Organization of the
Multinational Firm
VK Int. Unternehmensführung
SS 2005
Elmar Kiesling, 0008665
Irmgard Krebner, 9804601
Padmini Ranawat, 9905070
Organization of the Multinational Firm
Outline
1.
2.
3.
4.
5.
6.
7.
8.
Introduction
Structural Designs for Global Operations
Home-based vs. heterarchical MNC
Multidivisional & Network Form (M&N)
The Transnational form
Case Study: Acer
A glimpse at the future: 2 scenarios
Discussion
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Global trends and developments
• Intense competition among developed
countries
• Increasing competition through newly
industrialized Asian countries
• Shift towards market economies
(e.g. Eastern Europe, China)
• Power blocks (e.g. European Union, YenBlock, NAFTA)
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Today´s Challenges
To enable organizations to compete
effectively in this global environment
MNC´s have to:
• be at least as good as a local firm
providing similar products or services
• approach new organization design
possibilities
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Stages of International Development
Global
Multinational
International
Domestic
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
International corporate structure model
High
Economies
of global
standardization and
size
Global
Transnational
International
explorer
Multidomestic
Low
High
need for localization
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Structural Designs for Global Operations
Global product structure
•
•
•
CEO
Product divisions responsible for
global operations
Uses globally based advantages
Overlook of locally advantages
Brand A
Geographic area structure
•
•
Each region has functional
activities
Exploits local advantages
Introduction
Structural Designs Home/heterarchical
M&N
President
Central
Staffs
Brand B
Brand C
CEO
Central
Staffs
European
Division
Transnational form
Asian Division
Case Study
American
Division
Scenarios
Organization of the Multinational Firm
Structural Designs for Global Operations
Matrix structure
•
balances global product and local market concerns
•
Problems:
- complexity
- dual reporting structure
- confusion over responsibility and decision making
•
Solution: 3 C’s
- clarity of firm’s basic objectives
- continuity in commitment to those objectives
-
Introduction
consistency in the work of divisions together
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Structural Designs for Global Operations
Horizontal organization
•
Structured around workflows
and processes
Process
Coordinators
•
Flat vertical hierarchy
•
Management tasks delegated
to lowest level
•
Management
Customer-driven
Team
Team
Product Development Process
Process
Coordinator
Team
Team
Order Fulfillment Process
Process
Coordinator
Team
Team
Logistics Process
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Horizontal organization structure
Decision making:
• lateral decision processes
 direct contact, temporary task forces, self-directed
teams, …
• horizontal network
 flexible responding to external changes
• common decision premises
 shared set of values
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Horizontal organization structure
Differentiation from matrix structure:
•
•
•
Coordination more mixed and flexible
Internal flexible processes link system elements
Latterly resolution of conflicts
Advantages:
•
•
Simultaneously achieving global and local advantages
reduced barriers among departments
Problems:
•
•
Time intensive coordination of decisions
„Being stuck in the middle“
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Home-based vs. heterarchical MNC
1. Home-based:
• Core functions (strategic decision making,
R&D etc.) in a limited geographic area
• Links to
-
other firms
local research and education facilities
governmental bodies
2. Heterarchical:
• many centers of different kinds
• combining diverse technologies worldwide
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Home-based MNC
1. „Simple“ home-based MNC
• Home base of all businesses in home country
2. Selective tapping
• Core technology in home base
• Selective tapping of international
environment for support
3. Multi-home-based MNC
• Separate bases for individual lines of
businesses
• Often connected to mergers and acquisitions
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Heterarchical MNC
• Many centers: traditional HQ functions
geographically dispersed
• Holographic structure: information stored
in each part of the organization
• Interdependencies: tasks of any unit
complexly related to the tasks of other
units
• „firm as a brain“: thinking not only
restricted to one exclusive center, but
goes in whole enterprise => global
competitive advantage
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Multidivisional & Network Form (M&N)
Contrasts between the multidivisional and the
network :
Multidivisional
Network
Dividing things
Combining things
permanent structures
(departments)
Temporary groupings (teams)
coordination through managers
delegation to lower levels
vertical communication
lateral dialogue
Senior managers as monitors and senior managers as technical,
resource allocators
human and knowledge catalysts
Development diversifying into
separate organizational units.
Introduction
Structural Designs Home/heterarchical
development combining rich
areas of knolewdge
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
The Transnational form
• Network form:philosophy of responsiveness,
flexibility and ability to learn of a MNC in a
borderless world
• Objective: respond to the MNC´s central
dilemma of having to be globally integrated but
locally responsive at the same time
Multidomestic
form
Global form
Transnational
form
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
The Transnational form
Asymmetrical organizational form:
• Multilateral communications between all
levels and layers
• Resources, responsibilities and decisionmaking dispersed across all types of units
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Case Study: Acer Group
• Taiwanese company founded 1979
• PC and computer component manufacturer
• 1992: „global brand, local touch“
•
•
Introduction
First corporate re-engineering
Decentralized its organization towards network structure
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Client-server organization (1994)
Acer Group
Chairman and CEO
Acer America
Acer Inc.
Acer Europe
Acer Peripherals
Acer Latin America
TI-Acer
Acer Sertec
Acer Labs
Regional
Business Units
Strategic
Business Units
RBUs
Introduction
Structural Designs Home/heterarchical
SBUs
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Restructuring 1997-1998
•
External challenges:
• Direct vendors, price cuts of market leaders
• New price war (sub-$1000 PCs)
•
Internal problems:
• Service and support
• Serious coordination problems
• Redundant functions
• Duplicate investments
• Inefficient use of enterprise resources.
• Lack of IT infrastructure
• No common information system
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
Organizational structure 1998
1997-98: simplification of organization structure
restructuring into 5 core businesses:
Acer Group
Chairman and CEO
Corporate
Functions
Special Teams
- IT
- Logistics
- Brand Mgmnt
- Customer Services
International
Services Group
Introduction
Sales & Service
Group
Semiconductor
Group
Structural Designs Home/heterarchical
M&N
Information
Product Group
Transnational form
Peripherals
Group
Case Study
Scenarios
Organization of the Multinational Firm
Organizat. structure since 2001
Acer Group
Chairman and CEO
High Trust
Apacer
Technology
Services
TWP
Sertek
Acer Inc.
Weblink
• Flexible, cell based organization structure
• Interaction of semi-autonomous firms
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
A glimpse at the future: 2 scenarios for 2015
• Elaborated by MIT Scenario Working
Group between 1994 and 1997
• Main focus: size of companies
Two extreme scenarios for 2015:
1. Small companies, large networks
nearly every task is performed by
autonomous teams
2. Virtual countries
dominance of keiretsu-style alliances
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
1. Small companies, large networks
Autonomous and self-organizing teams of 1-10
•
•
•
•
Linked by fluid networks
Temporary combinations for each project
Importance of electronic markets
Rapid innovation in dynamically changing
markets
e.g. radical outsourcing in producing athletic
shoes, computer displays and software
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
1. Small companies, large networks
Stable communities providing:
• health insurance
• protection against unemployment and income
fluctuation
• professional development
• sense of belonging
Comparable to guilds of pre-industrial times
e.g. guilds in film industry
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Organization of the Multinational Firm
2. Virtual countries
Large vertically- and horizontally-integrated
firms each with operating companies in
almost every industry
•
•
•
•
•
•
Providing job-security, health care etc.
Pervasive role of firms in employees‘ lives
Employee ownership of firms
Employee selection of firm management
Oligopolistic structure in most sectors
Minimal national allegiance
e.g. Merger wave
Introduction
Structural Designs Home/heterarchical
M&N
Transnational form
Case Study
Scenarios
Discussion
Thank you for your attention!
Organization of the Multinational Firm
References
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Daft, R. (1998), Organization Theory and Design, Chicago,
Chap. 7.
White, R. E., T. A. Poynter (1991), Organizing for Worldwide Advantage, in: C. A. Bartlett, Y. Doz, G. Hedlund
(eds.), Managing the Global Firm, London, 95- 113.
Söllvell, Zander (1995) Organization of the Dynamic
Multinational Enterprise, Int. Studies of Organization and
Mangement, 25. 17 - 38.
Segal-Horn & Falkner (1999), The Dynamics of International
Strategy, Ch. 9.
Laubacher, R. J., T. W. Malone (1999), Two Szenarios for
21st Century Organizations: Shifting Networks of Small
Firms or All-Encompassing ‚Virtual Countries‘, Working
Paper, MIT.
Dedrick, J., K. L. Kraemer, T. Tsal (1999), Acer: an IT
company learning to use Information Technology to
compete, Center for research on IT and organization,
University of California