Organization
Acer’s Organizational Evolution
Stage 1: Centralization
Stage 2: Decentralization
Stage 3: Global Matrix
Stage 4: Global Business Units
Stage 5: Separation of DMS from
ABO
Stage 2: Decentralization
• Separation SBUs and RBUs
• Client-Server model
• Fast food model
• “21 in 21”
Pros and Cons of Stage 2
Pros:
• More local initiative
• Better adaptation to local markets
Cons:
• Lack of vertical coordination
• Lack of horizontal coordination
• Duplication
• Competition
Stage 3: Global Matrix
Effort at solving coordination problems of
stage 2
But slow decision making
SBU/
RBU PCs
AA
AE
ACLA
IPG
AP
Lines of Business
Peripherals Semi
conductors
Other
Business
Stage 4: Six GBUs
• AIPG (IP + Europe and US RBUs)
• Acer Peripherals
• Acer International Service Group (ACI
+ ACLA RBUs)
• Acer Sertek
• Acer Digital Services
• XBUs
Pros and Cons of GBUs
• Better vertical and horizontal
coordination
• Interference between OEM and
branded operations
Stage 5
• Acer Brand Operations
• Acer Design, Manufacturing and
Service
• Holding and Investment Business
Adaptation/Standardization
dilemma
Adaptation = duplication =
high cost but high price
Standardization = poor fit =
low cost but low price
Decentralization
• Good when locals know more than HQ
• Encourages initiative
But
• Suboptimization
– Duplication
– Competition
Centralization
• Good when HQ knows better than
the locals
But
• Low incentives
• Poor local adaptation
Choice between centralization and
decentralization depends on
Product
Target Market
Experience
Four interdependent levers
• Organizational structure
• Management processes
• HRM policies
• Corporate culture
Fundamentals of Organization
Design
• Decomposition principle
• Match between strategy and
structure
Decomposition principles
The way the firm is organized
determines what employees see and do
Group together strongly interacting units
and separate them from weakly
interacting units
Link weakly interacting units with soft
structures (committees, task forces)
Three dimensions of
organizational structure
• Functions
• Areas
• Products
Four structural templates
• Functional
• Area
• Global
• Matrix
• (Mixed)
Organizational Dimensions
Business/ products
A
B
C
Others
Asia
America
Europe
D
Manufacturing
Marketing
R&D
Management/services
Function
Geography
Fragmented Structure
Products
A
Countries
France
Belgium
Netherlands
Germany
B
C
D
Fragmented Structure
• Result from frequent acquisitions
• Little coordination at area level
• Little coordination at product level
Functional Structure
Functions
A
Countries
France
Belgium
Netherlands
Germany
B
C
D
Functional Structures
• Single product manufactured and sold
the same way in all countries
• High economies of scale
• Low volume
Area Structure
Products
A
Countries
France
Belgium
Netherlands
Germany
B
C
D
Area Structure
• Advised if..
– products have similar technologies and similar
end users in a given area
– need to adapt all products to each area
– potential product scale economies are low
• Pros and cons
–
–
–
–
good adaptation to local conditions
good interface with local stakeholders
lack of inter-country coordination
give up product scale economies
Product Structure
Products
A
Countries
France
Belgium
Netherlands
Germany
B
C
D
Product Structure
• Advised if..
– Products require different
technologies and have different end
users
– No need to adapt products to a given
area
– Potential scale economies are large
Product Structure
• Pros and cons...
–
–
–
–
–
Captures scale economies
Worldwide product consistency
Ethnocentric bias
Not responsive to local-only opportunities
Lack of coordination and potential duplication
within a country
– Poor interface with local stakeholders
Mixed Structure
Products
A
Countries
France
Belgium
Netherlands
Germany
B
C
D
Mixed Structure
• Advised if...
–Some products require adaptation
to areas while others do not
Matrix Structure
Products
A
Countries
France
Belgium
Netherlands
Germany
B
C
D
SBU/
RBU PCs
AA
AE
ACLA
IPG
AP
Lines of Business
Peripherals Semi
conductors
Other
Business
Matrix Structure
• Advised if..
– Products benefit at the same time from
adaptation to areas and rationalization
across areas
• Pros and cons
– Makes it possible to choose for each
product the precise mix of adaptation and
rationalization
– Confusion, conflict and paralysis as some
managers have two bosses
Strategy and Structure
Strategy
Standardization
Adaptation
Standardization for
some products,
adaptation for
others
A bit of both for all
Structure
Product divisions
Area divisions
Mixed
Matrix
Management Processes
• Information systems
–E.g. Citibank
• Strategic Plan
• Budgeting
• Compensation
HRM policies
• Local vs. Expatriate Managers
• National or Multicountry
careers
Culture
• Language
• Values
Organizational Evolution
of MNEs
• Ethnocentric
• Polycentric
• Geocentric
Conclusion
• Everything is a tradeoff
• Organization must change
–as conditions change
–as strategies change