Chapter 10 - Organizational Design and Control

One problem with the matrix is that the two or three managers (if a three-dimensional matrix) must agree on a decision. This can lead to less-than-optimum compromises, delayed responses, and power politics in which more attention is paid to the process than to the problem.

List some issues with a matrix organization structure.

True

Organizations exist for the purpose of enabling a group of people to effectively coordinate their collective activities and accomplish objectives. True or False?

Transfer pricing

Pricing between members of the same enterprise is referred to as __________________ ________________, and while IC headquarters could permit undirected, arm's-length negotiations between itself and its subsidiaries, this might not yield the most advantageous results for the enterprise as a whole.

Transfer Pricing

Pricing that is established for transactions between members of the enterprise

Reengineering

Redesigning organizational structure, hierarchy, business systems, and processes in order to improve organizational efficiency

Subsidiary Detriment

Situation in which a small loss for a subsidiary results in a greater gain for the total IC

Joint venture

A ________________ ______________ may be a corporate entity between an IC and local owners where the _____________ _________________ is located, or it may involve one company working on a project of limited duration in cooperation with one or more other companies.

True

A company's structure helps determine where formal power and authority will be located within the organization, and this structure is what is typically presented in a company's organization chart. True or False?

International Division

A division in the organization that is at the same level as the domestic division and is responsible for all non-home-country activities

Horizontal Corporation

A form of organization characterized by lateral decision processes, horizontal networks, and a strong corporate-wide business philosophy

Hybrid Organization

Structure organized by more than one dimension at the top level

Organizational Design

A process that deals with how an international business should be organized in order to ensure that its worldwide business activities are able to be integrated in an efficient and effective manner

Affiliates

A term sometimes used interchangeably with subsidiaries, but more forms exist than just stock ownership

Subsidiary detriment

An IC has opportunities to source raw materials and components, locate factories, allocate orders, and govern intrafirm pricing that are not available to non-IC. Such activities may be beneficial to the enterprise yet may result in _____________________ _________________.

Matrix Overlay

An organization in which top-level divisions are required to heed input from a staff composed of experts of another organizational dimension in an attempt to avoid the double-reporting difficulty of a matrix organization but still mesh two or more dimensions

Virtual Corporation

An organization that coordinates economic activity to deliver value to customers using resources outside the traditional boundaries of the organization

Matrix Organization

An organizational structure composed of one or more superimposed organizational structures in an attempt to mesh product, regional, functional, and other expertise

What are coordination mechanisms?

Textual communication (email, letter, memos, etc.), direct contact (face-to-face and videoconferencing), liaison roles (communicating between departments), task forces (temporary groups created to solve a problem), teams

Matrix Organization

The _______________ ___________________ has evolved from management's attempt to mesh product, regional, and functional expertise while still maintaining clear lines of authority.

True. This is sometimes called a matrix overlay.

As a result of the difficulties associated with the matrix structure, many firms have maintained their original organizations based on product, function, region or international divisions and built into the structure accountability for the other organizational dimensions. True or False? What is this called?

False. It is based on product, region, function, or customer classes. At secondary, tertiary, and still lower levels, these four dimensions - plus (1) process, (2) national subsidiary, and (3) international or domestic - provide the basis for subdivisions.

As their overseas operations increase in importance and scope, most managements feel the need to eliminate international divisions and establish worldwide organizations based on location, time, culture, and profit. True or False?

Strategic Business Unit (SBU)

Business entity with a clearly defined market, specific competitors, the ability to carry out its business mission, and a size appropriate for control by a single manager

Subsidiaries

Companies controlled by other companies through ownership of enough voting stock to elect board-of-directors majorities

False. Companies use controls to accomplish those tasks.

Every successful company uses rules and regulations to put its plans into effect, evaluate their effectiveness, make desirable corrections, and evaluate and reward or correct executive performance. True or False?

Modular Corporations

Examples of network organizations are the various clothing and athletic shoe marketers such as DKNY, Nike, and Reebok, which are also called _________________ _______________.

Because an organization based on one or possibly two dimension, such as area and product, both the geographic area managers and the product managers will be at the same level, and their responsibilities will overlap.

Explain why it an organization is called a matrix.

1. Financial 2. Technological 3. Market Opportunity 4. Political and Economic

For controls to be effective, all operating units of an IC must provide headquarters with timely, accurate, and complete reports. There are many uses for the information reported. Among the types of reporting required are.....

1. A management contract 2. Control of the finances 3. Control of the technology 4. Putting people from the IC in important executive positions

How can an international company maintain control of a joint venture or of a company in which the international company owns less than 50% of the voting stock (or even no voting stock).

Hybrid Organization

In a _________________ ______________________, a mixture of firms organized by geographic region (such as countries) and functional areas (such as accounting, marketing, etc.), is used at the top level and may or may not be present at the lower levels as well.

Horizontal Corporation

In a ___________________ ___________________, employees worldwide create, build, and market the company's products through a carefully cultivated system of interrelationships.

True

International companies vary with respect to the way the four dimensions are structured and integrated. No single structure is best for all companies and contexts. Rather, managers have to consider the nature of their company's international operating environment and strategy - both currently and how they are expected to change in the future - when deciding when and how to modify the company's organizational structures. True or False?

1. Product and technical expertise regarding the different businesses that the company participates in 2. Geographic expertise regarding the countries and regions in which the company operates 3. Customer expertise regarding the similarity of client groups, industries, market segments, or population groups that transcend the boundaries of individual countries or regions 4. Functional expertise regarding the various value chain activities that the company is involved with

What are the four primary dimensions that need to be considered when designing the structure of an IC?

Creating and evolving the structure of an international organization over time

What are the fundamental tasks of senior management?

1. Instrumental (positions are defined in terms of task and relationships between positions are structured in a way that is instrumental to achieving organizational objectives) 2. Social (positions are defined in terms of social status and authority and relationships between positions are ordered by a hierarchy)

What are the two views of organization?

1. Finding the most effective way to departmentalize to take advantage of the efficiencies gained from specialization of labor, and 2. Coordinating the activities of those departments to enable the firm to meet its overall objectives

What are two of the concerns that management faces in designing the organizational structure for an IC?

The ability to maintain alignment between the organization and its global and hypercompetitive environment.

What is a fundamental determinant of many organizations' ability to merely survive?

A network corporation

What is another name for a virtual corporation?

The size of the organization and the complexity of its business operations. Also, it is essential that the structures and systems being implemented are not merely consistent with each other but also consistent with the environmental context in which the organization is operating and the strategy the company is using for competing in this international environment.

When designing an international company, what must be considered?

Strategic Business Unit (SBU)

_________________ __________________ ______________ are an organizational form in which product divisions have been defined as though they were distinct, independent businesses.

Control systems

___________________ _________ help link the multinational corporation vertically so that the activities of subsidiaries are channeled to support the corporation's strategies.

Coordination systems

_______________________ ________________ helps link the multinational corporation horizontally. They provide information flows among subsidiaries so that they can coordinate their respective activities.

Reengineering

The increasing acceptance by many companies of the need for frequent reorganization, called _____________________ by many, is often accompanied by a significant reduction in the levels of middle management, restructuring of work processes to reduce the fragmenting of the process across functional departments, improvement in the speed and quality of strategy execution, empowerment of employees, and the use of computers for instant communication and swift transmittal of information.

Output control

The performance of a subsidiary is assessed based on results, not the process used to achieve those results

Evolve over time, to allow the organization to respond to change and to efficiently and effective reconfigure the way in which its competencies and resources are integrated within and across the company's various units

The structure of an international company (IC) must be able to:

Cultural control

The subsidiary is to develop loyalty to HQ so that tis culture eventually replicates headquarters

Bureaucratic control

The subsidiary should develop a culture of impersonal and bureaucratic efficiency is

Organizational Structure

The way that an organization formally arranges its domestic and international units and activities, and the relationships among these various organizational components

True

True or False: Outsourcing once was used for downsizing and cost reduction, but now companies use it to obtain specialized expertise that they don't have but need in order to serve new markets or adopt new technology.

1. Be more capable of developing competitive strategies to confront the increasing global competition 2. Obtain lower production costs by promoting worldwide product standardization and manufacturing rationalization, and 3. Enhance technology transfer and the allocation of company

Managements that change to organizations that eliminate international divisions and establish worldwide organizations feel that they will....