Assignment IAH6-The Organization of International Business

Chap 14: The organization of International Business
Sharing economy is an economic model, define as a peer-to-peer based activity of acquiring, providing, or sharing access
to products and services facilitated among providers and customers via a community based on-line platform.
Organizational Architecture refers to the totality of a firm’s organization, including formal organizational structure,
control systems and incentives, organizational culture, processes, and people.
Organizational structure refers to three things:
+The formal division of the organization into subunits;
+The location of decision-making responsibilities within that structure;
+The establishment of integrating mechanisms to coordinate the activities of subunits, including cross-functional and
pan-regional teams.
Control systems refer to the metrics used to measure the performance of subunits and to make judgments about how
well managers are running those subunits.
Incentives are the devices used to reward appropriate managerial behavior. Incentives are very closely tied to
performance metrics.
Processes are the manner in which decisions are made and work is performed within the organization. Processes are
distinct from the location of decision-making responsibilities within an organization, although both involve decisions.
Organizational culture refers to the norms and value systems that are shared among the employees of an organization.
Organizational Structure: For both traditional organizations and those companies that operate in the sharing economy,
organizational structure can be thought of in terms of three dimensions:
(1) vertical differentiation, which refers to the location of decision-making responsibilities within a structure;
(2) horizontal differentiation, which refers to the formal division of the organization into subunits;
(3) integrating mechanisms, which are mechanisms for coordinating subunits. The integrating mechanisms are especially
critical for the effective operations of a company in the peer-to-peer sharing economy.
Arguments for Centralization: There are four main arguments for centralization.
+Centralization can facilitate coordination and integration of operations.
+Centralization can help ensure that decisions are consistent with organizational objectives.
+Centralization can give top-level managers the means to bring about needed major organizational changes.
+Centralization can avoid the duplication of activities that occurs when similar activities are carried on by various
subunits within the organization.
Arguments for Decentralization: There are five main arguments for decentralization.
+Decentralization gives top management time to focus on critical issues by delegating more routine issues to lower-level
managers.
+Motivational research favors decentralization. Behavioral scientists have long argued that people are willing to give
more to their jobs when they have a greater degree of individual freedom and control over their work.
+Decentralization permits greater flexibility—more rapid response to competitive markets and environmental changes—
because decisions do not have to be “referred up the hierarchy” unless they are exceptional in nature.
+Decentralization can result in better decisions. In a decentralized structure, managers who are located closer to
the customers—or at least closer to where the products and services are developed—often have a better grasp of what
decisions need to be made than top-level executives (although they clearly have a better picture of the overall
company).
+Decentralization can increase control. Decentralization can be used to establish relatively autonomous, self-contained
subunits within an organization. Subunit managers can then be held accountable for subunit performance. The more
responsibility subunit managers have for decisions that impact subunit performance, the fewer excuses they have for
poor performance, the more committed to success they are likely to be, and the more value they feel that they offer the
organization.
TYPES OF CONTROL SYSTEMS
Four main types of control systems are used in multinational firms: personal controls, bureaucratic controls, output
controls, and cultural controls. In many firms, all four are used to some degree, but their emphasis varies with the
strategy of the firm.
Synthesis: Strategy and Architecture
LOCALIZATION STRATEGY: Firms pursuing a localization strategy focus on local responsiveness. Firms pursuing a
localization strategy do not have a high need for integrating mechanisms, either formal or informal, to knit together
different national operations.
INTERNATIONAL STRATEGY: Firms pursuing an international strategy attempt to create value by transferring core
competencies from home to foreign subsidiaries.
GLOBAL STANDARDIZATION STRATEGY: Firms pursuing a global standardization strategy focus on the realization of
location and experience curve economies.
TRANSNATIONAL STRATEGY: Firms pursuing a transnational strategy focus on the simultaneous attainment of location
and experience curve economies, local responsiveness, and global learning (the multidirectional transfer of core
competencies or skills).
IMPLEMENTING ORGANIZATIONAL CHANGE
The basic principles for successful organizational change can be summarized as follows:
(1) unfreeze the organization through shock therapy
(2) move the organization to a new state through proactive change in the architecture
(3) refreeze the organization in its new state

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Chap 14: The organization of International Business

Organizational structure refers to three things:

+The formal division of the organization into subunits;

+The location of decision-making responsibilities within that structure;

+Centralization can facilitate coordination and integration of operations.

TYPES OF CONTROL SYSTEMS

Synthesis: Strategy and Architecture

IMPLEMENTING ORGANIZATIONAL CHANGE

(1) unfreeze the organization through shock therapy

(3) refreeze the organization in its new state

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