CHAPTER 11
ORGANIZATION,
IMPLEMENTATION,
AND CONTROL
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Copyright © 2011 John Wiley & Sons
Chapter 11
Learning
Objectives
1. Describe alternative organizational
structures for international operations
2. Highlight factors affecting decisions
about the structure of international
organizations
3. Indicate roles for country
organizations in the development of
strategy and implementation of
programs
4. Outline the need for and challenges of
controls in international operations
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Functions of an Organization
1.
Provide a route and locus of decision making
and coordination
2. Provide a system for reporting and
communication
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Organizational Designs
Little or No Formal Organization
1.



Domestic operations are responsible for international
operations early on
Export department may appear as a separate entity or
department
International division may ultimately be established
2. The International Division
 Firms recognize the ever-growing importance of the
international involvement
 Coordination between domestic and international operations
is necessary
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Organizational Designs
3. Global Organizational Structures:
Global
Product
Structure
Global Area
Structure
Global
Functional
Structure
Global
Customer
Structure
Mixed or
Hybrid
Structure
Matrix
Structure
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Evolution of Organizational Structures
 First stage: Autonomous subsidiaries reporting
directly to top management
 Second stage: International divisions
 Third stage: Development of global structures
 Fourth stage: Some companies opt for a matrix
structure to best meet the challenges of global
markets
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Energy Solutions Announces New
Organizational Structure
In March 2010, Energy Solutions announced a new organizational
structure designed to facilitate the Company's goal of better integrating
its unique technologies, assets and expertise in order to design and
deliver high value solutions to its customers.
Previously, the Company had four operating groups reporting to the
Chief Operating Officer. The four groups were international services,
federal services, commercial services, and logistics, processing and
disposal (LP&D). The Company has reorganized these four groups into
three customer-focused groups: the international customer group, the
government customer group, and the commercial customer group.
Source: Marketwire.com:
http://www.marketwire.com/press-release/EnergySolutions-Announces-New-Organizational-Structure-NYSE-ES1140117.htm
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Focus on Management:
Organizing for Growth
Global corporations are adapting their geographic
organizational structures to help find revenue
growth in emerging markets and scale in developed
countries. As new markets emerge, the need to
manage increased complexity is necessary. A
gateway model has been proposed to reduce the
tension between global integration and local
responsiveness.
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Locus of Decision Making
 Decentralization – Granting subsidiaries a high
degree of autonomy
 Centralization – Tight controls with strategic
decision making at headquarters
 Coordinated decentralization – Direction of
overall corporate strategy by headquarters while
granting subsidiaries the freedom to implement
strategy within established ranges
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Wal-Mart Decentralizes its Supply Chain
According to Supply Chain Digest, Wal-Mart recently established a plan
to consolidate its global procurement functions and reduce the use of
intermediaries in its global sourcing processes. The move would lead to
savings of billions of dollars per year.
Wal-Mart had been operating in a very decentralized mode, with each of
the 15 countries where it operates buying goods from the same
suppliers. The company hopes to alter the ratio of its supply chain so
that it is buying direct from the manufacturer for 80% of its purchases.
Source: Supply Chain Digest: http://www.scdigest.com/ASSETS/ON_TARGET/10-01-06-1.php
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Factors Affecting Structure and
Decision Making
Chapter 11
Degree of
Involvement in
International
Operations
The Products
Marketed by
Firms
Size and
Importance of the
Firm’s Markets
Human Resource
Capability of the
Firm
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The Networked Global Organization
 Glocal – Thinking globally and acting locally

 Three dimensions of networked global organizations:
 Develop and communicate a clear corporate vision
 Effectively manage human resource tools to broaden
individual perspectives and develop identification with
corporate goals
 Integrate individual thinking and activities into the broad
corporate agenda
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The Networked Global Organization
Decentralized Federation
Model
Networked Global
Organization
HQ
HQ
Subsidiaries
Figure 11.6
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Focus on Entrepreneurship:
Centers of Excellence
A center of excellence is an organizational unit that
incorporates a set of capabilities that have been
identified as an important source of value creation.
It is intended that these capabilities are leveraged
by and/or disseminated to other parts of the firm.
Centers of excellence are used as birthplaces and
incubators for solutions that can be applied on a
worldwide basis. They are in places of strategic
importance.
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Promoting Global Internal Cooperation
 Teaching through educational programs and
executive development
 International teams or councils to share best
practices
 Networking




Podcasts
Webcasts
Intranets
Virtual teams
 Cyber-security is an issue of critical importance
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The Role of Country Organizations
 Strategic Leader

A highly competent national subsidiary in a strategically
critical market
 Contributor

A country with a distinctive competence
 Implementor

In less-developed countries where there is less corporate
commitment for market development, but rather for sales
 Black Hole

A low competence country organization in a highly strategic
market
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The Role of Country Organizations
Competence of
Local Organization
High
Strategic
Leader
Contributor
Black Hole
Implementer
Low
High
Low
Strategic Importance of Local Market
Figure 11.7
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Types of Controls
 Distinction to be made:
 Variations by design
 Variations as a result of autonomy
 Company must use benchmarking and learn and
share best practices throughout the firm



There must be a device for organizational memory
Best practice must be updated and adjusted to new situations
Best practice must be legitimized
 Object of Control must be determined in designing it
 Control output
 Control behavior
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Bureaucratic/Formalized Control
 Limited and explicit set of regulations and rules outline the
desired levels of performance
 Elements include:



International budget and planning system
Functional reporting system
Policy manuals to direct functional performance
 Budgets – Shorter-term guidelines:




Allocate funds among subsidiaries
Plan and coordinate global production capacity and supplies
Evaluate subsidiary performance
Communicate information
 Plans formalized for over one-year horizon
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Cultural Control
 Less formal and are the result of shared beliefs and
expectations among the members of an organization
 Outside the U.S., multinationals emphasize
corporate values and culture
 Requires an extensive socialization process
 Primary instruments are the careful selection and
training of corporate personnel and the institution of
self-control
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Exercising Controls
 Different functional areas are subject to different
guidelines due to various constraints
 Degree of control imposed will vary by subsidiary
characteristics, including location
 Management must consider controls on a
cost/benefit basis
 The environment has be to considered


The control system must measure only those dimensions over
which the organization has actual control
Control systems have to be in harmony with local regulations
and customs
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Toyota Establishes Quality Control
Task Force
In spring 2010, Toyota Motor Corp. announced that it would establish
a global quality-control task force to be headed by the company's
president, Akio Toyoda, which will seek to bolster its product. The task
force, known as the special Committee for Global Quality, will
designate a quality officer from each principal geographical region in
which the company operates.
The measure was announced at a time when the company was under
pressure to spell out what steps it is taking to address design flaws that
led to a recall of 8.5 million vehicles worldwide.
Source: Marketwatch.com: http://www.marketwatch.com/story/toyota-to-establish-quality-task-force-2010-02-17
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Focus on Ethics:
Corporate Acculturation
Many of Toyota’s most recent quality problems are
partially the result of cultural issues within the
company. With 27 different companies and over
320,000 employees around the world, it can be
challenging for Toyota and other multinational
corporations to organize effectively to maintain a
strong corporate culture. In 2009-10, following
two separate recalls covering 7.5 million vehicles,
Toyota announced it was suspending the sale of
eight of its best-selling vehicles.
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