Chapter 13: The Organization of International Business: Park, Du-Jun G Liu, Jia Naran, Zorigt Ganaa

Chapter 13: The
Organization of
International Business
October 15, 2007
Park, Du-jun Liu, Jia

g
Naran, Zorigt Ganaa
Content
Organizational Architecture Park, Du-jung
Organizational Liu, Jia

Structure
Control systems and Incentives & Process Naran, Zorigt
Organizational Culture & Change Ganaa

Organizational Architecture(1)
Structure
Incentives
Processes People And
Controls
Culture
Organizational
Architecture(2)
 Maximizing its profitability
=>Internal consistency
=>Consistency between architecture and

strategy
=>Consistency to competitive condition
Organizational Structure
 Vertical differentiation
 Horizontal differentiation
 Integrating mechanisms
Vertical differentiation
 Arguments for Centralization
Arguments for
Decentralization
 Strategy and Centralization in an
Horizontal differentiation
International Structural Stages Model
Worldwide
Product
Division Global Matrix
(“Grid”)
Foreign
Product
Diversity
Alternate Paths
of Development
Area
Division
International
Division
Foreign Sales as a Percentage of Total Sales

Integrating
Mechanisms(1)
 Strategy and Coordination in the
Localization International Global Transnational

firms firms firms firms
Law High
Need of coordination
Integrating
Mechanisms(2)
 Impediments to Coordination
- Different orientations
- Different goals
 Formal Integrating Mechanisms
- Direct - Liaison roles
contact
- Teams - Matrix
structure
 Informal Integrating Mechanism
=> Knowledge Networks : network for transmitting information
Types of control system.
 Personal control is control by personal contact with
subordinates
 Bureaucratic Controls is control through a system of
rules and procedures that directs the actions of
subunits
 Output controls involves setting for subunits to
achieve and expressing those goals in term of
relatively objective performance metrics such as
profitability, productivity, growth, market share, and
quality.
 Cultural Controls exist when employee “buy into” the
norms and value system of the firm. When this occurs,
the employee tend to control their own behavior,
which reduces the need of other controlling systems.
 Incentive refers to the devices used to reward
appropriate employee behavior.
 Important points to consider when using
incentive system.
 The type of incentive used often varies depending
on the employees and their tasks.
 Most firms use a formula for incentives that links a
portion of incentive pay to the performance of
subunit in which a manager or employee works and
portion to the performance of the entire firm, or
some level other higher level organization unit.
 The incentive system used within a multinational
enterprise often have to be adjusted to account for
national differences in institutions and culture.
 Unintended consequences
 Performance ambiguity is a function of the
interdependence of subunits in an
organization.
Cost control can be defines as the amount of time
top management must devote to monitoring and
evaluating subunits’ performance.
Strategy Interdependenc Performance Costs of
e Ambiguity control
localization Low Low Low
International Moderate Moderate Moderate
Global High High High
Transnational Very high Very high Very high
 Process is defined as manners in which
decisions are made and work is performed
within the organization.
Organizational Culture:
-Creating and Maintaining Organizational
Culture
-Organizational Culture and Performance
in the international Business
Synthesis: Strategy and Architecture
-Localization Strategy
-International Strategy
- Global Standardization Strategy
- Transnational Strategy
- Environment, strategy, Architecture and
Performance
Organizational Change:
- Organizational Inertia
- Implementing Organizational Change
 Organizational Culture
Creating and Maintaining Organizational
Culture
Influences on Organizational Culture
1.Important leaders can have a profound impact on an organizations

culture.
Example: Japanese from Matsushita:
- Natural Service through Industry
- Fairness
- Harmony and cooperation
- Struggle for betterment
- Courtesy and humility
- Adjustment and assimilation
- Gratitude
2.Broader social culture of the nation where the firm was founded
3.History of the enterprise, which over time may come to shape the
values of the organization.
Culture is maintained by a variety of mechanisms.
1. Hiring and promotional practices of the

organization
2. reward strategies
3. Socialization Process
4. Communication Strategy
 Organizational Culture & Performance in the
firms with strong Strong Culture A culture can be

culture are normally + - strong but bad
seen by outsiders Example:1980General
as having a certain Motors had a strong culture
style or way of doing things
Adaptive Culture
Most Managers care deeply about and value costumers, stock-holders,
and employees
 Environment, Strategy, Architecture and
Performance
A firm to succeed, two conditions must be fulfilled.
1. The firm’s strategy must be consistent with the environment

in which the firm operates.
2. The firm’s organization architecture must be consistent with
its strategy.
 Organizational Change
Organizational Inertia
Inertia forces come from a number of sources.
1. Existing distribution of power and influence with on organization
2. Existing culture, as expressed in norm and value system
3. Senior managers’ preconceptions about the appropriate business
model or paradigm.
4. Institutional constrains might also act as a source of inertia
Implementing Organizational Change
The Basic Principles for successful

Organizational damage
Unfreezing the organization Moving to the new State Refreezing the Organizati
Movement requires a
Whose power is threatened substantial change in the Refreezing requires that
by change can too easily form of a multinational’s employees be
resist incremental change organization architecture socialized into the new
so that it matches the way of doing things
desired new strategic
postures

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Chapter 13: The

Park, Du-jun Liu, Jia

Organizational Architecture Park, Du-jung

Organizational Liu, Jia

Control systems and Incentives & Process Naran, Zorigt

Organizational Culture & Change Ganaa

=>Consistency between architecture and

Foreign Sales as a Percentage of Total Sales

Localization International Global Transnational

1.Important leaders can have a profound impact on an organizations

1. Hiring and promotional practices of the

firms with strong Strong Culture A culture can be

A firm to succeed, two conditions must be fulfilled.

1. The firm’s strategy must be consistent with the environment

The Basic Principles for successful

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