int mgmt test 3

Two basic questions when designing an organization

- How shall we divide the work among the organization's subunits? - How shall we coordinate and control the efforts of the units we create?

Problems with Worldwide Matrix Structures

- Slow decision-making process - Too bureaucratic - Too many meetings and too much conflict

Why do companies abandon their international division?

- Too many products overwhelm the capacities of the international division - When the number of locations in different countries grows, it is difficult for the international division to manage multidomestic or regional adaptations - The international division makes it more difficult to implement international strategies using worldwide products or location advantages

Structure to deal with the shortcoming of the International Division

- Worldwide product structure - Worldwide geographic structure - Matrix structure - Transnational network structure

If an alliance does not work, there are two choices

1. Improve implementation 2. negotiate an end

E-commerce Strategy Formulations

1. Telecommunications: infrastructure to move bits or computerized information (download software) 2. Payment: infrastructure to move money (PayPal, retail stores) 3. Physical: infrastructure to deliver products (UPS tracking)

6 coordination systems

1. Textual communication: email, memos, reports 2. Direct contact: face to face interaction 3. Liaison roles: part of a person's job in one department to communicate with people in another department 4. Task forces: temporary teams created to solve a particular organizational problem 5. Full time integrators: cross-unit coordination is the main job responsibility 6. Teams: groups of employees working together a. The strongest coordination mechanism b. Permanent units of the organization c. Come from several organizational subunits to specialize in particular problems

dominant parent

1. the dominant parent (majority owner) controls strategic and operational decision making a. Often has a majority ownership Treats the IJV as its wholly subsidiary

Decision Making control systems

1. the level of the organization where mangers have the authority to make decisions a. In decentralized organizations, lower level managers make many important decisions b. In centralized organization, higher level managers make most important decisions c. Transnational structures do not have a tendency for control in either direction

decision-making controls

2 key areas of decision making 1. Operational decisions (daily running of the organization) 2. Strategic decisions (strategy for long term survival) Majority ownership does not necessarily mean controlling the decision making. · IJC's strategic decision-making takes place at the level of the board of directors or top management · IJV parent companies who want control of operational decision making usually have most of their people service as mid to lower level managers In non-equity ICAs, strategic decisions remain with parent companies

Strategic Alliance Issues

: because they are fast and flexible ways of gaining complementary resources, they are among the most popular strategies that companies use to develop new products and to expand in new areas Alliances fail most often due to poor design or management as opposed to a poor

Globalizing through the Internet

: to increase in information exchanges and efficiency due to the Internet and e-commerce has made it possible for companies to reach customers worldwide - The internet is enabling the emergence of a new form of multinational the born-global firm - Born global firms are able to obtain a significant portion of their revenues from sales in international markets - Though a website gives the world access to firm's goods and services, the internationalization challenges faced by traditional MNCs remain o The firm must still solve the global-local dilemma, and deal with national culture and institutional contexts

Hybrid Structures

A hybrid structure mixes functional, geographic, and product units

Independent Management

Alliance managers act more like managers from a separate company.

output control systems

Assess the performance of a unit based on results, not on the processes used to achieve the results - responsibility for profit

Types of ecommerce

B2C, B2B, C2C, C2B, C2G, B2G

Major Attractions of e-commerce

Cost reduction: relatively inexpensive to reach international customers via Web Technology: the technology to reach customers is readily available Efficiencies: electronic communication and processes can be very efficient Convenience: the web is in operation 24/7 Speed of Access: company's products or services can be accessed and immediately from anywhere in the world

Picking a market for e-commerce

Countries with market inefficiencies Countries with attractive demographic characteristics

bureaucratic control systems

Focuses on managing behaviors, not outcome (budget reports, centralized decision making)

Geographic Structure

Geographic Structure: building departments or subunits based on a particular geographic region · Product and geographic units must still perform all the functional tasks of a business. · Functional tasks are duplicated for each unit, leading to loss of economies of scale, and loss of efficiency · But, such inefficiencies disappear as customer groups and products proliferate · Even for small organizations, a products or geographic unit may offer competitive advantages: o It allows a company to serve customer needs and adapt products. o Managers can quickly identify customer needs and adapt products

Organizational Design

How organizations structure subunits and use coordination and control mechanisms to achieve their strategic goals the best multinational strategies do not guarantee success. Managers must design their organizations with the best mechanisms to carry out domestic and international strategies.

Steps for a Successful E-commerce Strategy

Leadership Build on current business models and experiment with new e-commerce models Meet the challenge of developing an e-commerce organization allocate resources have an e-comm strategy develop appropriate system measure success

Coordination Systems

Link the organization horizontally. - Coordination systems provide flows among subsidiaries so that they can coordinate their activities - EX: for plans to use advanced information systems that designers in Europe, the U.S. and Japan can coordinate their design efforts for the world market

Rotating Management

Managers from the partners rotate through the key positions in the management hierarchy. popular in developing countries

OECD

Organization for Economic Cooperation and Development, countries dominate the internet Sees broadband development as a critical aspect of the internet and e-commerce Broadband can result in economic growth, facilitating social and cultural development, and even innovation

Split Control Management

Partners usually share strategic decision making and make functional decisions independently.

A standardized website

a company's web sites are fairly similar in layout and design around the world

A localized website

a company's web sites around the world are adapted to the local culture in terms of values, appeals, symbols, and even themes in the communication

Formal International Cooperative Alliance

a high degree of involvement with partners, usually a contract specifies what each partner will give and receive · May require sharing proprietary information which makes backing out more difficult · Very popular in some high-tech industries because of high costs and risks of R&D · Sometimes one partner may take an equity share of ownership of the other. The popular press calls these relationships "joint ventures", but no separate legal entity is created

The Metanational

a large, entrepreneurial multinational firm able to tap into hidden pockets of innovation, technology and markets, especially emerging markets worldwide. - centerless structure - objective to learn and communicate

Informal International Cooperative Alliance

a non-legally binding agreement between companies from two or more countries to cooperate on any value chain activity · They may be agreements of any kind, and may provide links anywhere on their value chains · Because there is no legally-binding agreement, managers usually limit the scope of involvement, and resist revealing proprietary information

International Joint Venture

a self-standing legal entity owned by two or more parent companies from different countries; each has an equity interest · The simplest IJV occurs when two parent companies have 50/50 ownership of the venture · The venture need not be equally owned · 50/50 partnership may not mean both partners have equal influences on the venture · Contributions may be cash, technology or other resources · Difficulty arises in determining ownership from equity contributions other than cash · If there are many members, the entity is called a consortium

Market and sales alliance

allow companies to increase the scope and number of products sold and to share distribution systems

Worldwide Matrix Structure

balances the benefits of geographic and product structures, and to coordinate their subunits · unlike hybrids, it is a symmetrical organization with equal lines of authority for worldwide product groups and geographical divisions · The Geographical divisions focus on national responsiveness · The product divisions focus on find global efficiencies Ø Balances the benefits produced by area and product structures Ø Works best with near equal demands from both sides Ø Requires extensive resources for communication and coordination Ø Requires middle and upper level managers with good human relations skills Ø PRODUCES QUALITY DECISIONS

Shared Management

both parent companies contribute approximately the same number of managers to the alliance organization

Product Structure

building departments or subunits around a particular product.

Companies need to be concerned about these security issues

confidentiality availability integrity authentication

Export Department

coordinates and controls a company's export operations · Is created when exports become significant · Deals with international sales of all products · Sales representatives in other countries may report to the export department manager

2 key issues in managing an alliance

decision-making control management structures

E-commerce Security

degree to which customers feel that their private and personal information is safeguarded by companies collecting it

output alliance

deliver a service and are perhaps the most popular in the airline industry

Functional Structure

departments perform separate business functions such as marketing or manufacturing · The functional structure is the simplest organization · Most smaller organizations have functional structures · Organizations choose a functional structure for its efficiency · Efficiencies arise from economies of scale in each function because of cost savings when a large number of people do the same job in the same location. · Coordination is difficult, as functional units are separated from each other and serve functional goals. · The functional structure works best when the firm has few products, locations, and types of customers. · Works best in a stable environment, with minimal need for adaptation

Basic Structural framework of transnational network

dispersed subunits specialized operations interdependent relationship

Management Structures

dominant parent shared management split control management independent management rotating management

Worldwide Product Structure

each product division is responsible for producing and selling its product or services throughout the world - it may be the ideal structure to implement an international strategy in which the firm gains economies of scale by selling worldwide product activities based at home this type of structure sacrifices the regional or local adaptation strengths derived from geographical structure

Network Readiness Index

examines the readiness of countries to benefit from products and services relying on the Internet

e-commerce enablers

fulfillment specialists that provide services such as Web site translation, and calculate shipping, value added taxes, duties, and other charges unique to each country (outsourced help)

benefits of strategic alliances

gain access to local partner's knowledge of the market, meet government requirements, share risks, share technology, economies of scale, access lower cost raw material or labor.

transnational network structure

has no basic form, symmetry or balance between geographic and product divisions · Links different functional, product, and geographic subsidiaries dispersed worldwide · Nodes, units at the center of the network, coordinate product, functional and geographic information · No two subunits are alike · Transnational units evolve to take advantage of resources, talent, and market opportunities · Resources, people and ideas flow in all directions

control systems

help link the organization vertically, up and down the organizational hierarchy in two ways: 1. They measure or monitor performance of the subunits 2. They provide feedback on effectiveness to subunit managers

E-commerce Diffusion

linkage between brick and mortar and internet, is occurring at a rapid pace worldwide.

Alliances...

linking upstream and downstream components of the value chain can serve the objectives of low-cost supply or manufacturing

operations alliance

multinational companies often combine manufacturing or assume activities to reach a profitable volume of activity

International Division

not considered effective for multiproduct companies operating in many countries, however for companies of moderate size with limits number of products or country locations the International Division remains popular (declined popularity among large multinationals) - differs from the export department in several ways: - It is larger and has greater responsibilities - It has more extensive staff with international expertise - It is responsible for managing exports, international sales, negotiating contracts, and managing foreign subsidiaries - It is the usual step after the export department - It deals with all products - It manages overseas sales force and manufacturing sites

Fair Exchange

occurs from the evaluations, expectation, and concerns about future potential for gaining rewards from the relationship

4 types of control systems

output control systems bureaucratic control systems decision making control systems cultural control systems

Indirect Benefits of Alliances

penetrate risky markets, learn new markets or technologies, overcome local political barriers, develop a presence in the market, support other competitive tactics

To build and sustain trust and commitment, Multinational managers should consider key factors:

pick your partner carefully know each side's strategic goals seek win-win situations go slowly invest in cross-cultural training find the right levels of trust and commitment

Worldwide Geographic Structure

regions or large-market countries become the geographic divisions of the multinational company - The primary reason to adopt this structure is to implement a multidomestic or regional strategy - Differentiation of products or services requires an organizational design with maximum geographic flexibility - Regions or large-market countries become the geographic divisions of the multinational company o The semiautonomous subunits provide flexibility to meet location needs o Country-level divisions usually exist only when a country's market size is sufficiently large to support its own organization o Separate divisions make sense for large market countries

factors encouraging e-commerce growth

relative advantage compatibility organizational readiness manager's characteristics security

Minireplica Subsidiary

scaled-down version of the parent company, using the same technology and producing the same products as the parent company

2 indicators of the global presence of e-commerce

secure server (allows user to send an receive encrypted data) internet hosts (computers connected to the Internet with their own IP addresses)

direct benefits of alliances

stand-alone profit centers provide direct financial benefits to parents

key criteria in choosing an alliance partner

strategic complementarity complimentary skills compatible management styles right level of mutual dependency avoid anchor parter be cautious of the elephant and ant complex assess operating policy differences cross-cultural communication

Foreign Subsidiaries

subunits of the multinational company that are located in another country · Growing component of international business · · Foreign subsidiaries are the structural building blocks for running multinationals

Transnational Subsidiary

supports a multinational firm strategy based on location advantages. It has no firm wide form or function. Each subsidiary contributes what it does best or most efficiently anywhere in the world

Commitment

taking care of each other and putting forth extra effort to make the venture work

Credibility trust

the confidence that the partner has the intent and ability to meet promised obligations and commitments

Benevolent Trust

the confidence that the partner will behave with goodwill and with fair exchange

The Internet Economy

the internet and e-commerce are drastically changing how international business is done · The internet allows any company to create a virtual and global presence to conduct operation around the world, and it allows MNCs to dramatically alter the way they present and communicate with global customer · The growth of smartphones and social media are revolutionizing commerce · Although small in comparison to the traditional economy, the Internet economy is: o Growing faster than any other business trend in history; a worldwide phenomenon o Drastically changing how international business is done The next generation of Multinational managers must address unique challenges in formulating and implementing multinational strategies for the Internet economy

Major Deterrent to E-commerce

the return/receipt burden and cost delivery cost of site construction channel conflicts easily copied models cultural differences traditional cross-border transaction complexities standard or local websites customer trust and satisfaction

E-commerce

the selling of goods or services over the internet, and includes those delivered online and offline

Cultural Control Systems

use organizational culture to control employees' behaviors and attitudes

Attitudinal Commitment

willingness to dedicate resources and face risks to make the alliance work

Both Worldwide product structure and Worldwide Geographic structure have advantages and disadvantages:

· a product structure supports global products · a geographic structure emphasizes local adaptation Multinational often want both abilities and adopt a HYBRID form which combines both.