Chapter 13

The Organization of
International Business
 How Does Organizational
Structure Change Over Time?
The International Structural Stages Model

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 How Can Subunits
Be Integrated?
Regardless of the type of structure, firms need a
mechanism to integrate subunits. There are 2
types mechanism to integrate subunits.

1. Many firms use informal integrating mechanisms

knowledge network: is a network for transmitting
information within an organization that is based not on
formal organization structure.

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 TYPER OF FORMAL CONTROL SYSTEM
2. Formal integrating mechanisms include
a. Personal controls:
is control by personal contact with subordinates. It is
used the head to influence the behavior of their
subordinates.

b. Bureaucratic controls
is control through a system of rules and procedures
that directs actions of subunits. Most important
bureaucratic controls in subunit within multinational
firms are budgets and capital spending rules.

Budget are a set of rules for allocating a firm’s financial

resources.
Capital spending rules require head management to approve
any capital expenditure by a subunits that exceeds a certain
amount.

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TYPER OF FORMAL CONTROL SYSTEM

c. Output controls
Involve setting goals for subunits to achieve and
expressing those goals in terms of relatively objective
performance metrics such as profitability, productivity,
growth, market share and quality. The performance of
subunits managers is then judged by their ability to
achieve the goals.

d. Cultural controls
Exist when employee” buy in to” the norms and value
systems of firm. Employee tend to control their own
behavior, which reduces the need for direct supervision

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 What Is
Organizational Culture?
Organizational culture - the values and norms that
employees are encouraged to follow
Evolves from:
a. founders and important leaders
b. national social culture
c. the history of the enterprise
d. decisions that resulted in high performance
Managers in companies with a “strong” culture
share a relatively consistent set of values and
norms that have a clear impact on the way work is
performed.

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 What Is The Link Between
Strategy And Architecture?
1. Firms pursuing a localization strategy focus on
local responsiveness.
2. Firms pursuing an international strategy create
value by transferring core competencies from
home to foreign subsidiaries.
3. Firms pursuing a global standardization
strategy focus on the realization of location
and experience curve economies.
4. Firms pursuing a transnational strategy focus
on simultaneously attaining location and
experience curve economies, local
responsiveness, and global learning.

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 What Is The Link Between
Strategy And Architecture?
A Synthesis of Strategy, Structure, and Control Systems

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 How Can Firms Implement
Organizational Change?
For a firm to succeed
1. The firm’s strategy must be consistent with the
environment in which the firm operates
2. The firm’s organization architecture must be
consistent with its strategy
To implement organization change
1. Unfreeze the organization through shock therapy
2. Move the organization to a new state through
proactive change in architecture
3. Refreeze the organization in its new state

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