Introduction To Organizational Structure & Design

VIDEO - ORGANIZATION DESIGN

[Video] ORGANIZATION DESIGN

Part 1 : Traditional Organization Design

Part 2 : Contemporary Organization Design

Mind Mapping : Form of Global Organization & Design

Posted By : Lourdes Domy (JG/5986/12)

POP QUIZ

THE NATURE OF INTERNATIONAL ORGANIZATION DESIGN

Organization design ( sometimes called organization structure ) is the overall pattern of structural components and configuration used to manage the total organization.

To see how this begins to happen, we will start by considering a domestic firm that has no international sales.

https://drive.google.com/a/ikmkk.edu.my/file/d/0BztUb3yAQDOEZTI4eW1mN3dzUnc/edit?usp=sharing

Global Organization Designs : Global Product Design

There are 5 most common forms of global organization design namely product, area,functional,customer and matrix. As for this discussion i will explained on Global Product Design.

Global Product Design

• It was the common form adopted by most MNC today.
• It assign worldwide responsibility for specific products or product group to separate operating division within a firm.
• This design work best when the firm has diverse product lines.
• If the product are unrelated, the firm takes on M-form design - Multidivisional - the various divisions of the firm usually self-contained operations with interrelated activities.
• If the product are unrelated, the firm takes on H-form design - Holding - various unrelated business function with autonomy

Advantages :

• Manager gain expertise in all aspects of the product
• Facilitates efficiencies in production because manager are free to manufacture the product
• Allow manager to coordinate production at their various facilities
• Manager able to incorporate new technologies into their product and respond quickly to technological changes
• Facilitates geocentric corporate philosophies - to develop greater international skills internally

Disadvantages  :

• Encourage expensive duplication because each product need its own functional area skills such as marketing and finance
• Coordination and corporate learning across product groups also becomes more difficult.

THE CONTROL FUNCTION IN INTERNATIONAL BUSINESS

Another important role of organization design is to enable the firm to more effectively manage its control function. Control is the process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals. Control is conceptually similar to a thermostat. A thermostat monitors room temperature and then turns on the cooling or heating system when the actual temperature moves too far from the ideal temperature. When the desired room temperature is reached, the system is turned off until it is needed again.

There are three main levels at which control can be implemented and managed in an international business. These three key levels of control are the strategic, organizational, and operations levels. Although each is important on its own merits, the three levels also are important collectively as an organizing framework for managers to use in approaching international control from a comprehensive and integrated perspective.

Strategic Control

Strategic control is intended to monitor both how well an international business formulates strategy and how well it goes about implementing that strategy. Strategic control thus focuses on how well the firm defines and maintains its desired strategic alignment with the firm’s environment and how effectively the firm is setting and achieving its strategic goals. For example, a few years ago Germany’s largest automobile manufacturer, Daimler-Benz, bought Chrysler, the third largest automaker in the United States. At the time this decision seemed very logical. For instance, managers believed that the firms could learn from each other, that their existing product lines and organizational strengths complemented one another, and that the combined firm would be able to compete more effectively in global markets with other behemoths such as General motors, Ford, and Toyota. As it turned out, though, this ended up being a poor strategic decision. The anticipated synergies and efficiencies could never be achieved and so Chrysler was subsequently sold to a group of private investors.

RELATED ISSUES IN GLOBAL ORGANIZATION DESIGN

In addition to the fundamental issues of organization design we have addressed, MNCs also face a number of other related organizational issues that must be carefully managed.

 

Centralization Versus Decentralization

When designing its organization, an MNC must make a particulary critical decision that determines the level of autonomy, power, and control it wants to grant its subsidiaries. Suppose it chooses to decentralize decision making by allowing individual subsidiaries great discretion over strategy, finance, production, and marketing decisions, thereby letting those decisions be made by manager closest to the market. these managers may then focus only on the subsidiary's needs rather than on the firm's overall needs. An MNC can remedy this deficiency by tightly centralizing decision making authority at corporate headquarters.  Decisions made by the corporate staff can then take into account the firm's overall needs.  However, these decisions often hinder the ability of subsidiary manager to quickly and effectively respond to changes in their local market conditions.  Because both centralization and decentralization offer attractive benefit to the MNC, most firms constantly tinker with a blend of the two to achieve the best outcome in terms of overall strategy.

Numerous U.S businesses have stumbled after setting uo  shop in China because they try to maintain centralized control from abroad. This has been especially problematic in industries where responsiveness to market conditions is critical.  Both Google and eBay, for instance,  have struggled in China because small local rivals have been more nimble in responding to customer preferences. Amazon, meanwhile, recently acquired a major online Chines retailer CallednJoyo.com.  Amazon founder and CEO Jeff Bezos has vowed to not replicate the mistakes of other firms, but instead that the local Joyo.com manager will have a great deal of discretion and control over how they respond to peculiarities in the Chinese market.