Chapter 8:
Organization Structure and
Control Systems
PowerPoint by
Hettie A. Richardson
Louisiana State University
© 2008 Pearson Prentice Hall
8-1
Opening Profile: Changing
Structures in Emerging Markets
Expansion modes in emerging
markets may not fit the mainstream
MNC model
Many are “born global”
Competition is limited in niche
businesses
They thrive in old-economy industries
abandoned by established MNCs
© 2008 Pearson Prentice Hall
8-2
Opening Profile: Changing
Structures in Emerging Markets
 Family based governance structures and rigid
control systems must be redefined
 Hybrid structures and fast-growth entities will
emerge
© 2008 Pearson Prentice Hall
8-3
Organizational Structure
 Must evolve to accommodate
internationalization
 Must “fit” with strategy
 Should be contingency based
© 2008 Pearson Prentice Hall
8-4
Evolution and Change in
Structures
 Stages model
 Alcoa
Created smaller units
Linked geographically dispersed, but
similar businesses (e.g., Brazil and
Australia)
© 2008 Pearson Prentice Hall
8-5
International Division
 Organized along functional, product, or
geographic lines
 IBM World Trade
 Pepsi Cola International
© 2008 Pearson Prentice Hall
8-6
Global Functional Structure
 Designed on the basis of the company’s
functions
 Allows for functional specialization and
economies of scale
© 2008 Pearson Prentice Hall
8-7
Organizing for Globalization
 Need for differentiation
 Need for globalization
IBM
Rationalization
Development of alliances
© 2008 Pearson Prentice Hall
8-8
Comparative Management in Focus:
The Overseas Chinese Global Network
 “Chinese commonwealth”
 Overseas Chinese
Control $2 trillion in liquid assets
Contribute 80% of the capital for the PRC
Contribute 70% of the private sector in
Malaysia, Thailand, Indonesia, and the
Philippines
© 2008 Pearson Prentice Hall
8-9
Comparative Management in Focus:
The Overseas Chinese Global Network
 The Overseas Chinese business culture
Business largely confined to family and
trusted friends—guanxi
Adherence to patriarchal authority
Thrift and a high savings level
Investment in tangible goods
Wary outlook
© 2008 Pearson Prentice Hall
8-10
Organizing to “Be Global, Act
Local”
 Colgate-Palmolive
Primary structure is geographic
CEO oversees centralized operations
 Levi Strauss
Allows managers to act independently
Keeps some centralized control, but
decentralizes control of foreign subsidiaries
© 2008 Pearson Prentice Hall
8-11
Management Focus: Proctor and
Gamble’s Structure
 P&G/Gillette merger: Gillette adopts P&G’s
organizational structure
 P&G’s structure:
Global Business Unit (GBU)
Market Development Organization (MDO)
Global Business Services (GBS)
© 2008 Pearson Prentice Hall
8-12
Emergent Structural Forms
 Interorganizational networks
Royal Philips Electronics
Intel
 Global e-corporation network structure
© 2008 Pearson Prentice Hall
8-13
Emergent Structural Forms
 Transnational corporation (TNC) network
structure
 Asea Brown Boveri (ABB)
© 2008 Pearson Prentice Hall
8-14
When is Change Needed?
 Clashes among divisions, subsidiaries, or
individuals over territories or customers
 Duplication of administrative or personnel
services, sales offices, account executives
 An increase in overseas customer service
complaints
© 2008 Pearson Prentice Hall
8-15
When is Change Needed?
 A shift in operational scope
 Conflict between overseas and domestic staff
 Centralization leads to excessive and, thus,
misused or misunderstood data
 Unclear reporting relationships
© 2008 Pearson Prentice Hall
8-16
Direct Coordinating
Mechanisms
 McDonald’s in Moscow
Problem: Quality control
Solution: Built processing plant in Moscow
and provided managerial training
 Other options: Visits by head-office
personnel and regular meetings
© 2008 Pearson Prentice Hall
8-17
Indirect Coordinating Mechanisms
 Examples: sales quotas, budgets, and
financial tools and reports
 Three financial statements
One for accounting standards in host
country
One for the standards in the home country
One for consolidation
© 2008 Pearson Prentice Hall
8-18
The Appropriateness of Systems
 Where are top managers from?
 US individualism vs. Japanese collectivism
© 2008 Pearson Prentice Hall
8-19
The Role of Information Systems
 US MNCs monitor via specific functional
reports
 Inaccurate information, different norms, MIS
adequacy
 Noncomparability of performance data
© 2008 Pearson Prentice Hall
8-20
Evaluation Variables across
Countries
 Adjust statements to reflect variables unique
to each country
 Take nonfinancial measures into account
© 2008 Pearson Prentice Hall
8-21