CHAPTER 2: Creating the international organization: Strategy and structure

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CHAPTER 2 Creating the international
organization Strategy and structure
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Learning objectives (chapter 2)

• Describe the evolution of the multinational
  enterprise and explain the global organizational
  structures used by MNEs
• Describe the choices for entry into international
  business
• Explain the IHR implications of cross-border
  acquisitions, IJVs, and alliances
• Describe the record of success and failure of
  cross-border acquisitions and joint ventures
• Design a proper due diligence program in
  cross-border acquisitions and partnerships and
  explain its importance
• Describe the HR issues in managing cross-border
  acquisitions and partnerships

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Overview chapter 2

• Global organizational structure
• Managing the cross-border acquisition and joint
  venture/partnership
• Organizational structure and design
• IHRM and global organizational design
• Research on structure and performance of the MNE
• The global learning organization The tie that
  binds

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Complexities of international business

• Number of countries involved
• Protection of foreign investments
• Political uncertainty
• Competitors
• Operational differences abroad

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Global competitive advantage

• Adapt to local market differences
• Exploit global economies of scale
• Exploit economies of global scope
• Tap into the best locations for activities and
  resources
• Maximize knowledge and experience transfer
  between locations.

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Global organizational structure
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Evolution of the MNE

• Stages of internationalization
• Eight strategies
• Internationalization through export
• International division or global product division
• Multi-country/multi-domestic strategy
• Regionalization
• The global firm
• The transnational firm
• The born global firm
• The globally integrated enterprise

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1. Export

• Little impact on HR and the organization of the
  firm

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2. International division or global product
division

• International responsibilities of the HR
  department can expand dramatically and become
  much more complex

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3. Multi-country/multi-domestic strategy

• Coordinate HRM activities and practices of the
  many subsidiaries
• International assignees from the home office will
  be relocated

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4. Regionalization

• Manage HR from a regional headquarters

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5. The global firm

• The world is one market
• Dominant HQs
• Strong organizational culture
• Global organizational branding

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6. The transnational firm

• Final stage of globalization (Bartlett Ghoshal)
• Balance of global integration, local
  responsiveness and knowledge sharing

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7. The born global firm

• Operate instantly around the globe
• IT focus

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8. The globally integrated enterprise

• Integrated approach to deliver value to employees
  and customers worldwide
• Talent and expertise within the MNE flow to where
  it creates most value

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Choice of method of entry into international
business (IB)

• Licensing and sub-contracting
• Outsourcing
• Off shoring
• Wholly owned subsidiary
• Mergers and acquisitions (MAs)
• International joint ventures (IJVs)
• Strategic alliances, partnerships (e.g. research)
  and consortia

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Maquiladora

• Unique form of international partnership between
  the U. S. and Mexico
• Special form of foreign subsidiary with special
  characteristics favorable to the foreign parents
• Take advantage of low-cost Mexican labor

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Managing the cross-border acquisition joint
venture/partnership

• Record of success and failure
• Higher rate of failure than success
• HR implications and considerations
• Due diligence
• Process of integration
• Process of acculturation

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Organizational structure and design
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Designing the organizational structure of global
firms

• Integrates activities
• Coordinates policies and practices
• Organizational components
• Additional factors

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Coordination mechanisms

• Balance common policies with local approaches
• Reduced size of business units
• Informal linkages
• Global networks

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IHRM and global organizational design
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IHRM and the management of global organization
structure

• Shared services model
• Linkages
• Networks

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Research on structure and performance of the MNE
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Empirical shortcomings

• Manufacturing industry slant
• More emphasis placed on strategy issues rather
  than management and organization issues
• Failure to capture temporal context

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The global learning organization The tie that
binds
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Knowledge is power

• Intellectual and social capital
• Knowledge sharing
• Facilitate learning on a global basis
• Utilize full skill sets

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Key terms

• Export
• International division or global product division
• Multi-country and multi-domestic organizations
• Regionalization
• The global firm
• The transnational firm
• The born-global firm
• The globally-integrated enterprise
• Licensing and sub-contracting
• Outsourcing
• Off-shoring

• Wholly-owned subsidiary
• Global mergers and acquisitions
• International joint ventures
• International alliances, partnerships, and
  consortia
• Maquiladoras
• Cross-border/dispersed/virtual teams
• Informal global networks
• Global learning organization
• Global integration
• Local responsiveness
• Due diligence