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EMERGENCE OF THE TRANSNATIONAL
Basics of Structure
"You will appear to be a visionary planner if you decentralize everything which is centralized and centralize everything which is decentralized." Dogbert’s Big Book of Business
Six Dimensions of Organizational Structure
Specialization Departmentalization Chain of command Span of control Centralization Formalization
Six Key Questions That Managers Need to Answer in Designing the Proper Organizational Structure
The Key Question Is 1. To what degree are tasks subdivided into separate jobs? 2. On what basis will jobs be grouped together? The Answer Is Provided By Work Specialization Departmentalization
3. To whom do individuals and groups report? Chain of Command 4. How many individuals can a manager efficiently and effectively direct? 5. Where does decision-making authority lie? 6. To what degree will there be rules and regulations to direct employees and managers? Span of Control Centralization and Decentralization Formalization
Work Specialization The entire job is broken down into steps. each step completed by a separate individual Individual workers specialize in doing part of an activity Involves repetitive performance of a few skills Can be viewed as a means to make the most efficient use of employees’ skills Some tasks require highly developed skills Others can be performed by the untrained .
Economies and Diseconomies of Work Specialization (High) hu m Im a n pa di ct se fro co m no m ie s (Low) (Low) Im pa c of t fr sp om ec e ia co liz no at m io ie n s Productivity Work Specialization (High) .
Departmentalization Basis upon which jobs are grouped Functions Performed Type of Product Basis of Geography or Territory Particular Type of Customer .
Chain of Command Unbroken line of authority that extends from the top of the organization to the lowest. and clarifies who reports to whom Authority: Rights inherent in a position to give orders and expect orders to be obeyed Unity of Command Principle: Concept of an unbroken line of authority .
.Span of Control Determines the number of levels and managers an organization has.
096 2 3 4 5 6 7 Span of 8: Operatives = 4.096 Span of 4: Operatives = 4.096 Managers (Levels 1-4) = 585 .Contrasting Spans of Control Assuming span of 4 1 4 16 64 256 1.096 Managers (Levels 1-6) = 1.365 (Highest) 1 Organizational Level Assuming span of 8 1 8 64 512 4.024 4.
Centralization and Decentralization Centralization: Decision making and authority are concentrated at a single point in the organization Little or no input from lower-level personnel Decentralization: Decision making and authority are pushed down to those closest to “the action” Lower-level personnel provide input or are given the discretion to make decisions Action can be taken quickly to solve problems More people provide input into decisions Employees feel less alienated Provides more flexibility .
Exercise discretion when. and how Great deal of freedom Consistent output Less standardization Explicit job descriptions Consider alternatives Organizational rules Clearly defined procedures .Formalization Degree that jobs within the organization are standardized High levels Low levels Minimum amount of Unprogrammed behaviors discretion over what.
The Simple Structure Description Low degree of departmentalization Wide spans of control Little formalization Small business with owner manager Centralized control Major Weakness with Growth Difficult to maintain Creates information overload at top Decision making becomes slower or a standstill Lose momentum Eventually fail Dependency on one person Strengths Simplicity Fast and flexible Inexpensive to maintain Clear accountability .
The Bureaucracy Description Standardization Formalized rules and regulations Functional departments Centralized authority Narrow span of control Chain of command Weaknesses Sub-unit conflicts Concern with rules No room for modification Efficient only for experienced decisions More levels Slower decision making Strengths Efficient performance Economies of scale Minimum duplication Centralized decision making .
) More flexibility Efficient allocation of specialists Economies of scale Weaknesses Strengths Facilitates coordination Complex and independent activities Better communication Confusion created Stress placed on workers Increased ambiguity Unclear reporting relationships Power struggles Role conflicts Unclear expectations .The Matrix Structure Description Combines two forms of departmentalization • functional • product Breaks unit of command Dual chain of command Strengths (cont.
Matrix Structure for a Construction Company Functional Project Project 1 Project 2 Project 3 HRM Engineering Finance Sales .
n e E T n o g o i nl s e D i I v n i st e i o r n a t i o n a l D o m e s t Di c i v . D o m eD s o t im c e s t i c D i v i s i o n S u b s i d S i a u r b s i d S i a u r by s i d i a r y y B r a z i l A u s t r a Gl i a e r m a n y GEOGRAPHIC REGIONS STRUCTURE P C R E S I D E N T o r p o r a t e S t a f f E N o r t h A m L e a r ti ic n a nA m e E r i uc ra o n p e a n i d d l e M D i v i s i o n D i v i s i o n D i v i s i o nA f r i c a n a F s at e r r E / a s t e n D i v D i s i i v o i ns i o n .INTERNATIONAL DIVISIONS STRUCTURE P C R E S I D E N T o r p o r a t e S t a f f E l e c t r o n i cM s a D c ih v i .
WORLDWIDE PRODUCT DIVISIONS STRUCTURE P C S o R E t e S I D E N T r p o r a t a f f E W o r l d w i d e W o r l d w l e c t r o n i c s M D a i c hi s i ni o e n T v i d e W o r l d w i d e o o l Es n D g i vi n i se i so n D i v WORLDWIDE FUNCTIONAL DIVISIONS STRUCTURE P W F o r l d w i d eW i n a n c e O R E S I D E N T o r l d w i d eW o r l d w p e r a t i o Hn su m a n R i d eW o r l d w i d eW o r l d w i d e e s o M u ar c r ek se t i n g E n g i n e e r i n g .
Executives are streamlining their divisions. many Japanese companies have used for years. It’s a formula that. trying to produce standardized “global” products. April 14. not coincidentally. a colonial era coming to a close. and pulling decision-making power back to home offices.flung foreign subsidiaries.THE NEW GLOBAL FORMULA: A Universal Prescription? It’s a bit like the end of an empire. Companies in the United States and Western Europe are reining in far. “Rebuilding Corporate Empires: A New Global Formula” Newsweek. 1986 .
Globalization: The Conventional Wisdom Stanardize products Rationlize operations Centralized coordination and control .
The Major Risk: Globalization Glaucoma Blindness to everything but global forces Short-sightedness to localizing forces .
Integration: Forces for National Responsiveness. Differentiation: .INTERNATIONAL ENVIROMENTAL FORCES: Diverse Industry Impact Forces for Cross-Market Coordination.
integration •scale advantages •competitive strategy • National responsiveness. market differences •government policy . differentiation • consumer preferences.Forces in the International Environment • Global coordination.
GLOBAL AND NATIONAL FORCES: Industry Effect Cross. Differentiation . Consumer Integration Electronics Telecom Switching Cement Branded Packaged Products National Responsiveness.Market Coordination.
ADMINISTRATIVE HERTIAGE: Strategic Asset and Organizational Anchor • “Where to” is influenced by “where from” • Competitive advantage shaped by country of origin. time of expansion. and nature of leadership • The challenge is to build new capabilities while protecting existing strengths .
PERSONAL CONTROL • STRATEGY BASED ON UNDERTSANDING AND RESPONDING TO NATIONAL MARKETS. .HERITAGE OF FAMILY MANAGEMENT.PREFERENTIAL ACCESS TO FOREIGN EMPIRE MARKETS • ORGANIZATION DEVLOPED AS A PORTFOLIO OF NATIONAL COMPANIES .PRE-WAR EUROPEAN EMPIRES: NATIONALLY RESPONSIVE STRATEGIES • EXPANDED ABROAD IN A PERIOD OF HIGH INTERNATIONAL BARRIERS .
PRE-WAR EUROPEAN EMPIRES: DECENTRALISED FEDERATIONS • MULTINATIONAL STRATEGY MODEL .COMPETE BY BEING NATIONALLY RESPONSIVE .
HERITAGE OF PROFESSIONAL MANAGEMENT. AND OTHER SKILLS . MARKETING.LARGE.POST-WAR AMERICAN HEGEMONY: STRATEGY OF KNOWLEDGE TRANSFER • EXPANDED ABROAD IN A TIME OF ECONOMIC RECONSTRUCTION . SYSTEMS CONTROL • STRATEGY BASED ON TRANSFERING PARENT COMPANY’S LEADERSHIP IN TECHNOLGY. ADVANCED HOME MARKET AS KNOWLEDGE SOURCE • ORGANIZATION BUILT ON STRONG LINKS TO THE PARENT COMPANY BASED ON TRANSFER OF EXPERTISE .
COMPETE THROUGH KNOWLWDGE TRANSFER .POST-WAR AMERICAN HEGEMONY: COORDINATED FEDERATIONS • INTERNATIONAL STRATEGY MODEL .
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 .MODERN DAY JAPANESE CHALLENGE: COMPETING THROUGH GLOBAL EFFICIENCY • EXPANDED ABROAD IN A PERIOD OF FALLING TRADE BARRIERS .
MODERN DAY JAPANESE CHALLENGE: CENTRALIZED HUBS • GLOBAL STRATEGY MODEL .COMPETE THROUGH GLOBAL EFFICIENCY .
THE BASIC STRATEGIC POSTURES Forces for CrossMarket Global Strategy Integration International Strategy Treats the world as a single integrated strategic unit Treats overseas units as offshoots of domestic strategy Treats the world as a portfolio of national opportunities Multinational Strategy Forces for National Responsiveness .
STRATEGIC POSITIONS: CONSUMER ELECTRONICS INDUSTRY Forces for Cross-Market Integration Matsushita General Electric Philips Forces for national Responsiveness .
Matsushita offers a comprehensive range of products. general electronic components." "Quasar. for its own and other manufacturers' use.." "Victor" and "JVC". display devices. . business and industrial use based on sophisticated electronics and precision technology. audio and household equipment. systems and components for consumer. is one of the world's leading producers of electronic and electric products. electric motors. Matsushita also produces semiconductors." "Technics. Matsushita's traditional and primary business area consists of video. and home appliances. communications and industrial equipment. which include information.Matsushita Electric Industrial Co." "National. compressors and batteries. Ltd. Most of the Company's products are marketed under several trademarks including "Panasonic. and industrial products.
Losers. and Survivors • Consumer Electronics Matsushita's ascendancy Philips's struggle GE’s exit • Branded packaged goods Unilever’s dominance P&G’s progress Kao’s failure • Telecommunications Ericsson’s success NEC’s adjustment ITT’s withdrawal switching .WORLDWIDE COMPETITVE SHAKEOUTS: Winners.
ADMINISTRATIVE HERTIGATE Meet Industry Characteristics NEC Consumer Electronics Telecom Switching Branded Packaged Goods Kao Ericsson ITT Matsushita GE Philips P&G Unilever .
NEW REQUIREMENTS FOR THE 21st Century Multidimensional Strategic Capabilities Need for Global Efficiency Need for National Responsiveness Need for Worldwide Innovation. Learning .
flexibility.Strategic Capability of the Transnational st The New Game for the 21st Century • Sensitivity. and responsiveness to local needs • Global scale efficiency and competitive response capability • Worlwide innovation skills and learning capabilities .
Coordinated Federations Search for global efficiency and local responsiveness . responsiveness and global learning .New Challenge for Winners. and worldwide innovations . competitive response.Centralised Hubs Search for flexibility. and Survivors .Decentralized Federations Search for efficiency. Losers.
Matsushita's search for local responsiveness: Giving is different form developing the desire to take .Initial Response: Emulation and Failure .GE’s search of competitiveness: The futile dream of analytical fit .Unilever’s search for efficiency: The legacy of self-fulfilling prophecies .
THE TRANSNATIONAL ORGANIZATION MODEL: The Integrated Network Centralized Hub Decentralized Foundation The Integrated Network Coordinated Federation .
Organizational Characteristics of the Transnational: C haracteristics Configuration of assets and capabilities M ultinational D ecentralized and nationally self-sufficient G lobal Centralized and globally scaled International Core com petencies centralized. interdependent and specialized Role of overseas operation Sensing and exploiting local opportunities Im plem enting parent com pany strategy D ifferentiated contributions by national units to integrated w orldw ide operations K now ledge developed jointly and shared w orldw ide D evelopm ent and diffusion of know ledge K now ledge developed and retained w ithin each unit K now ledge developed and retained at the center . others decentralized A dapting and leveraging parent com pany com petencies K now ledge developed at the center and transferred to overseas units Transnational D ispersed.