2
Lecture 2
Developing a Global Transnational
Organization (TNO)
Copyright © 2015 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin
Initial questions:
1. Is it possible to apply one standard organizational
structure in all global transnational organizations?
Why or why not?
2. What factors should be taken into account for
developing a global transnational organization?
3. How can cultural differences affect global transnational
organization?
Copyright © 2011 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin
2-2
Archetypes of Organizational Structure
• Competitive advantage is shaped by
country of origin, time of expansion, and
nature of leadership
• The challenge is to build new capabilities
while protecting existing strengths
• Three archetypes can be identified…
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Pre-WW II European Empires: Dominance of
Multinational Model
Decentralized Federation Organization...
…Strategy of National Responsiveness
•
Expanded abroad in a period of high international
barriers; Preferential access to foreign empire markets
• Organization developed as a portfolio of national
companies; heritage of family management, personal
control
• Strategy based on understanding and responding to
national markets
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Post-WW II American Expansion: Dominance
of International Model
Coordinated Federation Organization...
…Strategy of Knowledge Transfer
•
Expanded abroad in a time of economic reconstruction:
large, advanced home market as knowledge source
• Organization built on strong links to the parent company
based on transfer of expertise: heritage of professional
management, systems control
• Strategy based on transferring parent company’s
leadership in technology, marketing, and other skills
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Late XX-th Century Japanese Challenge:
Dominance of Global Model
Centralized Hub Organization…
…Strategy of Global Efficiency
•
Expanded abroad in a period of falling trade barriers: newly
added capacity and government industrial policy as assets
• Organization grew as dependent foreign units tightly
controlled from the center: heritage of culturally dependent
management practices dominated by group processes
• Strategy based on capturing global scale economies
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Administrative Heritage
Meets Industry Characteristics
NEC
Matsushita
GE
Consumer
Electronics
Ericsson
Philips
Forces for
Global
Integration
Telecom
Switching
Kao
Branded
Package Goods
P&G
Unilever
Forces for National Responsiveness
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Building and Managing
the Transnational Organization
• The transnational organization attempts to
resolve the inherent limitations of the three
organization archetypes
• Three key characteristics:
• Builds and legitimizes multiple internal
perspectives
• Dispersed and interdependent physical assets
and capabilities
• Robust and flexible integrative process
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Characteristics of the Transnational Organization
THREE-DIMENSIONAL MODEL
Global
Efficiency
National
Responsiveness
Worldwide
Innovation
& Learning
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Organizational Configurations
Decentralized
Federation
Centralized Hub
The Integrated Network
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Coordinated Federation
ILLUSTRATION: EXAMPLE OF GM STRATEGIC RECONFIGURATION
GM (General Motors) before and after bankruptcy (2008)
Pre-bankruptcy strategy: Decentralized Federation Model (Multinational)
-Multiple federated units, relatively loose control,
subsidiaries collected through several acquisitions between
1925 - 1931 (Opel, Vauxhall) and 2002 (Daewoo Motors)
-Estimated weights of strategic components (Bennett, 2012)
National responsiveness 70%
Global efficiency 15%
Worldwide innovation 15%
Post-bankruptcy strategy (2009 -…): Coordinated Federation Model (Global/Internat)
-Reduced number of brands (only four: Chevrolet, Cadillac, GMC
and Buick); orientation to joint ventures
-Reduced number of executives (by about 35%); globalization of manufacturing
-Estimated weights of strategic components (balanced)
National responsiveness 35%
Global efficiency 40%
Worldwide innovation 25%
Bennett, M., The global strategy of General Motors, MTU Project report BA5780, Houghton 2012
The Transnational:
A New Type of Organization
• A new structural anatomy
• Redistributing assets and responsibilities
• A new process physiology
• Redefining information flows and
relationships
• A new cultural psychology
• Readjusting mentalities and beliefs
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Managing the Process of Change: Traditional
Model
•
Classic change process driven by structural
reconfiguration
Change in formal
structure/responsibilities
reshapes
Organizational
processes/relationships
redefines
Individual attitudes/mentalities
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Managing the Process of Change: Emerging
Model
•
Change process initiated by changes in attitudes and
mentalities
Change in individual attitudes and mentalities
Changes in interpersonal relationships and
processes
Change in formal structure and responsibilities
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Building & Maintaining Multiple
Strategic Capabilities
Requires Protecting the
Legitimacy of Multiple
Management Tasks
Global
Efficiency
Business
Management
Functional
Management
Worldwide
Innovation & Learning
National
Responsiveness
Area
Management
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Organizational Characteristics
Multinational
Global
International
Transnational
Configuration Decentralized
of assets and and nationally
capabilities
self-sufficient
Centralized
and globally
scaled
Core
competencies
centralized,
others
decentralized
Dispersed,
interdependent
and specialized
Role of
overseas
operation
Sensing and
exploiting local
opportunities
Implementing
parent
company
strategy
Adapting and
leveraging
parent
company
competencies
Differentiated
contributions
by national
units to
integrated
worldwide
operations
Development
and diffusion
of knowledge
Knowledge
developed and
retained within
each unit
Knowledge
developed and
retained at the
center
Knowledge
developed at
the center and
transferred to
overseas units
Knowledge
developed
jointly and
shared
worldwide
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SUMMARY
1. Historical view and three archetypes of TNO
organizational structures
2. Characteristics of TNO: global efficiency, national
responsiveness, worldwide innovation
3. Building multiple strategic capabilities
4. Four types of organizational configuration and
strategy