Organization Of International Business

The Organization of International BusinessChapter 13Why Is the Issue of Organization Important in IB?•The firm needs to make sure that its strategy (a) is carried out and (b) is working.•Affects the firm’s ability to control its operations•Organizational questions facing international firms:•Where are decisions made?•How can the firm optimize globally?•How should country units report to headquarters?Why Is the Issue of Control Important in IB?Foreign control is usually more difficult because of:•Distance—it takes more time and expense to communicate•Diversity—country differences make it hard to compare operations•Uncontrollables—there are more outside stockholders and governmental dictates•Degree of uncertainty—there often are rapid changes in the environment and data problemsOrganizational Structure•Type of international strategy (global, multidomestic, etc.) Type of international organizational structure (separate versus integrated):–how separate versus integrated–location and type of foreign facilities•Int’l operations may be grouped together or integrated by product, geography, functionDifferent Organizational Structures•International Division: –Creates a separate ―critical mass‖ of international expertise–May have problems getting resources from domestic divisions–Used in initial stages of internationalization•Functional Division–Firms generally start with functional structures when they have little product diversityDifferent Organizational Structures•Product Division–Used in firms with diverse products–Helps to focus attention on specific product rather than region–International strategy that goes with this?•Geographic (Area) Division–Used when strategies are dominated by the country or region context–Product decisions are country specific–International strategy that goes with this?Different Organizational Structures•Matrix–Helps to focus joint attention on product, geographic, and functions–Stresses interdependence and ―working together‖ across the organization–very complex and expensive structure–latter stages of internationalization–International strategy that goes with this?•Dynamic Issue: A firm’s structure evolves as its businesses evolve.Location of Decision-making•Should decisions be centralized (HQ) or decentralized (subsidiary)?•Depends on pressures for global integration or local responsiveness •(Simple) Global strategy: –product undifferentiated or standardized across countries–scale economies are importantLocation of Decision-making•Multidomestic strategy:–cultural, legal and economic differences affect product strategy in different countries–scale economies are less important•Transnational strategy (complex global):–hybrid of multidomestic and global strategies–country differences AND scale economies important at the same timeControl and Coordination Mechanisms•If org structure is the ―hardware,‖ then control mechanisms are the ―software‖ of orgs. Includes:•Organizational culture•Networks•Reporting systems•Cross-cultural teams•Reward and incentive systems