increased innovation.

Transnational Model of Organization

The transnational model exists for large multinational firms with subsidiaries in
many countries that try to take advantage of both global and local advantages. It
creates an integrated network of individual operations linked together to achieve the

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 105

multidimensional goals of the overall organization. The transnational model is a

managerial state of mind, a set of values, a shared desire to make a worldwide
learning system work, and an idealized structure for effectively managing such a
system.

Characteristics of a transnational organization include:

• Assets and resources are dispersed worldwide into highly specialized
operations that are linked together through interdependent relationships.
• Structures are flexible and ever-changing, operating on the principle of
flexible centralization─ centralizing some functions in one country and
decentralizing them in another.
• Subsidiary managers initiate strategy and innovations which become strategy
for the corporation as a whole.
• Unification and coordination are achieved through corporate culture and
shared vision and values, and management style, rather than through formal
structures and systems.

ASSESS YOUR ANSWER

The most advanced multinational corporations have developed systems
for maintaining tight headquarters control over subsidiaries in dozens
of countries.

ANSWER: ANSWER: Disagree. To succeed as part of a huge global firm, individual units
need flexibility and autonomy. Most of the alignment in a transnational
organization is achieved through common culture and values, shared vision
and goals, and interdependent relationships among subsidiaries. Managers
have to stretch out of their familiar comfort zone to succeed internationally,
which sometimes means giving up control in the traditional sense.

Design Essentials

• Three primary motivations for global expansion are to realize economies

of scale, exploit economies of scope, and achieve scarce or low-cost
factors of production such as labor, raw materials, or land.
• Organizations evolve through four stages: a domestic orientation, an
international orientation, a multinational orientation, and a global
orientation.
• Global organizational challenges include: addressing environmental
complexity through organizational complexity and differentiation, achieving
integration and coordination among differentiated units, and implementing
mechanisms for the transfer of knowledge and innovations.

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 106 ● chapter six

• Geographic structures are effective for organizations that benefit from a

multidomestic strategy. A product structure supports a globalization
strategy. Huge global firms might use a matrix structure. Many firms use
hybrid structures.
• Additional coordination mechanisms include global teams, stronger
headquarters planning and control, and specific coordination roles.
• Companies are moving toward the transnational model of organization,
which is based on a philosophy of interdependence.

LECTURE ENHANCEMENT
Chinese Tech Giant Baidu Steps Back from Middle East
Based on an article in The Wall Street Journal (October 26, 2017)
https://www.wsj.com/articles/chinese-tech-giant-baidu-steps-back-from-middle-
east-1509039191
by
Asa Fitch
Chinese internet search giant Baidu is retrenching from an Egyptian market from
where it had hoped to expand in the Middle East, said people familiar with the
matter, following a six-year effort to challenge its American rivals.

In recent months, the company has gradually laid off its more than 30 employees
and closed its Cairo office after the business didn’t meet its targets, said these
people, who are several former employees and a regional technology executive
with knowledge of Baidu’s business.

The Beijing-based company, which has a near monopoly on China’s internet

search traffic, had focused in Cairo on developing Arabic-language applications
and websites as advertising platforms for the Middle East and North Africa. It
tested an Arabic search engine but never launched it widely, these people said.
No Baidu representation could be found in Cairo. A company spokesman in
Beijing declined to comment on the Cairo office, the search engine nor any plans
for Egypt and the Middle East. He said the company still had representation in
Egypt, that it was focusing on mobile apps there and that it had tens of millions of
monthly active users in the Middle East and North Africa.

Baidu isn’t alone among Chinese tech giants in its struggles overseas. Others,
including Alibaba and Tencent have faced difficulties expanding into a global tech
landscape dominated by American giants like Google, Amazon and Facebook.

Baidu began expanding abroad in 2007 with mixed success. The company
launched its flagship search engine in Japan in 2008 but withdrew in 2015 after
failing to make a dent in Google and Yahoo’s market lead. A spokesman said at
the time that the company might re-enter the market in the future. The spokesman
in Beijing declined to comment on Japan.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 107

Sam Blatteis, who heads the MENA Catalysts Inc., a regional tech policy advisory
based in Dubai, said Baidu faltered partly because it chose the wrong Middle
Eastern market. Egypt’s rocky politics and strained economic conditions have
made it a difficult market despite its large population and role as a leader in the
Arab world. The deep foothold of American companies, which have effectively
localized regional content, has also been an impediment to new entrants, he said.

The Middle East is among the fastest-growing regions in the world in terms of
internet users, with 15% annual growth as of January, according to a report by We
Are Social, a London-based digital ad agency. There were almost 150 million
internet users in the region at the time of the report’s publication.
Baidu, whose flagship search engine is the fourth-most-popular website globally,
entered Egypt about six years ago. In Egypt, it tried to apply a model that worked
in China—spending heavily on marketing to secure new users and then hoping
organic growth follows.

Some of Baidu’s products were a success, he said, including battery-saving and

speed-boosting apps for Android. But Baidu ultimately didn't achieve its targets in
Egypt and the Middle East, the employees and the tech executive said.

DISCUSSION QUESTIONS

1. Name some companies that you think could succeed today with a
globalization strategy and explain why you selected those companies. How
does the globalization strategy differ from a multidomestic strategy?

ANSWER: The companies that the students come up will vary.

Multidomestic strategy means that exports are taken seriously and that the
company deals with the competitive issues of each country separately.
Globalization means that the company transcends any single country and
does not identify with a single home country. Products and practices that
work in any one country are used in other appropriate countries.

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 108 ● chapter six

2. Why do you think the tension between a desire for global uniformity and
local responsiveness is greater today than in the past?

ANSWER: Students can discuss this question. In reality, there has been
an escalating tension for most companies between the need for global
uniformity and the need for local fit and responsiveness. Today,
consumers have many choices and very different lifestyles. Panasonic
was losing market share to a local Chinese company until it. learned to
meet local consumers’ needs. The company created a research center to
develop a deep understanding of different consumer lifestyles

3. Many American companies enter China through joint ventures with

local firms, but China is succeeding in the United States primarily with a
strategy of buying companies outright. What are some factors that
might account for this difference?

ANSWER: Companies seek joint ventures to achieve production cost

savings. However, when they can persuade senior managers of foreign
companies to stay on, many companies prefer acquisitions because they
offer greater control than joint ventures. Acquisitions have been China’s
preferred way of expanding internationally. Chinese companies have
succeeded by buying strong brands overseas and keeping them healthy.
They keep local managers and let them run the companies.

4. Do you think it makes sense for a transnational organization to have

more than one headquarters? What might be some advantages
associated with two headquarters, each responsible for different
things? Can you think of any drawbacks?

ANSWER: Answers will vary, and this question can spark a lively debate.
No. The transnational organization does not need to have more than one
headquarters because the company’s executives are learning to manage
a worldwide organization “as a network, not a centralized hub with foreign
appendages. Since the units of a transnational organization network are
far-flung, it would add complexity and confusion to have more than one
headquarters. The transnational model creates an integrated network of
individual operations that are linked together to achieve the
multidimensional goals of the overall organization. Two headquarters
might cause a breakdown in communication. With one headquarters,
individual units still have autonomy and the ability to have an impact on
other parts of the organization. Drawbacks include added organizational
complexity.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 109

5. What are some of the primary reasons a company decides to expand

internationally? Identify a company in the news that has recently built a
new overseas facility. Which of the three motivations for global expansion
described in the chapter do you think best explains the company’s
decision? Discuss.

ANSWER: By going global companies can realize economies of scale and

exploit economies of scope—the number and variety of products and
services it offers. Another reason for moving to global market is to take
advantage of low-cost production factors, especially lower-cost labor. The
companies that the students come up will vary as will their analysis of the
motivations behind that expansion.

6. When would an organization consider using a matrix structure? How does

the global matrix differ from the domestic matrix structure described in
Chapter 3?

ANSWER: The global matrix structure is most effective when forces for both
global integration and for national responsiveness are high. It presents a
complexity in the structure, and therefore should not be considered when
either or both of those forces are low because it would impose unnecessary
complexity on organizational activity. However, when the needs are present,
the design can help the organization effectively match its structure to its
strategy.

The international matrix has much in common with the inner workings of the
domestic matrix, except for the fact that distances are greater--worldwide--
and coordination is more complex. This means that decisions may take
longer to make unless new communications technology is used to help
overcome distance. It means, further, that factors of local conditions,
legalities, and cultures must also be considered when running the
organization. Structurally, the domestic matrix highlights managers for both
functional areas and product or project areas, whereas the international
matrix typically highlights managers for both regional areas and product or
project areas.

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 110 ● chapter six

7. Name some of the elements that contribute to greater complexity for

international organizations. How do organizations address this
complexity? Do you think these elements apply to an online company such
as Netflix that wants to expand its online video streaming service
internationally? Discuss.

ANSWER: The factors that contribute to greater complexity for international

organizations include offering modified or different products, the need for
integration, the problem of transferring knowledge across a global firm, and
cultural differences. Organizations address this complexity by adapting the
organizational structure to produce offerings complying with local tastes,
culture, and laws. They often must develop new positions as Colgate-
Palmolive did.

Online companies such as Netflix must be able to adapt to more complexity.

Cultural and legal differences will still play a major role and may require some
organizational changes.

8. Traditional values in Mexico support high power distance and a low

tolerance for uncertainty. What would you predict about a company that
opens a division in Mexico and tries to implement global teams
characterized by shared power and authority and the lack of formal
guidelines, rules, and structure?

ANSWER: Mexican workers would probably not respond well to this type of
approach. They would view management as weak and would want more
direction to be provided them. Another response might be that the teams set
up this way would have a strong personality assume the stronger leadership
role that their culture prefers.

9. Do you believe it is possible for a global company to simultaneously

achieve the goals of global efficiency and integration, national
responsiveness and flexibility, and worldwide transfer of knowledge and
innovation? Discuss.

ANSWER: While this is certainly possible, it takes a lot of work. The

company may have to give up some efficiency and have a little less
integration to achieve the responsiveness and flexibility it desires. The
company may learn that what makes it efficient in one country does not fit the
culture of another country or is not allowed by local laws.

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 DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 111

10. Compare the description of the transnational model in this chapter to the
elements of the learning organization described in Chapter 1. Do you think
the transnational model seems workable in a huge global firm? Discuss.

ANSWER: A corporate culture that is strong and fosters shared values

characterizes both the learning organization and the transnational model; it is
described in the text as the learning organization extended to the
international arena. The transnational model has multiple centers, subsidiary
managers who initiate strategy for the whole company, and coordination and
control which is achieved through corporate culture and shared values. This
type of structure may be the only workable structure in huge global firms that
truly have subsidiaries in many countries that try to exploit both global and
local advantages.
When it is necessary to deal with multiple interrelated competitive issues, the
complexities of even the global matrix structure are inadequate to carry
beyond balancing simultaneous product and geographic needs. Simply due
to the size of the organization, more restrictive types of structures would tend
to slow down the organization and make it less competitive.

WORKBOOK ~ MADE IN THE U.S.A?

Through discussion, this activity will help students understand that most products we
buy and use are international in nature and that we have truly become a global
economy. A variation on this exercise would be to challenge the students to find a
product made completely in the U.S.A. and then to discuss how difficult this was to
do.

CASE FOR ANALYSIS ~ Halogen Analytics

In discussing this case your students should answer the following questions:

1. What are the arguments for Halogen Analytics going international?

ANSWER: The arguments can be gleaned from the case itself. One reason
for going international is a defensive response to the invasion of FastData,
the Norwegian company, and other possible international companies. The
other reason is that international markets offer an attractive way to expand
both sales and profits.

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 112 ● chapter six

2. What are the arguments for Halogen Analytics staying focused on the U.S.
market?

ANSWER: Arguments against going international are that the company still
can expand domestically and is really still establishing itself in the U.S. It
also does not have any international experience, and any approach it uses
will require an investment in both time and money.

3. Which of the three international strategy options—open its own offices,

take on foreign partners, license its products—would you recommend.
Explain why.

ANSWER: There are pros and cons of each of these approaches. Opening
its own offices gives the company maximum control and it does not have to
share profits with anyone. However, this would be expensive and the
company would probably make many mistakes as it learns the market
conditions and requirements in each country where an office is located.

Taking on foreign partners will reduce the learning curve and facilitate
complying with local conditions, culture, and laws. However, this will mean
sharing profits and the company may find that it is just training its own future
competition.

Licensing foreign distributors also will reduce the learning curve and facilitate
complying with local conditions, culture, and laws. The profits will be even
lower than with partners and the loyalty of these distributors will depend on
how well they can sell the products and how much profit they can earn. If
they find a better deal from another company, they could abandon Halogen.

CASE FOR ANALYSIS ~ Rhinebeck Industrial

1. What do you see as the pros and cons of a new headquarters’ international
department to coordinate across geographic regions?

ANSWER: The benefits to a new international department at headquarters

include greater coordination of activities and greater sharing of information
and innovations. These could result in substantial cost reductions and
increased sales. However, the three regional Vice Presidents and managers
at all of the subsidiaries are accustomed to thinking only in terms of what is
best for their regions and/or subsidiaries. They will most likely resist this new
way of thinking, at least initially, and may not be willing to implement some
changes that benefit the entire organization if they feel the changes hurt their
subsidiaries.

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Solution Manual for Organization Theory and Design 13th Edition Richard L. Daft

DESIGNING ORGANIZATIONS FOR THE INTERNATIONAL ENVIRONMENT ● 113

2. Do you support the proposal to reorganize into a worldwide product

structure? What implementation challenges do you foresee? Explain.

ANSWER: The pros and cons of a worldwide product structure are fairly
similar to those of the international department. The restructuring should
result in greater coordination of activities and greater sharing of information
and innovations, which should yield significant cost reductions and increased
sales. Here again, the three regional Vice Presidents and managers at all of
the subsidiaries will most likely resist the change initially. However, in time,
they may come to see themselves as part of a collaborative global effort, as
opposed to individuals within a conglomerate.

© 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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