BA 361 Chapter 14

strong culture

-Managers in companies with this type of culture share a relatively consistent set of values and norms that have a clear impact on the way work is performed -this type of culture is not always good -it may not lead to high performance -it could be beneficial at one point, but not at another *Companies with adaptive cultures have the highest performance

international division at Walmart

-Walmart's organizational architecture -when Walmart initially expanded into international markets, it established an international division -Over time, however, this structure proved to be problematic and was abandoned

bureaucratic controls

-a system of rules and procedures that directs the actions of subunits -budgets and capital spending rules

worldwide product division structure

-adopted by firms that are reasonably diversified -allows for worldwide coordination of value creation activities of each product division -helps realize location and experience curve economies -facilitates the transfer of core competencies -does not allow for local responsiveness

international strategy

-create value by transferring core competencies from home to foreign subsidiaries -the need for control is moderate -the need for integrating mechanisms is moderate -performance ambiguity is relatively low and so is the cost of control -the worldwide product division structure is common

product divisional structure

-each division is responsible for a distinct product line -headquarters retains control for the overall strategic direction of the firm and for the financial control of each division

cultural controls

-exist when employees "buy into' the norms and value systems of the firm -strong culture implies less need for other forms of control

performance

-exists when the causes of a subunit's poor performance are not clear -is common when a subunit's performance is dependent on the performance of other subunits -is lowest in firms with a localization strategy -is higher in international firms -is still higher in firms with a global standardization strategy -is highest in transnational firms

centralized decision making

-facilitates coordination -ensures decisions are consistent with the organization's objectives -gives managers the means to bring about organizational change -avoids duplication of activities

worldwide area structure

-favored by firms with low degree of diversification and a domestic structure based on function -divides the world into autonomous geographic areas -decentralizes operational authority -facilitates local responsiveness -can result in a fragmentation of the organization -is consistent with a localization strategy

integrating subunits

-firms need a mechanism to do this -need for coordination is lowest in firms with a localization strategy and highest in transnational firms coordination can be complicated by differences in subunit orientation and goals -simplest formal mechanism is direct contact between subunit managers, followed by liaisons -temporary or permanent teams composed of individuals from each subunit is the next level of this mechanism -the matrix structure allows for all roles to be integrating roles

localization strategy

-focus on local responsiveness -they do not have a high need for integrating mechanisms -performance ambiguity and the cost of control tend to be low -the worldwide area structure is common

transnational strategy

-focus on simultaneously attaining location and experience curve economies, local responsiveness, and global learning -some decisions are centralized and others are decentralized -the need for coordination and cost of control is high -an array of formal and informal integrating mechanism are used -a strong culture is encouraged -matrix structures are common

global standardization strategy

-focus on the realization of location and experience curve economies -headquarters maintains control over most decisions -the need for integrating mechanisms is high -strong organizational cultures are encouraged -the worldwide product division is common

processes

-how decisions are made and work is performed within the organization -many of these cut across national boundaries as well as organizational boundaries -these can be developed anywhere within a firm's global operations network -formal and informal integrating mechanisms can help firms leverage these

profitable

-in order to be this... -the elements of the organizational architecture must be internally consistent -the organizational architecture must fit the strategy -the strategy and architecture must be consistent with each other, and consistent with competitive conditions

knowledge network

-informal integrating mechanism -network for transmitting information within an organization that is based not on informal contacts between managers and on distributed information systems -a non-bureaucratic conduit for knowledge flows -must embrace as many managers as possible and managers must adhere to a common set of norms and values that override differing subunit orientations

functional structure

-most firms begin with no formal structure, but as they grow, split into functions reflecting the firm's value creation activities -functions are coordinated and controlled by top management -decision making is centralized -product line diversification requires further horizontal differentiation -Most firms begin with no formal structure and are run by a single entrepreneur or a small team of individuals. As they grow, the demands of management become too great for one individual or a small team to handle. -At this point the organization is split into functions reflecting the firm's value creation activities (e.g., production, marketing, R&D, sales). -These functions are typically coordinated and controlled by top management. -Decision making in this functional structure tends to be centralized.

organizational culture

-norms and values that are shared among the employees of an organization -evolves from: *founders and important leaders *national social culture *the history of the enterprise *decisions that resulted in high performance -can be maintained through: *hiring and promotional practices *reward strategies *socialization processes *communication strategies -tends to change very slowly

foreign market

-over time, manufacturing may shift to this -firms with a functional structure at home would replicate the functional structure in this market -firms with a divisional structure would replicate the divisional structure in this market -there is the potential for conflict and coordination problems between domestic and foreign operations

personal controls

-personal contact with subordinates -most widely used in small firms

decentralized decision making

-relieves the burden of centralized decision making -has been shown to motivate individuals -permits greater flexibility -can result in better decisions -can increase control

output controls

-setting goals for subunits to achieve and expressing those goals in terms of objective performance metrics -compare actual performance against targets and intervene selectively to take corrective action

incentives

-the devices used to reward managerial behavior -usually closely tied to performance metrics used for output controls -should vary depending on the employee and the nature of the work being performed -should promote cooperation between managers in sub-units -should reflect national differences in institutions and culture -can have unintended consequences

people

-the employees and the strategy used to recruit, compensate, and retain those individuals and the type of people they are in terms of their skills, values, and orientation

organizational structure

-the formal division of the organization into subunits -the location of decision-making responsibilities within that structure *centralized versus decentralized -the establishment of integrating mechanisms to coordinate the activities of subunits including cross-functional teams or pan-regional committees -has three dimensions

horizontal differentiation

-the formal division of the organization into subunits -usually based on function, type of business, or geographical area *organizational structure dimension

vertical differentiation

-the location of decision-making responsibilities within a structure -determines where decision-making power is concentrated *organizational structure dimension

integrating mechanisms

-the mechanisms for coordinating subunits

control systems

-the metrics used to measure performance of subunits -A major task of a firm's leadership is to control the various subunits of the firm—whether they be defined on the basis of function, product division, or geographic area—to ensure their actions are consistent with the firm's overall strategic and financial objectives *structure and control systems establish decision-making responsibilities and integration mechanisms

organizational architecture

-totality of a firm's organization including: organizational structure, control systems and incentives, processes, organizational culture, and people

global matrix structure

-tries to minimize the limitations of the worldwide area structure and the worldwide product divisional structure -allows for differentiation along two dimensions - product division and geographic area -has dual decision making - product division and geographic area have equal responsibility for operating decisions -can be bureaucratic and slow -can result in conflict between areas and product divisions -can result in finger-pointing between divisions when something goes wrong

international division

-when firms expand internationally, they often group all of their international activities into this -this has tended to be the case for firms organized on the basis of functions and for firms organized on the basis of product divisions -regardless of the firm's domestic structure, this division tends to be organized on geography

implementing organization change

1. Unfreeze the organization through shock therapy -requires taking bold actions like plant closures or dramatic structural reorganizations 2. Move the organization to a new state through proactive change in architecture -requires a substantial and quick change in organizational architecture so that it matches the desired new strategic posture 3. Refreeze the organization in its new state -requires that employees be socialized into the new way of doing things Can be difficult to change because of: -the existing distribution of power and influence -the current culture -managers' preconceptions about the appropriate business model or paradigm -institutional constraints