Scribd Logo
Importer

Bienvenue sur Scribd !

  • Organization of Multinational Operations PDF

    Transféré par

    Mihai Stoica
    10 vues23 pages

    Titre original

    5. Organization of Multinational Operations.pdf

    Copyright

    © © All Rights Reserved

    Formats disponibles

    PDF ou lisez en ligne sur Scribd

    Avez-vous trouvé ce document utile ?

    Ce contenu est-il inapproprié ?

    Signaler ce document

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    10 vues23 pages

    Organization of Multinational Operations PDF

    Transféré par

    Mihai Stoica

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 23
    Introduction Definition and Functions of Organizing ‘The Organization of Multinationals Factors Influencing MNC Structure External Forces Company Factors Development of Intemational Corporate Structure ‘The Extension of the Domestic Structure ‘The Transition: Autonomous Foreign Subsidiary ORGANIZATION OF MULTINATIONAL OPERATIONS The International Division ‘The Geographic Division Structure ‘The Product Division Structure ‘The Functional Structure Mixed Structure Matrix Structure Other Organizational Structures Conelusion Discussion Questions Case Study 8 84 ORGANIZATION OF MULTINATIONAL OPERATIONS In Chapter 3 we present the various organi: zational structures of MNCs and we will lear that many factors influence an MNC’s selection of the proper organizational structure. Some of these factors are external forces and demands. Among the extemal forces that could determine an MNC’s choice of structure are economic conditions at home and abroad, host govern- ment policies, product-market characteristics, and information technology. Factors that are r= lated to the firm itself are the history of the com- pany, top management philosophy, nationality, corporate strategy, and the degree of intemna- tionalization. We first discuss the development Of an organizational structure designed to deal with the export of products to foreign markets. ‘The subsequent major structural designs for MNCS including the autonomous foreign sub- sidiary, the international division, geographic and product divisions, and the matrix structure are explained in this chapter, Asea-Brown Boveri (ABB) is a global electronic equipment giant that is bigger than Westinghouse and could challenge General Electric in a head-to-head competition. Iris a world leader in high-speed trains, robotics, and environmental control. ABB was created by merging Asea, a Swedish engineering group, to Brown Boveri, a Swiss ‘competitor, and adding on more than 70 other companies in Europe and the United States, with joine ventures in South Korea and Taiwan, The architect of this global organization is Perey Baynevik, a Swede who has created the ‘most successful cross-border merger since Royal Dutch Petroleum was linked 10 England's Shell in 1907. IBM sought this help in reducing its own overstaffed bureaucracy, and Du Pont put hien on its board of directors ABB became very efficient by getting rid of excess capacity and eliminating duplication and reducing waste. It cut ‘more than one in five jobs, closed dozens of factories, and decimated headquarters staffs throughout Europe and the United States. There are only 13 executives at the headquarters in Zurich, making up the executive committee. The committee consists of Americans. Germans, Swedes, and Swiss managers. Since there is no commoa fst language, they speak only English. The executive committee is responsible for ABB's global strat performance. More than fifty business ‘area managers report to the executive and To leverage its core technologies and global economies of scale without sacrificing focal responsiveness, ABB is using a loose, decentvalized version of the matrix organizational structure. ABB ~ is organized along a matrix system of 50 (or so business areas (BAS) which are grouped into eight business segments. A ‘member of the executive committe is responsible for each business segment ‘An example of a business segment is a group of five BAs that sells components systems, and software to firms for automating their industrial processes. This business segment includes ‘metallurgy, drives, and process engineering, and is headed by a German board member whose office isin Stamford, Connecticut BA managers devise strategies 10 ‘optimize the business areas globally: They are responsible for cost and quality STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT 88 standards, allocation of export markets to factories thar are located around the world, and the sharing of expertise by rotaring people across borders. Nationat managers, who are responsible for ocal firms within national borders, report to BA managers. Most of she national ‘managers are host country citizens. The local companies act as national firms. ‘and have their own boards including eminent outsiders, presidents, nancial reporting, and career ladders for eniployee advancement. They are very much like any other national conporaion. In other words they are local companies that are responsive 10 local demands and needs. The managers of local frms have a global boss, the BA ‘manager, who sets the overall framework for the operation of the BA. They also report to the country manager, who coordinates the activities of national firms ABB has 1.100 of these local firms ‘around the world. This allows ABB to ‘um eacl operation locally with intense global coordination. Simply put, ABB is sunning a successful model of ‘multidomestic” structure. The power rransformer BA. for example, has 25 Jctories in 16 countries, and its leader isa Swede who is stationed in Mannheim, Germany. Each BA leader is responsible for the global pesformance of a husiness, and supervises the operations ‘and manufacturing facilities spread all over the world. Sources “Aseu-Brown Boveri: Generating New Hope fo Europe.” Multinational Bosiness (1987), 9. 4. 35-37; C Rappopor. "A Tough Swede Invades the US.” Forune June 1992, 77-79; W. Taylor “The Lovie of Global Busines: An ineriew Wilh ABB's Perey Bamevik Harvard Business Review (MarchlApAl 1991), 91-105: Introduction Collective endeavors, such as businesses, re quire & certain amount of order and organiza tion, without which failure ensues. Orga nizational goal achievement is dependent on the effective combination of the contributions and work output of the individual - members Because organizational activities are interde- pendent, complementary, and varied in types and timing, they require a certain degree of co- ordination and integration. The coordination and integration of these activities is facilitated ‘through their operational proximity. Operational proximity means making allowances for the synchronization of activities in time and space. Simply put, physical proximity allows the mem: bers of the organization to perform their tasks together and in a timely fashion, Organizational ‘activities need 10 be grouped in such a fashion that its easy for people to work together and so that progress toward goals is expedited, In ar ranging the operational proximity of organiza tional activities and tasks, different methods and frameworks are available for organizing. The methods of organizing are based on work spe- cialization, division of labor, and economies of scale that were first articulated by Adam Smith. ‘The frameworks that are used should allow for appropriate job designs, reporting and commu- nication arrangements, authority and responsi bility distribution, and the physical layout of the organization, In short, an organization needs form and structure, Definition and Funetions of Organizing ‘The organizing function involves designing the skeleton and the structure that delineate the na- ture and extent of formal relationships among Avca‘Brown Bove.” The Economist (May 28, 1988) 19-22; "Assttrown Boveri Union Underscores Industy's Move Toward Consolidation.” The Wall Street Joarnal {August 12, 19D). p. BIS: and “Swish Swiss Merger Braces European Elecwonic.” Electronic Business (Dece er 10,988), 32 Sele 86 ORGANIZATION OF MULTINATIONAL OPERATIONS various internal components, including tasks jobs, positions, and units of the organization. It is the physical and nonphysical form that the or- sanization assumes in response to its internal re- {quirements and extemal environment. It allows for the distribution of power and authority among the members, and the establishment of ‘communication lines between them, The inter- nal requirements of a firm are the type of tech nology used, the nature of tasks performed, and type of strategy employed. The external envi- ronment is the combination of outside con stituencies and forces that are influential in de- termining the fate of the organization. Because firms have different internal requirements and external environments, they employ various structural configurations. Simply put, the struc: ture of the firm is a tool for goal attainment and a means to an end, ‘The structure of the organization defines the boundaries of organizational components (units) the relationships among various parts; the ex- tent, mits, and location of authority and power: and the formal communication patterns. The architects of organizational structure need to answer four basic questions about the firm: (1) What should the units of organization be? 2) Which components should be joined and Which kept apart? (3) What size and shape per- tain to different components? (4) What is the appropriate placement and relationship of dif- ferent units?" “To respond to these questions, the basic prin- ciple for organizing is 10 group activities that have similar characteristics and functions from the lowest levels of the firm and proceed up. ward, In doing so, tasks are clustered into jobs. jobs are combined to form departments, and de: partments are put togethe units, Larger firms that serve multiple markets and have many products lines consequently have a number of different business units. These business units are organized into a corporate structure. The clustering of activities just de: seribed is commonly referred to as departmen: talization. to create business ‘There are six common bases for departmen- ouping of the organizational ac tivities: knowledge and skill, work process and function, time (shifts ina Factory), output (prod- cts) client, and place (geographic), Figure 3.1 represents organizational structures. result; from two of the most commonly used types of ;partmentalization: functional and geographic. talization oF The Organization of Multinationals The fundamental structural. considerations of MNCs are similar to those of domestic firms. Internal requirements and the external environ- ‘ment of MNCs, however, pose additional design challenges. The MNC structure should accom- modate for physical distance, legal and mental considerations, headguarter-subsidiary tionships, and many other factors. Because of the environmental diversity. the coordination and integration needs of the MNCs are differen from those of the domestic firms. Therefore, re: {quirements of operating across national borders create additional concerns for organizing. In ad- dition to those issues pertinent to organizing do- ‘mest fiems, three major concems surround the design of an MNC or wnizational structure: + How to encourage a predominantly domes- tie organization to take full advantage of {growth opportunities abroad, + How to blend product knowledge and geo- graphic area knowledge most efficiently in coordinating worldwide business. + How to coordinate the activities of forei units in many countries while permitting each to retain its own identity As consumers’ tastes. conve firms that respond to this convergence in prod: uct preferences could gain competitive advan- tage, The MNCS respond to these changes by adopting various strategies. These strategies were the previous cha Therefore, we could add another item to this lis ee ee ee STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT $7 Functional Organizational Stucture | cto Geogr Once See Veron || se Soxpon” [sma ]| eam Figure 1 Two Types of Department + How to exhibit focal responsiveness while maintaining a global orientation, An MNC’s response to these concerns is influ enced by many factors including the size and history of the company, top management orien- tation, product-market characteristics, and cor Ponte strategy. As MINCs expand abroad, under the influence of these factors, their structures evolve to facilitate the accomplishment of cor- Porate objectives. Consequently, there are many Variations among MNC structures. The organizing variations among firms are ally discussed at a level ditectly below the chief executive officer. We differentiate among various forms of MNC designs by focusing our presentations on this level. We also contine our discussion to the managerial organization, as opposed to the statutory or legal organization To satisty the host countries” legal and statutory requirements, MNCs create legal entities that exist on paper only. The statutory entities are de signed to fulfill legal obligations while promot- ing the MNCs" objectives of ease of operation and increased earnings. It is through these enti- ties that the legal and ownership relationships between the headquarters and its various sub- sidiaries are specified. Many different statutory and legal forms link the parent company to its foreign operations, including branch offices, subsidiaries, and holding companies. ‘The legal requirements of the host country and tax impli- cations determine the MNC's statutory organi- zation. 1g MNC S Many factors influence an MNC’s choice of or- ganizational structure, These are either external environmental forces, of factors related to the firm itself, or a combination of both. External Forces Major external environmental forces that in- Hluence an MNC’s structure are economic con- ditions, host governments, technological de- velopments, procuct-market characteristics, and information technology. 88 ORGANIZATION OF MULTINATIONAL OPERATIONS Economie conditions nomic conditions at hom Changes and abroad portunities and threats 10 the operation of MNCS. Unemployment and red power resulting from recessions and slower eco- adjustments in MNCS" busi: ness. operations. Reduced market share and ‘earnings in mature markets may prompt firms to diversify. [ntemationalization may partly be the consequence of home market saturation and ma. od purchasing nomic growth fore! Technological developments dustries, the high level of risk and huge invest ment required for developing new products are straining the financial capabilities of many MNCs. This is promptin ventures between competitors. Also, globs tion of some markets has created conditions in which MNCs face the same competitors in ‘many markets. Consequently, local advanta are quickly eroded by the immediate responses international joint of international rivals. The reality of compet tion between partners of international joint ven: tures and the need for fast response require a flexibility in structure and a lo he worldwide operations. Technological developments are considered to be the most important factor influencin nges in MNCs. New product de velopment, and new manufacturing methods of- fer opportunities for ¢ kets. In turn, expanded foreign operations resulting from the & cessitate the provision of organizational support ation of structural ch pansion into new mar- nological advances ne- systems and structural changes, Technological ational compet: obal integration of Telecommunications and informa Jing technology have improved the ability of the headquarters office to monitor sub- advances have increased inter tion and have caused the the MNCs. tion proces sidiary performance in a timely fashion Improved communication between the sub- sidiaries and headquarters allows the adoption of either a centralized or decentralized mode of control. In either case, the management of infor ‘mation provides an opportunity for devising a proper structure Product-market characteristics Recent shifts jonal economic growth have resulted in snce of new international competitors from newly industrialized countries such as South Korea and Taiwan, ‘The eme new competition has incr tainty and instability. Simulta in manufacturing technol velopment, and marketin nce of consumer tastes and preferences for certain products, have ereated a global market. To compete in this market, MNCS n economies of scale and quick response. Con: neously, advances 2s, new product de- sequently, firms requ 2 of internal inte their disp ion and coordination amor ersed worldwide operations, while local responsiveness to their national subsidiaries Therefore, in designing a new structure, the MNCs are concemed with the ree: onciliation of these two conflicting needs. An MNC’s organizational structure should facilitate global int fon and local responsiveness. (Other produet-marker characteristics such as di- of product line and the nature of compe~ effons of MNCs. A product division structure and centralized tition affect the organizin decision-making process, for example, would serve well those firms that have a diverse prod: uct line and are competing with other MNCs in national markets. If competition in national markets is limited to local firms, autonomy to the subsidiary would be appropri ate, With competition limited to local firms, in timate knowledge of loca closer relationship with domestic businesses would be necessary ~ Host government policies Host government policies are influential factors shapi and, in tur, MNCs, Investment incentives offered by host governments stimulate FDI and the expansion ‘of MNC operations, Many forms of trade and business requirements and restrictions influence the management of MNCS, Taxes and tariffs the need for local content, local ownership, technol gy transfer, local employment, and minimum conditions and 3 strat the structure of the MN ee gee epee rer ce een reer cest russ ier cr mer cr mm STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT 89 exports exert pressure on foreign subsidiaries. OF course, an MNC’S responses 10 host government policies. influence headquarters subsidiaries relationships, and subsequently re sult in structural changes, Company Factors Major company factors include its history, top ment philosophy, nationality. corporate strategy, and degree of internationalization.” Company history Firms atthe early stages of internationalization have a few managers with experience and expertise in coping with a ‘complex worldwide operation. As the firms eon- tinue operating abroad and learn how to manage their worldwide businesses, the decisions re- ‘garding the organizational structure will b Feoted by the years of experience in foreign mar- kets, Therefore, when there is a small pool of "swith international experience, the most tional divi sion. The use of other types of structure has to wait for more advanced stages of international: Top management philosophy Top man ‘ment philosophy regarding the autonomy ‘granted to subsidiaries is reflected in various control mechanisms that the headquarters em= ploys. The organizational structure is a means for exercising headquarters control over sub- Sidiaries. A loose federation of national sub- Sidiaries under the general direction of head- quarters, for example, is sign of management belief that local executives are better qualified to run their own operations. Nationality There are differences among the organizational design of American, Japa- nese, and European MNCs, European sub- sidiaries, for example. tend to have more auton- ‘omy than the Americans. The type of control used also varies among the MNCs from differ- cent countries. A higher level of output control tends to be exercised by the U.S. MNCS over their subsidiaries, while the Europeans tend to exert a higher level of behavioral control.” Foreign subsidiaries of Japanese MNCs appear sible structure is an interna to have more local decision-making power Executive selection, socialization, and accul- turation of Japanese managers assure the subsid- iaries” strict compliance with the headquarters” norms, and renders other control mechanisms less necessary. Consequently, there is n0 need for Japanese MNCS to receive extensive and fre- quent performance data from their foreign Subsidiaries of the sort that the American sub- sidiaries are required to send to their head- quarters. Another unique feature of Japanese MNCS is the structure of the Keiretsu system, Many Japanese manufacturing firms have been using keiretsu systems. A keitetsu is a very close collective of many firms in manufacturer supplier relationships. The Japanese have effectively used Keiretsu systems to gain inter- national competitiveness and successfully pen- crate world markets, Corporate strategy Corporate strategy greatly influences the structure of the firm, From the pioneering work of Chandler." and subsequent research by others, we have learned that, among, other factors, the strategy of the firm sets the stage for structuring the organization. The popular phrase “structure follows strategy” sug gests the link between the to, An internation alization strategy that moves the firm away from the familiar domestic market also results in structural variations. Some organizational struc tures employed by the MNCs appear to work better with certain strategies.” International di vision structure tends to fit a strategy that calls for a low level of foreign sales with a few prod- ‘ucts, Strategies that involve product diversity tend to be associated with product division structures Degree of internationalization ‘The degree of internationalization affects. organizational siructure through headquarter-subsidiary rela tionships. Foreign subsidiary autonomy and in temationalization of the firm are related, Internationalization could be thought of as the rhumber of foreign countries in which a firm has Subsidiaries. As the number of foreign sub- Sidiaries increases, so does the complexity of 90 ORGANIZATION OF MULTINATIONAL OPERATIONS oo Keiretsu Structure Many large manufacturers in Japan have formed keiresu, or company coalitions, by group- | ing the subcontractors who supply them vith parts. The result is a production system, dis- tributed among many firms, that has helped Japanese manufacturers strengthen their global competitiveness. Japan's traditional Keietsu-type “distributed production” system appears to have two major characteristics, Fits, a key manufacturer takes care of only a small portion of a mut tistage production process, with the remaining processes subdivided among a chain of sub an operat as su contractors for manufacture Second, the key manufacturer assures subcontractors of contractors (more than $0% of small-and medium-sized companies in Ja g-tem and continuous relationships. In tum, the subcontractors offer advice on quality contr and impose stability tothe flow of parts. They offer technical assistance and promote join: development projects Recently, however, the subcontracting system has started changing 10 ref tural sophistication in Japanese industries. This trend is expected to accelerate as Japan's the struc: Large Japanese manufacturing 8 creasing earnings are inereasingly pressuring subcontractors fo cut production costs. If they ‘donot comply, they will be excluded from the ketets, An increasing number of subcon- twactos are now seeking ways fo gain independence trom ke neously sus although most silt ek 10 improve their technology and production to satisfy key manufacturers | Excerpted fom |. Uebayashi. "New Treads in the Keietsu System" The Wall eet Journal {November 16. 1992). p. AIO. Rept by permission of The Wall Steet Jura © 1982 Dow Jones 2 Company, Ins. Al ph reserved worldwide managing them. It is expected that the MNCs ternational operations evolves to serve the with a high degree of intemationalization may growing needs of their diverse markets be forced to allow more autonomy 10 their sub- Consequently, their choice of structure depends sidiaries for certain decisions such as marketing. on the type of strategy employed. An organiza- For other decisions such as finance, however, tion's structure not only signifies distribution of they may exert more control, The intimate power and authority, and a formal relationship knowledge of local situations is more critical inbetween organizational members, but it also ‘marketing than in finance tells of the importance the company places on certain aspects of the business. A company or- Development of International anized along the customer groups, for exam- Corporate Structure ple, signals the importance it attaches to meet- [As a mechanism that facilitates progress toward ing the needs of its customers. goals, organizational structure evolves t0 ac: {As the firm grows, so does the importance of ccommodate the implementation of strategies. its structure. A small business requires a simple Since fims follow different paths to interna- formal organization, But as it expands, in- tional expansion, they assume many different creased specialization of tasks and duties ere- forms. The organizational structure of most in- ates additional demand for coordination and in- STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT 91 tegration, A more sophisticated structure is needed to handle the complexity of the opera tion, and the coordination and integration re~ quirements of a large firm. Such a structure ‘would also facilitate the efficient distribution of the firm’s resources and the execution of its strategies, The structure that served the business cof a domestic firm may well be ill equipped to hhandle the diversity ofthe intemational market- place, Intemational expansion brings about structural changes. A three-phase evolutionary process characterizes the changes in organiza tional structure of MNCs. The progression through these phases parallels the three stages ‘of introduction, growth, and maturity of a prod- uet’s life cycle." These changes transform the firm from domestic orientation through three phases of international, multinational, and global perspectives. In the frst phase, competition is limited t0 a small number of companies located in devel ‘oped countries, These firms manufacture prod- cfs with funetions, features, and characteristics that‘ are designed for the domestic market. International operation t0 these firms is nothing ‘but exports. Although exports may be an impor- tant source of revenues, they constitute a small portion of total corporate earnings. Therefore interwational operations are carried out as an ap- pendage to domestic business, At this stage, the firms continue using the existing domestic structures with some minor additions to accom modate business activities across. national bor- ers, Inthe growth stage, technology diffusion and price competition, particularly from domestic firms, force firms to establish manufacturing fa- cilities in low-cost locations abroad, As the in creased foreign sales make up st larger share of corporate revenues, firms enter phase two by & change in the organizational structure. In this Phase, MNCs use the international division Structure, All intemational business activities are organized into a division comparable 10 other divisions in the domestic side of the busi- ness. No attempt is made to integrate foreign subsidiaries. Operations within each foreign country remain separate from one another Some firms go through a transition phase before entering phase three, Firms in the transition phase attempt to learn the intricacies of the in- ternational environment through their au- tonomous foreign subsidiaries. A major portion fof the MNC eamings come from these au- tonomous foreign subsidiaries, which are given ‘substantial decision-making freedom. In phase three, most of the corporate rev- cemuies are generated from abroad, At this stage the MNCs organize their operations on a global basis. Domestic operation becomes one aspect of their business and receives corresponding at- tention along with foreign operations. Various forms of organizational structure that involve the transition from a domestic form to an inter- rational structure are discussed next The Extension of the Domestic Structure “The first attempts at doing business across nae tional borders result in-some or changes, The firm begins to learn about other markets beyond its own familiar domestic sur- roundings. It carries business transactions in other currencies, and learns about foreign busi- ness protocols, Foreign correspondence appears among the firm's official communications. To accommodate all these events and activities. some structural changes have (0 take place. None of these changes, however, require major structural modifications, Since the firm's busi- ness activities only marginally expand into the international domain, the corresponding formal ‘changes are handled under the existing domestic structure At the early stage of international expansion the firm’s interest and expertise are centered around the domestic operations, and its intema- tional involvement is incidental. Often, interna tional sales are triggered by foreigners” inquiries and are insignificant compared with domestic sales. The luck of competition and the firms su- wigational perior technology lead it to export the oducts or product line without many modifi cations. All export jobs are contracted to an in- dependent agent. With the increased sales to for- eigners, the firm may set up an in-house export desk or export unit. An export manager, who te ports to the marketing executive, is given the re- sponsibility of handling all export activities. The position and reporting arrangement for the export manager depends on the breadth of prod- uct line. In a firm with a narrow product line, the export manager reports to the chief marketing officer. The export manager reports directly 10 the chief executive officer in a firm that has a broad product line."" Figure 3,2 depicts the in- ternational organizational structure of the firm at this early stage of expansion abroad. AAs the volume of export increases, the firm ‘may establish an office abroad to handle sales czO vp Manutactuing vP Marketing ORGANIZATION OF MULTINATIONAL OPERATIONS. and service ofits products, Except for the addi- tion of an export manager, the basic organiza tional structure ofthe firms at this stage remains virtually intact. Most American firms’ early in temationalization experiences fit this descrip- tion. Japanese firms, however, have adopted a different approach. For expanding into foreign markets, the Japanese have relied on trading companies called sogo shosha, These trading companies perform all the necessary business functions for Japanese firms."? Although sogo shoshas play a vital role in Japanese interna: tional business, Japanese companies in the auto: mobile and consumer electronic industries have followed a pattem of intemational expansion similar to that of American and European firms." AAS the firm, volved in other facets of international business Jns experience, it may get in- =ieeeoupall vP vp Finance HAM: [ International Manager | _w ve | Finance | | Manutactring — ve |[{ ve ][ ve Marketing || pao || HRM Manager [ Product [vs Product 8 Figure 32 Position of Ineratonsl Manager STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT 93) sacturing_ abroad. With the passage of time the market matures, and local and foreign competitors enter the mar- ket. With increased competition and market ma- turity local demands could not effectively be adl- dressed with exports only. A change in the firm's foreign involvement is also hastened due to host ‘government demands. Inereased volume of ex: ports into a host country may prompt the host ‘government's demand for local participation in the business. Export restrictions are imposed. and local content laws are passed to assure the MNC’s operations provide benefits to the coun: try in additional jobs, improved skills, and tec. nology transfer, A combination of market pres- sure and government demands Forces the firm to establish local manufacturing facilities, When the firm establishes manufacturing fa cilities abroad, the diversity and scope of inter national operations brings about a change in the organizational structure, AV this stage, the firm leaves behind the simplicity of the international nizational structure of an exporter, and in- stead enters the world of managing foreign sub- Sidiaries. It needs a conteol and coordination mechanism to integrate its geographically dis. persed international operations. such as licensing. and ma The Transition: Autonomous Foreign Subsidiary Initially, local subsidiaries are allowed a consid- erable amount of autonomy. The headquarters” lack of experience in managing a distant opera tion in a foreign land leaves it no choice but to int the subsidiary managers most of the decision-making power usually reserved for top executives, To control dispersed foreign sub- sidiaries, MNCs commonly use financial report- ing. As long as the operations remain profitable, the headquarters follows a hands-off policy. The need to learn exceeds the desire to control.!* A direct reporting relationship links the for- subsidiary managers to the president atthe corporate headquarters, These managers are fully responsible for all aspects of the sub- sidiaries’ operations. For most American firms this type of structure has a short life. The longevity of autonomous foreign subsidiary structure depends on two factors: is growth rate and the rate of international experience accumu- lated by the headquarters, When a subsidiary’s contributions to corporate eamings become large enough to warrant closer scrutiny, Read- quarters begins a search for ways to exercise more control. Also, as the corporate executives’ familiarity with foreign operations increases, they begin to feel more confident in establishing more coordination and control among foreign organizational design modi- ations Sometimes, the foreign subsidiary has its ‘own local board of dreetos, with the headquar- tors representative as member" This arrange iment is practiced more by European tims, Two factors were influential in the ereation of au- tonomous foreign subsidiaries by the European MNCs. First, some European firms expanded into international markers before the advent of :moder communication technologies. It was not possible to closely control and integrate their foreign subsidiaries. Without the aid of modern communication technologies, European MNCs had no choice but tallow their subsidiaries a considerable degree of self-ule. Second, start ing with small domestic operations, European MNCs then found their foreign subsidiaries to be a significant part of the corporation, and therefore treated them accordingly." “The unigue relationship between the Euro- pean subsidiaries and their parent corporation is Jabeled “mother-daughter” relationship. Among, the many reasons given for such a relation- ship three stand out, Firs, European MNCs ere- ated a. strong organizational identification mong their managers through a long period of acculturation and indoctrination to the noes and ways of the corporation. Second, they voided joint ventures with foreign partners and assigned expatriate managers to be in charge of forcign subsidiaries, These managers could be 94 ORGANIZATION OF MULTINATIONAL OPERATIONS relied on to abide by corporate norms without close supervision by the headquarters, Third, barriers to trade kept national markets separate from one another and limited the need for eross boarder communication in most European MNCs. Even without a formal system of report ing, some of these MNCs were able to achieve {otal worldwide standardization of policies for product mix and diversity, product quality, pro: and formulas, brand nams, internal or external financing, and human resource man: agement procedures for promotions and re wards.” For years, Procter and Gamble operated strong national subsidiaries in Europe. Differ fences in market conditions, consumer habits, tnd competition resulted in the creation of these th of which resembled a mini nd Gamble. They had their own manufacturing facilities, product development ccapabili and advertising. a cies, and responded to local conditions as they saw fit, Honeywell is another MINC that allowed its European subsidiaries much Autonomous country managers were responsi ble for all operations in their countries, Each ‘subsidiary sold the full line of Honeywell prod: ucts. Some also had manufacturing and service facilities. The headquarters at Minneapolis pro vided administrative and marketing support. As fone executive put it, “Honeywell has always distinguished between centralized “what-to-do" decisions and decentralized “how-to-do-it' deci sions in international areas. The philosophy is to have a tight “what” and loose "how" because Danes will know the business in Denmark bet- ter than the Minnesotans do.""* ‘The structure of an autonomous Fore! subsidiaries, ture Procter ss, market sidiary is better suited to satisy the career aspi- ration of i to host government demands for local owner- ship. Having host nationals in visible high-level ‘managerial positions and sharing ownership with local investors can subdue nationalist fee ings against the MNCs and reduce tension be- toveen the MNCs and host governments. nationals. It also is more amiable Advantages Autonomous. foreign subsid iaries have the freedom to operate as indepen: dent, responsible enterprises within the host country environment. MNCS use a host country focus strategy for managing these subsidiaries. The host country focus strategy was presented in the previous chapter. Relatively free from close supervision by the parent firm, au. tonomous foreign subsidiaries can integrate into the economic context of the host country and develop their own competitive posture. They in competitive advantage by setting up local ‘manufacturing, marketing, and purchasing. By ‘operating as a local firm, they can tap the do- Imestic source of cheap labor, and are faced with fewer restrictions. Thei headquarters enables them to consider local consumers’ needs in making. major decisions and fo be sensitive to local markets and govern- ments, The direct relationship between the for ign subsidiary and the headquarters makes it possible to present the subsidiary problems at the highest corporate level without additional levels of bureaucracy. It also elevates the pres tige of subsidiary managers in the eyes of host government officials and immen their negotiation status.”” Disadvantages An subsidiary Allowing each subsidiary local decision-making power may cause subsidiaries to ignore the ben: elit ofthe corporation as a whole. As discussed in the previous chapter, certain benefits are as sociated with the operation of an integrated ‘multinational, The benefits ate realized by man- aging the firm as a whole and maximizing worldwide performance, The subsidiary man- ‘ager has a local horizon, whereas the maximi2a- tion of worldwide performance requires a total corporate perspective. One way to overcome this weakness is 10 tie some part of the sub- Sidiary manager's rewards to overall corporate performance. independence from the Ly improves foreign structure has certain drawbacks. The International Division With increased sales and revenues from dis persed foreign subsidiaries, MNCs are com: ——_~—_—_ STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT 95 pelled to impose more coordination and control ‘The organizational structure of an export office for the creation of independent foreign sub- sidiaties is inadequate to deal with the diversity fof expanded foreign business. At this stage, MNCS adopt an interational perspective and tise international division. structures. (Figure 32). Four factors prompt the establishment of an international division structure that enjoys suffi= cient organizational status on par with the other divisions.”* First, increased intermational in- volvement, both operationally and strategically, requires the attention and involvement of a se- rior executive, and the structure of a separate organizational unit. Second, at this early staze of internationalization, concentration of all in- temational activities in a single organizational unit is the best way to deal with the complexity of the global market and to exploit the world- wide business opportunities. Thind, there is the realization that internal specialists are needed 10 deal with the special features of international ‘market opportunities, Last, there is a desire 10 develop proactive global scanning capabilities to assess global opportunities and threats rather than passively respond to conditions that are presented to the frm, ceo In an international division structure, the ‘management of foreign operations is coordi nated by a department usually located at the headquarters. Each subsidiary manager reports directly to the head ofthe international division. ‘The executive in charge of the division is a member of the corporation's executive board. All activities of foreign operations are central- ized at the international division, and the head of the intemational division is given line author- ity over foreign subsidiaries. Through the inter national division, the MNC headquarters exer cises control and coordination over foreign ‘operations without much change in the corpora tion's existing structure. With the creation of an international division, the foreign subsidiaries” loss of autonomy is matched by a correspond measure of guidance and support from the cor- porate staff In effect, the intemational divi- sion allows the firm to maintain separate do- mestic and foreign businesses and to use its limited international expertise efficiently. Since the tiem basically has a domestic orientation, not many executives have international experience. Concentration of intemational staff in the inter- national division allows for integration, coordi- nation, and control of foreign subsidiaries with- ‘out placing undue demands on other executives. [ ve proauct | [ ve Product VP Product Line 3 Lune 8 Corporate Oices (manufacturing, | marta, te)_| Line © Figure 3.3 tnterational Division Stactre | | Genera! Manager 96 ORGANIZATION OF MULTINATIONAL OPERATIONS Intemational division corporate structure is likely to be adopted by firms with a dominant domestic business, a narrow product line, a lim- ited geographic diversity, and few mana, with international business expertise and ex} ence. With the dominance of domestic business over the international operations, upward mobil ity of the executives in the corporate hierarchy is not tied to international expertise and experi ence. Therefore, not too many executives see the knowledge, experience, and expertise of in: temational business as necessary for their career progress. Often, a foreign assignment may be an organizational hinderance that could limit thir managerial advancement. By spending a few years abroad on foreign assignments, they could become foreigners to domestic corporate net- work. They could be bypassed for promotion in favor of those who are active in the domestic ‘operations and a part of internal power network ‘An international division structure is a mani- festation of the firm's intemational orientation and geographic interests that are translated into design arrangements fitting the multinational nature of their foreign operations. ‘The firm at this stage considers each geographic area to be a separate market that requires differentiated busi- ness practices that are handled by foreign sub- sidiaries. These subsidiaries, although separate ‘operationally, could benefit from the overall guidance and integration efforts of the head- quarters, There is a need to balance the self interest of foreign subsidiaries with overall cor porate performance. This is accomplished by the standardization of inform ‘mechanisms of foreign subsidiaries. The struc ture of international division and the associated standardization allow for the application of ‘emational corporate practices that improve cor- porate performance, such as transfer pricing, re source acquisition and allocation, and product distribution. Polaroid is an example of frm that has used the international division structure. During th 1980s, nearly 40 percent of Polaraid’s revenues ‘came from international operations, ts interna. jon control tional division controls all manufacturing and marketing functions ouside the United States. It has three facilites in Scotland, Ireland, and the Netherlands that handle many aspects of manu facturing Polaroid products. It essentially sells abroad the same products as those sold in the domestic market, with some modifications to accommodate special market conditions. local regulations, and the metric measures. The inter national division markets the full line of Polaroid products through wholly owned sub- sidiaries in 20 countries. The international divi- sion is treated as a profit center and seems to en- joy a degree of independence within the ‘corporation that is envied by other divisions.** With the recent reorganization that has carved the firm into three major business units— consumer, industrial, and magnetic that Futaroid is experimenting with the g matrix organization design.”° Coleman Corporation based in Wichita Kansas, is another firm that has employed the intemational division structure for many years?” Coleman is the largest manufacturer of ‘outdoor products in the world. Its outdoor prod uct line, especially gasoline-powered lanterns and insulated coolers, has gained worldwide tion. Coleman started its intemational sal of operations in 1919, and bas had an international division structure since the 1940s, The division is headed by an executive-level vice president and is located a few miles from the corporate headquarters The international division structure works well for Coleman, which has a rather centralized ‘manufacturing operation and a narrow, homogt nous Tine of products. Coleman has principal ‘manufacturing sites in Wichita and Inheiden, Germany. Other smaller manufacturing sites are South Carolina, Utah, and Wash- ington. Outdoor products are manufactured in Wichita, Inbeiden, and Texas sites. Utah and South Carolina facilities make textile products, such as sleeping bags, and tents. It produces portable generators in Nebraska and water ski ing equipment in Washington, in Texas, STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT — 97) Coleman outdoor products generally need little modification for sales in foreign markets. ‘The changes that are made are generally cos- ‘metic, such as labeling and packaging changes. In the United States and developed counties, Coleman products are used for recreational pur- poses. In these countries, advertising and marketing is relatively undifferentiated. Adjust ments are made for variations in the infrastruc ture of the markets and for differences in cul- tures and languages. An example is Japan, where there are many small retailers and long channels of distribution, Products are used recreationally, however, so advertising and mar keting tactics are similar to those of Europe and the United States, In developing countries, Coleman products often serve basic utility functions. Lanterns are a primary source of light, and insulated cool- fers are a principal source of refrigeration Therefore, in these countries the marketing mix is differentiated, and the distribution is through dealers with an emphasis on product promotion. Coleman does not coordinate advertising, but instead provides free products for demonstra- tion based on the distributor's promotion et Forts Except for Inheiden, the international divi sion is centralized at the headquarters. At Inheiden, Germany, Coleman manufactures products for sale to European markets. Inheiden also coordinates European sales operations, and regional sales and distribution offices in Bristol, England, and Alphen aan den Rijn, Netherlands. ‘The international division coordinates all other regional sales and distribution offices, including Tokyo, Singapore (which covers the rest of Asia), Sydney, New Zealand, and San Juan, Puerto Rico (which includes Latin America and the Caribbean). ‘The international division structure at Coleman reflects characteristies of various foreign mar- kets and the strategic approach of Coleman in serving those markets. Europe has long held business opportunities in outdoor products. The Europeans’ interests in outdoor recreation and their higher level of income make Europe fa large market for Coleman products. Conse quently, the European operations are signifi- ‘cantly larger than operations in other countries and are afforded more local decision-making power, Ina sense, market characteristies deter- ‘mine either centralization or autonomy of the operating units While Europe has been Coleman's largest foreign market, Japan isis fastest growing mar- ket. During the 1980s, Coleman became the largest vendor of outdoor products in Japan. The increasing popularity of outdoor activities among Japanese, combined with the fast rate of ‘market growth, may make the Japanese market ‘equal to that of the United States for Coleman's products Iti also expected that market for out: door equipments will inerease in the rest of the Asian and Latin American countries. These changes in the external environment will have a structural impact on Coleman, as foreign sales surpass domestic sales. Until then, an interna tional division structure seems to be appropriate for Coleman, based on its narrow product line ‘and a dominant domestic business. ‘The MNCS typically continue to use the in- temational division structure as long as it re- ‘mains smaller than most domestic divisions. It is abandoned in favor of other structures when it rivals the largest domestic divisions. The inter- national division structure, however, may last longer ifthe rest of the MNC is organized along the geographic structure. There isa better fit be tween a geographic structure and an intema- tional division, Increased volume of business results in increased size, which in turn strains the capacity of the division to handle the prod uct diversity and geographic dispersion of the MNC. At this point the worldwide activities are in need of corporate direction. A very strong in- temational division, however, hampers head- quarters’ direction of worldwide operations. The increased size of the international division, which is accompanied by more independence, 9% ORGANIZATION OF MULTINATIONAL OPERATIONS tends to insulate the headquarters from interna tional operations. As Clee and Sachtjen ob- served, “the more independent an intemational livision becomes, the more it tends 10 insulate corporate man and opportunities vision needs the product expertise possessed by wgement from overseas problems * Also the international di domestic divisions. Domestic division staff however, are reluctant to share their expertise with fore he need to reorganize leads to one of the «wo Forms. an n operations. Consequently. international product division or intemational ‘zeographic division Advantages The choice of any organiza. tional design represents the trade-offs berween the benetits gained and the limitations imposed on the management of the firm, Intemational di- vision design provides a f which we briefly discuss.”” Among the benefits are adequate top management attention 10 foreign business, concentration of international: mar: w benefits, expertise at headquarters, and the ac quisition of capital and resources worldwide With the head of the in member of the senior executive team, the firm is, constantly reminded of the international impli- cation of strategic decisions, The © mational division as a stence of international expertise at headquarters expedites coordination between funetional units, such as marketin finance, and production, and fore operations. The presence of international man: al the top corporate hierarchy and their makin participation at strat low for evaluation of investment decisions on a worldwide basis, Disadvantages The international division structure has drawbacks.” There is an inhe conflict between the goals of the domestic and international division, Almost always, products that are sold abroad are those produced for the domestic market, The international division does not have its own R&D and engine: staff. Therefore, it cannot cater to the special needs of its Foreign customers, Domestic func tional specialists are (0 give priority to n customers because the evaluation of forei their performance is based on domestic criteria 1 heavily on the cooperation of domestic func tional departments, and such cooperation may ‘not be forthcoming. Ther of conflict. Some activities, such as financing and resource acquisition, need to be coordinated ationally at the divisional level. Attempts at the division level to exercise central control international relies is also another source fon financing clashes with country-level activi ties such as local marketing. Domestically the firm gives a high priority to product coordina: tion as compared with area coordination (a divi- ational division, how- raphy) sional activity). The in ever, needs both product and at The Geographic Division Structure The geo, worldwide ope phic or regional structure divides the fons into regional divisions, e responsibility of managing each geographic iven 10 a senior-level executive (see gure 3.4). These executives have operational and human resource management responsibil ions, while the headquarters and control for ties for their maintains stra worldwide corporate operations. Some regional operate as self-contained units, all needed products Lo phic divisions may rely on s. For the producing and sell cally, Other other divisions for some of their 1 MNCS with geographi domestic market is but one of mar worldwide, Nestle is an example of a firm using an international division form, based on geo- graphical grouping of its forei and operations. It has 75 country managers who wal managers, The f division structure, the markets n subsidiaries report to five region fe re he supervision of these managers are Europe; South and Central America: Africa and the Middle East and New Zealand; and North America, United Kingdom, and Ireland." Advantages gions unde Asia, Australia The geographic division struc- ture is suitable for c Advanta ‘ain products and market haracteristies. STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT 99 cz0 LT ee Headquarters ‘Stat | European Ohvision ie Division Streeture Figure 84 Geo division form are the possibility of regional ‘economies of scale and the treatment of country subsidiaries as profit centers. Geographic divi- sion works well when regional similarities in customers’ preferences allow for standardiza tion and create the opportunity for economies of scale, It is also suited to situations where. with ‘modest marketing modifications for individual countries, whole regions can be treated as a market. Firms using regional structures tend to have mature businesses and narrow product lines. They have @ greater growth prospect abroad where their products are at earlier st ‘of the life eycle. Since these firms generate lat earnings from foreign markets. they need an intimate knowledge of the local environment. ‘They generally emphasize low-cost manufac- turing by establishing large plants and usi stable technologies, They try to create compet tive advantages through marketing techniques land price and product differentiation. Auto- motive, beverages, containers, cosmetics, food, farm equipment, and pharmaceutical industries have characteristics favoring the regional structure." Disadvantages Although a regional struc- ture simplifies the task of top management by creating regional specialists, it may cause prob- Tems.** A firm with a diverse product range may find a regional structure inadequate in handling coordination among product lines and between the country subsidiaries, Regional structure ‘North American Dhision ‘South American sion tends to emphasize coordination and integration within an afea at the expense of overall corpo- rate integration, It may focus too much attention fon regional performance, which may not neces: sarily optimize overall corporate interests. Rivalry among the regions may sacrifice eoop- eration needed for global competition. [t may also create too much duplication of functional ‘and. product. specialists among the regions. Strong regional managers may block or delay implementation of strategies aimed at taking ad- ‘vantage of global economies of scale and world- wide opportunities. MNCs using a geographic ¢ dittcult division structure may experien« with the transfer of new production techniques and new product ideas from one country to an- other, and the optimum flow of products and material from diverse sources to world markets. Firms facing this problem may respond by es- tablishing a worldwide product manager at cor- porate headquarters. This manager is assigned the responsibility for particular produc proxluct lines worldwide. Product managers pro- mote the development, progress, and disservina- tion of product ideas and production worldwide. They recommend global product strategies and set as a clearing house for the transfer of suc- ‘cessful developments from an atea to the rest of the MNC. It is likely, however, that they en- counter an ambiguous operating relationship with geographic division managers, who have line responsibilities. 100 ORGANIZATION OF MULTINATIONAL OPERATIONS The Product Division Structure Firms using a product division structure arran; their business into product groups, and assign senior line executive the total responsibilty for each product division (Figure 3.5). Similar to the regional structure, stra each product division that affect the total MNC ic decisions within operations are made by headquarters. Products using similar technologies and having similar customers are grouped within a division, The total responsibility of servi rests with each product division, Within the guidelines established by headquarters, each product division prepares plans 0 serve the world market. These plans are subject to ap. proval by the headquarters before they are im. plemented. Financial, legal, technical, and other functional services and guidance are provided by corporate staff to all product divisions, Firms with diverse product li ‘opportunities tend to use the product division structure. Their products typically have a rela- tively high level of different end users. Because the world market nological content and iarketing require- 1 products are varied, there is a need for product and market integration among them. The product division structure makes it easier to market such products. It a product and market integration, Hewlett Packard isa firm that has been usin the product division structure to serve the world. rents for th 0 provides market. In 1970, Hewlett Pa its first product Later, in 1975, the product groups were ex: panded to six: Electronic Test and Measurement Instruments, Computer and Computer-based Systems, Calculators, Solid-State Components, Medical Electronic Products, and Electronic Instrumentation for Chemical Analysis. Each di vision was responsible for all aspects of busi ness within their produet g tufzcturing, sales, and services. Product groups also prepared sales forecasts and recommended prices. The a sions reported to two executive vice presidents ‘aed established oups with four divisions bup including man eral managers of product divi- who were jointly responsible for operations. Product divisions w rate staff reportn Advantages The bei sion are realized whe tariffs, and other considerations favor local manufacturing of the product. By emphasizing the product market and takin; vanced technology and product expertise, multi- national operations ace beter served by this type Of structure. The flexibility of division by prod- uct allows the MNCs with growth strategies to add new product divisions without disturbing the rest ofthe organization.** It also permits fast response (0 the global competitive pressures tupported by t -orpo- © the vice president for ad- fits of product divi high transportation costs, jvantage of ad- against specific product lines, Global competi tive maneuvers of international rivals are more | Heacquarers| [stat | Ls] | Preduet [Product uct Group B Group ¢ |_Gowa | STRATEGIC ASPECTS OF INTERNATIONAL MANAGEMENT — 101 sadly noticed by the product division execu- lives. Therefore, the MINC ean concentrate and apply its resources at the location of the com- petitive attack effectively. Disadvantages product division struc ture may result in wasteful duplication of man: agement, sales representation, and plant capac- ity utilization within 7 A customer, for ‘example, may be visited by representatives from different product divisions. To eliminate dupli cation and waste, coordination among divisions would be necessary. Within a given geographic area, however, coordination of different product division activities may representa difficult cask. The addition of country managers, who do not have profit esponsibility. may be used to over- come this shortcoming. The countey managers report to appropriate product divisions for their share of local activity. and perhaps to a regional slaff specialist for their role in maintaining local pre agers function as if they are operating in a mae {tix organization. A review of the matrix struc- ture is given later. ence. In this manner, the country. man The Functional Structure In a functional structure the responsibilities of managing the MNCs operations are organized by functions. Each business function such as manufacturing, marketing, finance, research und «development, human resource management, et. is assigned t© a top-level executive, Each exee- utive has worldwide responsibility in his or her functional area, and reports to the chief execu: tive ofticer of the MNC (Figure 3.6). The man- Uufacturing executive, for example, has line authority over, and! is responsible fo, all manu- facturing activities, domestic and foreign, within the MNC organization. This form of structure works well in a situation where the firm has a narrow, standardized product line,” and its global coverage and demand have reached a plateau, with no serious changes in the competitive challenge.” A functional org nization allows tight centralized control with a small cadre of functional managers, Except for raw material extractive industries, the functional form is [ess popular among MNCs. In a survey of 92 American MNCS, only 10 had functional structure, and all were in the raw material extractive industry" Advantages A functional structure seems to work well in this industry because raw mate rials are very homogeneous and processes do not differ substantially from one country to an- exploration, production, and sales is of strategic ‘importance. not the introduction of new prod- ucts or marketing. All major oil companies, for ‘example, have exploration, erude oil produc- tion, transportation (tankers and pipelines), re- fining, and marketing worldwide. Functional design permits functional line managers 10 con- twol directly all activities at each step globally through the process of product flow. Disadvantages For a firm with 2 multiple product line, the use of a functional structure could create problems. It puts undue demands fon functional managers that are not easily met. ‘These managers would need expertise in multi- ple product lines and regions. Another problem is the inherent divergence of objectives among = rap |_| Marceing (oworawide) || (word) | Mess) [Fen tera | | fa 102 functional managers, such as production and marketing. The conflicts resulting from differ ences in objectives between functional man- agers, such as marketing and production, which cannot be resolved at the country level need 10 be referred to headquarters, A headquarters overburdened with reconciling and resolving Conflicts among the functional divisions has less time for strategic decisions, Mixed Structure Some firms may find geographic and product di vision structures inadequate for their expanding ‘operations. These forms are 100 restrictive for the ever-changing pattern of international busi ness activites. These organizations have opted cither for a mixed design or a matrix form. The ‘mixed or overlapping design is a combination of other structures (Figure 3.7). One option is to combine functional and product divisions, Another choice is to mix geographic and prod. uct fines. A third version is functional and geo. graphic divisions, ‘A major reason for the adoption of a mixed structure is that the other designs do not allow for optimum integration of inputs from regional, functional, and product areas, An optimum level of interaction and eross-fertilization among the three areas is necessary for gaining a competi- tive position in the ever-changing global mar- kets. MNCs are constantly in search of the structure that combines area knowledge with product and functional skills *? ceo LC fal ORGANIZATION OF MULTINATIONAL OPERATIONS > Matrix Structure Ever since its introduction, the matrix structure hhas been praised and criticized both by business Scholars and managers, Matrix management is ‘an organizational form in which a normal hier- archy is overlaid by some form of lateral au- thority, communication, and influence. A matrix ‘organization does not follow the traditional principle of unity of command that prescribes cach subordinate to have only one superior. It Usually combines two chains of command, one along functional lines and the other along pro- ject lines (Figure 3.8), Thete are dual channels of authority, performance responsibilty, evalua- tion, and control in a matrix organization, Dow Chemical pioneered the matrix man- ‘agement structure in the 1960s and is still using '4 more flexible version of it. Dow's operations Arranged into three overlapping compo- nents: functional, business, and geographic. The functional components include manufacturing, R&D, marketing, and the like. The business segment consists of product lines, The geo- Braphic part encompasses the countries where Dow has business operations.*? Citicorp, Digital Equipment, General Electric, Shell Oil, and ‘Texas Instruments are among the well-known firms that have used matrix design, However, some large companies such as Xerox have re cently abandoned the matrix structure, claiming it had created a stranglehold on product devel- opment. Peters and Waterman even asserted that the tendency toward hopelessly compli- moaas | [ronaa | [vs] [cram tsarande, | | naan, | | ove | | Susem except US. ‘except U.S. Lee | Settee | | ESESS, Figure 37 Intemational Mixed Siucure STRATEGIC ASPECTS Manager OF INTERNATIONAL MANAGEMENT 108 Praguct Xin Region ¥ Figure 38 Intemational Matis Structure cated and ultimately unworkable. structures ‘reaches its ultimate expression in the formal matrix organization structure," OF course, Peters and Waterman were referring to the U.S. domestic operations, which combine functional andl product structu often combines product and regional forms. Matriy structure could be viewed as the end product in a sequence of lateral coordinating ‘crangements, These coordinating arrangements ‘encompass liaison roles, task forees, teams, in tegrating managers, integrating departments, and finally matrix.” The matrix structure is delicate system to manage. Experience indicates that firms that succeeded in building multidi- ‘mensional organizations, such as the matrix, are those that begin by building an organization Stead of installing a new structure. In other words, these firms first altered organizational psychology and built a strong organizational culture. Then they reinforced organizational psychology with improvements in organiza tional physiology by building the proper struc- ture.** ‘Advantages Armatrix structure offers many advantages. It allows the efficient use of organi zational resources, Specialists as well as equip- iment can be shared across multiple projects or counties, It also provides a clear and workable mechanism for coordination work across func- tional lines, facilitating project integration. s. An international matrix Vertical information flow should improve in a ‘matrix form since one role of the country man- ager or the project manager is to be a central ‘communication link with top management. In addition, lateral communication is normally very strong due to the necessity of such com ‘munication. The result is improved interaction both vertically and laterally. Frequent contacts between members from different areas expedite

    Vous aimerez peut-être aussi