Chapter Two
The Organizational
Context
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Chapter Learning Objectives
After reading this chapter, you should be able to:
• discuss how international growth places demands on
management
• analyze the effect of responses on human resource
management approaches and activities
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Chapter Learning Objectives
• define factors that impact on how managers of
internationalizing firms respond to these management
challenges including
– structural responses to international growth
– control and coordination mechanisms, including
cultural control
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Opening Vignette
UPS: From Bicycle Messenger Service To $30 Billion
Multinational Company
• internal responses (structure/control/HRM) as firms
grow globally
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Terms
M&A
born global
matrix structure
heterarchy structure
transnational structure bamboo network firm
multinational network clan control
chaebols social capital
greenfield building approach corporate culture
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Management Demands of
International Growth (Figure 2.1)
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The Path to Global Status
Organizational structures change due to
• strain imposed by growth and geographical spread.
• the need for improved coordination and control across
business units.
• the constraints imposed by host-government regulations
on ownership and equity.
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Stages of Internationalization (Figure 2.2)
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Evolutionary Process
• structural responses
• control mechanism
• HRM policies
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Export Department Structure (Figure 2.3)
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HRM’s Role in
Firms Early Exporting
• unclear and limited
• training of the foreign agency
• staffing strategies that focus on the international
customers demands
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Sales Subsidiary Structure (Figure 2.4)
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HRM’s Role in Sales
Subsidiary
Staffing
HCNs
• knowledge of foreign market, language, needs
• HR policies for local employees
PCNs
• maintaining control, ethnocentric attitude, expatriation
management ( staffing, training, compensation)
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International Division Structure
(Figure 2.5)
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HRM’s Role in International Division
Structure ( Foreign Production)
• expatriate management
• monitoring subsidiary HR function
• communicating corporate policies ( i.e compensation)
• facilitating control of subsidiaries
• training ( socialization and pre-departure training)
• supervising transfer of management and technical
know how
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MNEs Two Major Issues of
Structure
• the extent to which key decisions are to be made at the
parent-country headquarters or at the subsidiary units
(centralization versus decentralization)
• the type or form of control exerted by the parent over the
subsidiary unit
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Global Product Division Structure
(Figure 2.6a)
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Global Area Division Structure
(Figure 2.6b)
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HRM’s Role in Global Product/Area
Division
• adapting HRM activities to host countries specific
requirements
• local employee decisions made by subsidiaries
• monitoring with less intervening in local affairs
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As MNE Grows a Global Perspective
Accelerates
Think global, act local paradox”
MNE’s push toward global integration and host
stakeholders push for local responsiveness
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Global Matrix Structure (Figure 2.7)
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International Matrix Structure is
Difficult
Matrix is all but unmanageable because of
• dual reporting, which leads to conflict and confusion.
• the proliferation of communication channels which
creates informational logjams.
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International Matrix Structure is
Difficult
• overlapping responsibilities, which produce turf battles
and a loss of accountability.
• the barriers of distance, language, time and culture,
which often make it very difficult for managers to
resolve conflicts and clarify confusion.
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International Matrix Structure is
Difficult
Particular care with staffing
• focus less on structure and more on developing the
abilities, behaviour and performance of individual
managers
HRM’s Role in Matrix
Structure
• staffing (interpersonal skills)
• management development
• HR planning
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Beyond the Matrix
(Network of Subsidaries)
Organizational structures (decentralized/organic forms)
• heterarchy
• transitional
• networked firm
HRM’s Role in the Heterarchy
Structure
• corporate culture and shared awareness of central goals
and strategies
• organizational success rests solely on the required human
resources
• experienced personnel
• rewards and performance management
• use of staff as informal control mechanism
• knowledge management
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HRM’s Role in the Transnational
Structure
• developing global leaders
• staffing transfers
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The Networked Organization (Figure 2.8)
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The Multi-Centered
Networked Organization
Management Involves Less hierarchical structure and
features 5 dimensions
• delegation of decision-making authority to appropriate
units and levels.
• geographical dispersal of key functions across units in
different countries.
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The Multi-Centered
Networked Organization
• delayering of organizational levels.
• de-bureaucratization of formal procedures.
• differentiation of work, responsibility and authority
across the networked subsidiaries.
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The Culture of Origin and Structural
Paths to Globalization (Figure 2.9)
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Control Strategies for
Multinational Firms (Figure 2.10)
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Discussion Questions
1. What are the stages a firm typically goes through as it
grows internationally and how does each stage affect the
HR function?
2. What are the specific HRM challenges in a networked
firm?
3. Country of origin influences the firm’s approach to
organization structure. As MNEs from China and India
internationalize, to what extent are they likely to differ
from that observed for Japanese, European and US
MNEs?
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Case: Globalizing Corporate Culture –
“True Believers” in “The Toyota Way”
1. How is Toyota trying to internalize its corporate values
and beliefs? What organizational level is Toyota
targeting and why?
2. Can you find examples of other multinational companies
and their ways to and tools for transferring their
organizational values and beliefs to managers and
employees.
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Case: Globalizing Corporate Culture –
“True Believers” in “The Toyota Way”
3. Many national and multinational companies try to create
a very strong organizational or corporate culture. Ideally
managers and employees should eat and breath Company
A and become Company A people. In times of skilled
labor shortages and strong competition for management
talents how could a strong company culture be
contraproductive and represent a barrier in the external
recruitment and selection process?
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