Chapter Six
Designing Organizations for the
International Environment
Thomson Learning
© 2004
6-1
Motivations for Global Expansion

Economies of Scale
– large volume

Economies of Scope
– number of products /
countries

Low-cost Production
Factors
– labour, raw materials,
energy, capital, reg’s
Thomson Learning
© 2004
6-2
Four Stages of International
Evolution
I.
Domestic
II.
International
Strategic
Orientation
Domestically
oriented
Export-oriented,
multidomestic
Multinational
Global
Stage of
Development
Initial foreign
involvement
Competitive
positioning
Explosion
Global
Structure
Domestic
structure plus
export
department
Domestic structure
plus international
division
Worldwide
geographic,
product
Matrix,
trans-national
Market
Potential
Moderate,
mostly
domestic
Large,
multidomestic
Very large,
multinational
Whole world
Sources: Based on Nancy J. Adler, International Dimensions of
Organizational Behavior (Boston: PWS-KENT, 1991), 7-8;
and Theodore T. Herbert, “Strategy and Multinational Organization
Structure: An Interorganizational Relationships Perspective,”
Academy of Management Review 9 (1984): 259-71.
Thomson Learning
© 2004
III.
Multinational
IV.
Global
6-3
Matching Organizational Structure to
International Advantage
When Forces for
Global
Integration
are . . .
And Forces for
National
Responsiveness
are . . .
Low
Strategy
Structure
Low
Export
International
Division
High
Low
Globalization
Global Product
Structure
Low
High
Multidomestic
Global Geographic
Structure
High
High
Globalization and
Multidomestic
Global Matrix
Structure
Thomson Learning
© 2004
6-4
Domestic Hybrid Structure with
International Division
CEO
Human
Resources
Electrical
Products
Division
Corporate
Finance
Scientific
Products
Division
Medical
Products
Division
Research &
Development
International
Division
Europe
(Sales)
Brazil
(Subsidiary)
Mid East
(Sales)
Thomson Learning
© 2004
Staff (Legal,
Licensing)
6-5
Partial Global Product Structure Used by
Eaton Corporation
Chairman
Law &
Corporate
Relations
Engineering
President
Finance &
Administration
International
Regional
Coordinators
Global
Automotive
Components
Group
Global
Industrial
Group
Source: Based on New Directions in Multinational Corporate
Organization (New York: Business International Corp., 1981).
Global
Instruments
Product
Group
Thomson Learning
© 2004
Global
Materials
Handling
Group
Global
Truck
Components
Group
6-6
Global Matrix Structure
International
Executive
Committee
Business
Areas
Germany
Norway
Country Managers
Argentina/
Brazil
Spain/
Portugal
Power
Transformers
Transportation
Industry
Local
Companies Thomson Learning
© 2004
6-7
Building Global Capabilities

The Global Organizational Challenge
Increased Complexity and Differentiation
Need for Integration
Knowledge Transfer

Global Coordination Mechanisms
Global Teams
Headquarters Planning
Expanded Coordination Roles
Thomson Learning
© 2004
6-8
Cultural Differences in Coordination
and Control

National Value Systems
5.
Power Distance
Individualism vs. Collectivism
Masculinity vs. Femininity
Uncertainty Avoidance
Long Term Orientation

Three National Approaches to Coordination and Control
1.
2.
3.
4.
Centralized Coordination in Japanese Companies
European Firms’ Decentralized Approach
The United States: Coordination and Control
through Formalization
Thomson Learning
© 2004
6-9
Power Distance

“...the extent to
which the less
powerful members
of institutions and
organizations within
a country expect
and accept that
power is distributed
unequally.”
Thomson Learning
© 2004
6-10
Thomson Learning
© 2004
P.R.C
Russia
West Africa
Indonesia
Hong Kong
Netherlands
France
Japan
Germany
Canada
U.S.A.
100
90
80
70
60
50
40
30
20
10
0
PD
6-11
Power Distance at Work






Hierarchy
Centralization
Salary range
Participation
Ideal Boss
Privilege & status
symbols
Thomson Learning
© 2004
6-12
Individualism vs. Collectivism


Individualist
societies: ties are
loose and everyone
looks out for himself
or herself
Collectivist societies:
people integrated
into strong, cohesive
groups; protection is
exchanged for Thomson Learning
© 2004
loyalty
6-13
Thomson Learning
© 2004
P.R.C
Russia
West Africa
Indonesia
Hong Kong
Netherlands
France
Japan
Germany
Canada
U.S.A.
100
90
80
70
60
50
40
30
20
10
0
ID
6-14
Individualism / Collectivism
at Work




Employee-employer
relationship
Hiring and
promotion decisions
Managerial focus
Task vs. relationship
priority
Thomson Learning
© 2004
6-15
Masculinity vs. Femininity


Masculine societies:
social gender roles
are distinct (men
focus on material
success; women on
quality of life)
Feminine societies:
social gender roles
overlap (both quality
of life)
Thomson Learning
© 2004
6-16
Thomson Learning
© 2004
P.R.C
Russia
West Africa
Indonesia
Hong Kong
Netherlands
France
Japan
Germany
Canada
U.S.A.
100
90
80
70
60
50
40
30
20
10
0
MA
6-17
Masculinity / Femininity at
Work





Centrality of work
Ways of managing &
decision making
Fem: equality,
solidarity, quality of
work life
Mas: equity,
compete,
performance
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Conflict resolution
© 2004
6-18
Uncertainty Avoidance



“…the extent to
which the members
of a culture feel
threatened by
uncertain or
unknown situations.”
NOT the same as
risk avoidance
Presence of rules
Thomson Learning
© 2004
6-19
UA
Thomson
Learning
© 2004
P.R.C
Russia
West Africa
Indonesia
Hong Kong
Netherlands
France
Japan
Germany
Canada
U.S.A.
100
90
80
70
60
50
40
30
20
10
0
6-20
Uncertainty Avoidance at Work





Necessity of rules
Time orientation
Precision &
punctuality
Interpretation of
“What is different…”
Appropriateness of
emotional displays
Thomson Learning
© 2004
6-21
Long term orientation
Confucian Dynamism



The ‘newest’
dimension
three universal
dimensions and two
fourth dimensions
Truth vs. Virtue:
What one believes
vs. What one does
Thomson Learning
© 2004
6-22
LT
Thomson
Learning
© 2004
P.R.C
Russia
West Africa
Indonesia
Hong Kong
Netherlands
France
Japan
Germany
Canada
U.S.A.
120
100
80
60
40
20
0
6-23
Confucian Dynamism





Short-term
orientation
Social pressure to
‘keep up with the
Joneses’
small savings
expect quick results
concern with
possessing Truth
Long-term
orientation
 Thrift: being sparing
with resources
 large savings
 perseverance toward
slow results
 concern with
respecting the
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demands of Virtue
© 2004
6-24

Hofstede Framework Comparisons
140
120
100
U.S.A.
80
Canada
Japan
Netherlands
60
P.R.C
40
20
0
PD
ID
MA
Thomson Learning
© 2004
UA
LT
6-25
Idiosyncracies of North
American Management Theory



Stress on Market
Processes
Stress on the
Individual
Stress on Managers
rather than Workers
Thomson Learning
© 2004
6-26
Transnational Model of
Organizations




Assets and resources are dispersed worldwide into highly
specialized operations that are linked together through
interdependent relationships.
Structures are flexible and ever-changing.
Subsidiary managers initiate strategies and innovations that
become strategy for the corporation as a whole.
Unification and coordination are achieved primarily through
corporate culture, shared visions and values, and
management style rather than through formal structures and
systems
Thomson Learning
© 2004
6-27