Activity I – How do you feel about the prospect of becoming a manager and having to manage a set of relationships with other companies rather than just managing your own company? Discuss.
Activity II – Many American companies enter China through joint ventures with local firms, but China is succeeding in the United States primarily with a strategy of buying companies outright. What are some factors that might account for this difference?
Chapter
Chapter 6
Designing Organizations for the
International Environment
6
Organization Theory and Design
Thirteenth Edition
Richard L. Daft
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
Learning Objectives
1. Compare and contrast the three primary motivations for
entering the global arena.
2. Explain the three major challenges global design faces.
3. Define globalization, multidomestic, and glocalization
strategies.
4. Describe how different structural design options for
international operations relate to differences in global
strategy.
5. Identify mechanisms for global coordination, knowledge
transfer, and resolving the tension between global uniformity
and local responsiveness.
6. Describe the transnational model of organizing.
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2
Entering The Global Arena
• The world is rapidly developing into a unified
global field
• Emerging economies, such as BRIC (Brazil, Russia,
India, and China), are growing rapidly as
providers of products and services to the U.S. and
other developed nations
• China is currently the largest market for
automobiles and smartphones, and it represents
a huge market for consumer goods, jewelry, and
other luxury goods
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duplicated, or posted to a publicly accessible website, in whole or part.
3
Motivations for Global Expansion
• Economic, technological, and competitive
forces have combined to push companies
from a domestic to a global focus
• Motivations for global expansion:
–Economies of scale
–Economies of scope
–Low-cost production factors
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duplicated, or posted to a publicly accessible website, in whole or part.
4
Number of Companies on the
Global 500 List
2006
2013
2017
United States
170
132
126
China
20
89
111
Japan
70
62
52
Germany
35
29
32
France
38
31
28
Britain
38
26
20
South Korea
12
2
16
Netherlands
14
11
15
Switzerland
12
14
14
Canada
14
9
12
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5
Managing the Stages of International
Development
• The shift from domestic to global typically occurs
through stages of development
– Stage I: Domestic stage
– Stage II: International stage
– Stage III: Multinational stage
– Stage IV: Global stage
• As companies progress through these
development stages, they need cultural
intelligence to find clues to a culture’s shared
understandings and respond to new situations in
culturally appropriate ways
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duplicated, or posted to a publicly accessible website, in whole or part.
6
Four Stages of International Evolution
I. Domestic
II. International III. Multinational IV. Global
Strategic
orientation
Domestically Export-oriented,
Multinational
oriented
multidomestic
Stage of
development
Initial foreign Competitive
involvement positioning
Domestic
Domestic
structure
structure plus
plus export international
department division
Moderate,
Large,
mostly
multidomestic
domestic
Structure
Market
potential
Explosion
Global
Global
Worldwide
Matrix,
geographic
transnational
product structure structure
Very large,
multinational
Whole world
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duplicated, or posted to a publicly accessible website, in whole or part.
7
Global Expansion Through International
Alliances and Acquisitions
• Typical alliances include licensing, joint
ventures, and acquisitions
• Joint ventures are a separate entity of two or
more firms and may be made with either
customers or competitors
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duplicated, or posted to a publicly accessible website, in whole or part.
8
Challenges of Global Design (slide 1 of 2)
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duplicated, or posted to a publicly accessible website, in whole or part.
9
Comparison of Leading Multinationals and
Selected Countries, 2017 (in U.S. dollars)
Company
Revenue*
Country
Annual GDP†
Walmart
485,873 million
Belgium
468,148 million
Volkswagen
276,264 million
Chile
250,008 million
Apple
229,234 million
Portugal
205,269 million
Amazon
117,900 million
Kuwait
110,873 million
Microsoft
89,950 million
Slovakia
89,806 million
Johnson & Johnson
76,450 million
Ethiopia
73,151 million
Telefónica
62,341 million
Luxembourg
58,655 million
Repsol
49,747 million
Lebanon
49,611 million
Facebook
39,300 million
Serbia
38,300 million
Coca-Cola
35,410 million
Bolivia
34,053 million
*This size comparison is
assuming revenues were valued
at the equivalent of GDP.
†Gross domestic product
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duplicated, or posted to a publicly accessible website, in whole or part.
10
Challenges of Global Design (slide 2 of 2)
• Managers face the challenge of achieving the
integration and collaboration that is necessary
to reap the benefits of economies of scale,
economies of scope, and labor and production
cost
• Challenges:
–Increased complexity and differentiation
–Increased need for coordination
–Transfer of knowledge and reverse innovation
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duplicated, or posted to a publicly accessible website, in whole or part.
11
Examples of Reverse Innovation (slide 1 of 2)
Company
Innovation and Application
Groupe
Danone
Built tiny plants in Bangladesh that produce one-hundredth of
the yogurt a typical Danone factory produces and then
discovered that they can operate almost as efficiently as the
firm’s large factories, spurring Danone to adapt the concept to
other markets
Nestlé
Took the Maggi brand dried noodles created as a low-cost meal
for rural Pakistan and India and repositioned it as a budgetfriendly health food in Australia and New Zealand
General
Electric
Created an inexpensive portable electrocardiogram machine
for sale in India, where medical practitioners face power
fluctuations, lack of funding and space for big machines, high
levels of dust, and difficulty replacing parts in expensive
equipment, and now sells it in the United States as well as
other countries around the world
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12
Examples of Reverse Innovation (slide 2 of 2)
Company
Innovation and Application
HewlettPackard
Has a team in India looking for ways to migrate web-interface
applications created for mobile phones in Asia and Africa to
developed markets in the United States and Europe
John
Deere
John Deere India developed a high-quality low-cost tractor for
farmers in India that is now increasingly in demand in the
United States among farmers reeling from the recession and
that will play a big role in Deere’s expansion in Russia
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duplicated, or posted to a publicly accessible website, in whole or part.
13
Strategies for Global Versus Local
Opportunities
• Companies must decide whether to emphasize
lobal standardization versus local responsiveness
• With a globalization strategy, products are
standardized throughout the world
• With a multidomestic (localization) strategy,
competition is handled in each country
independently
• A glocalization strategy seeks to achieve both
global integration and local responsiveness
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14
Model to Fit Organization Structure to
International Advantages
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15
Global Organization Structures
• International division
• Global product structure
• Global geographic division
• Global matrix structure
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duplicated, or posted to a publicly accessible website, in whole or part.
16
Domestic Mixed Structure with
International Division
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duplicated, or posted to a publicly accessible website, in whole or part.
17
Partial Global Product
Structure Used by Eaton Corporation
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duplicated, or posted to a publicly accessible website, in whole or part.
18
Global Geographic Structure of ColgatePalmolive Company
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duplicated, or posted to a publicly accessible website, in whole or part.
19
Global Matrix Structure
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duplicated, or posted to a publicly accessible website, in whole or part.
20
Additional Global Coordination
Mechanisms
• Managers meet global challenges in a variety of
ways, such as:
– Global (transnational) teams
– Headquarters planning
– Expanded coordination roles
• The benefits of collaboration are cost savings,
better decision making, greater revenues, and
increased innovation
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
21
The Transnational
Model of Organization
• The transnational model seeks to achieve global efficiency,
local responsiveness, and global learning simultaneously
• Characteristics:
– Assets and resources are dispersed worldwide into specialized
operations that are linked together through interdependent
relationships
– Structures are flexible and ever-changing
– Strategy and innovations from subsidiary managers become strategy
for the corporation as a whole
– Unification and coordination are achieved primarily through corporate
culture, shared vision and values, and management style
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duplicated, or posted to a publicly accessible website, in whole or part.
22
International Organizational Units and
Interlinkages
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duplicated, or posted to a publicly accessible website, in whole or part.
23
Organizational Design Essentials (slide 1 of 2)
• Most companies today are affected by significant
global forces, many have developed overseas
operations to take advantage of global markets
• Organizations typically evolve through four stages
– Domestic
– International
– Multinational
– Global
• Succeeding on a global scale is not easy, most
international companies grow very large
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duplicated, or posted to a publicly accessible website, in whole or part.
24
Organizational Design Essentials (slide 2 of 2)
• Many firms combine elements of two or more
different structures to meet the dynamic conditions
of the global environment
• Teams can be a good way to help resolve the tension
between the desire for global uniformity and the
desire for local responsiveness
• The transnational model is based on a philosophy of
interdependence, and it represents the ultimate
global design in terms of both organizational
complexity and organizational integration
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duplicated, or posted to a publicly accessible website, in whole or part.
25
Chapter
Chapter 5
Interorganizational
Relationships
5
Organization Theory and Design
Thirteenth Edition
Richard L. Daft
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
Learning Objectives
1. Describe an organizational ecosystem and the changing
role of management in interorganizational relationships.
2. Identify types of resource-dependence relationships and
their power implications.
3. Explain the role of collaborative networks and the
interorganizational shift from adversaries to partners.
4. Describe key concepts of the population ecology
perspective, including organizational form and niche and
the process of change.
5. Compare three mechanisms that lead to institutional
similarity identified by the institutional view of
organizations.
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
2
Organizational Ecosystems
• Interorganizational relationships are the
relatively enduring resource transactions,
flows, and linkages that occur among two or
more organizations
• An organizational ecosystem is a system
formed by the interaction of a community of
organizations and their environment
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duplicated, or posted to a publicly accessible website, in whole or part.
3
Is Competition Dead?
• Organizations have a constant onslaught of
international competitors, changing
technology, and new regulations
• Traditional competition no longer exists, and
organizations both support and depend on
others for success—and perhaps for survival
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
4
An Organizational Ecosystem
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duplicated, or posted to a publicly accessible website, in whole or part.
5
The Changing Role of Management
• In ecosystems, managers must move beyond
traditional responsibilities and build
relationships with a network of partners
• Managers must think about horizontal processes
rather than vertical processes
• The old role of management relied on operation
roles, boundaries, and direct control of
resources
• Collaborative roles are becoming more
important for success
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
6
A Framework for
Interorganizational Relationships
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duplicated, or posted to a publicly accessible website, in whole or part.
7
Resource Dependence
• Organizations minimize their dependence on
other organizations for the supply of resources
and try to influence the environment to make
resources available
• Organizations alter interdependent
relationships through mergers/acquisitions,
joint ventures, strategic alliances, supply
chains, trade associations, and board interlock
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duplicated, or posted to a publicly accessible website, in whole or part.
8
Resource Dependent Relationships
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duplicated, or posted to a publicly accessible website, in whole or part.
9
Collaborative Networks
• Companies join together to become more
competitive and to share scarce resources
• Key reasons for collaboration include sharing risks
when entering new markets, mounting expensive
new programs and reducing costs, and enhancing
the organization’s profile in selected industries or
technologies
• Companies can share risk and cooperation is a
prerequisite for greater innovation, adaptation,
problem solving, and performance
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duplicated, or posted to a publicly accessible website, in whole or part.
10
Changing Characteristics of
Interorganizational Relationships (slide 1 of 2)
Traditional Orientation: Adversarial
Low dependence
• Suspicion, competition, arm’s length
• Detailed performance measures, closely monitored
• Price, efficacy, own profits
• Limited information and feedback
• Legal resolution of conflict
• Minimal involvement and up-front investment, separate
resources
• Short-term contracts
• Contract limiting the relationship
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duplicated, or posted to a publicly accessible website, in whole or part.
11
Changing Characteristics of
Interorganizational Relationships (slide 2 of 2)
New Orientation: Partnership
High dependence
• Trust, addition of value to both sides, high commitment
• Loose performance measures; problems discussed
• Equity, fair dealing, both profit
• Electronic linkages to share key information, problem
feedback, and discussion
• Mechanisms for close coordination; people on site
• Involvement in partner’s product design and production,
shared resources
• Long-term contracts
• Business assistance beyond the contract
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duplicated, or posted to a publicly accessible website, in whole or part.
12
Population Ecology
• The population-ecology perspective focuses on
organizational diversity and adaptation within a
population of organizations
• Large, established organizations often have difficulty
adapting to a rapidly changing environment
• New organizational forms that fit the current
environment emerge, fill a new niche, and over time
take away business from established companies
• The process of change in the population occurs in
three stages: variation, selection, and retention
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duplicated, or posted to a publicly accessible website, in whole or part.
13
Elements in the Population-Ecology
Model of Organizations
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duplicated, or posted to a publicly accessible website, in whole or part.
14
Strategies for Survival
• The struggle for existence is competition
• Generalist strategies are used by
organizations that have a wide niche or
domain, a broad range of products, or services
to a broad market
• Specialist strategies are used by organizations
that have a narrow range of goods or services
that serve a narrow market
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duplicated, or posted to a publicly accessible website, in whole or part.
15
Institutionalism
• The institutional perspective describes how an
organization survives and succeeds through
congruence between the organization and the
expectations of its environment
• An institutional environment is composed of:
– Norms and values of stakeholders
– Structures and processes that please outsiders
• Legitimacy is the perception that an
organization’s actions are desirable, proper, and
appropriate
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duplicated, or posted to a publicly accessible website, in whole or part.
16
Institutional View and
Organizational Design
Technical Dimension
Institutional Dimension
• Day-to-day work
• Technology
• Operating requirements
• Parts of the organization
that are visible to the
outside public
Governed by norms and
rationality of efficiency
Governed by the
expectations from the
external environment
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duplicated, or posted to a publicly accessible website, in whole or part.
17
Institutional Similarity
• Institutional similarity is the emergence of a
common structure and approach among
organizations in the same field
• The core mechanisms for adaptation are
mimetic forces, coercive forces, and normative
forces
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duplicated, or posted to a publicly accessible website, in whole or part.
18
Three Mechanisms for Institutional
Adaptation
Mimetic
Coercive
Normative
Dependence
Duty, obligation
Events:
Innovation
visibility
Political―laws, rules,
sanctions
Professionalism—
certification,
accreditation
Social basis:
Culturally
supported
Legal
Moral
Example:
Reengineering,
benchmarking
Pollution controls,
school
regulations
Accounting standards,
consultant
training
Reason to
Uncertainty
become similar:
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duplicated, or posted to a publicly accessible website, in whole or part.
19
Organizational Design Essentials (slide 1 of 2)
• Organizations may compete and collaborate at the
same time, depending on the location and issue.
• Four perspectives that explain relationships among
organizations are resource dependence theory,
collaborative networks, population ecology, and
institutionalism.
• Power relationships among organizations are always
changing. Some organizations increase their power
while others become less influential.
• The new partnership mindset emphasizes trust, fair
dealing, and achieving profits for all parties in a
relationship.
Daft, Organization Theory and Design, 13e. © 2021 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or part.
20
Organizational Design Essentials (slide 2 of 2)
• Through the process of variation, selection, and
retention, some organizations will survive and grow
while others perish.
• A company may adopt a generalist or specialist strategy
to survive in the population of organizations.
• The need for legitimacy means that organizations will
adopt structures and activities that are perceived by
external stakeholders as valid, proper, and up to date.
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duplicated, or posted to a publicly accessible website, in whole or part.
21
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