Introduction

Organizational challenges abound in this era of globally dispersed resources and operations. International managers must create structures, systems, and a culture that will effectively implement their company's strategies around the world. Formulating the appropriate strategy is merely the first step of a long process that includes crafting an organization that will work to implement that strategy.

Change: The Critical Factor

How an MNE organizes its operations is one of the most provocative issues in international business. Our ideas of the organization of international business are undergoing the sort of changes that require fundamentally reinterpreting many principles and practices. In this section you will learn about the different approaches used in organizational change.

Organization Structure

Organization structure is the formal arrangement of roles, responsibilities, and relationships within an organization and is a powerful tool with which to implement strategy. A company's choice of structure depends on many factors, including the configuration of a company's value chain in terms of the location and type of foreign facilities, as well as the impact of international operations on total corporate performance. Two central issues in organization structure are vertical and horizontal differentiation, which will be discussed in this section. Other contemporary structures will also be discussed in this section.

PointCounterpoint: The Superior Organization: Hierarchy or Hyperarchy?

Point:Proponents of hierarchy argue that this format is the enduring foundation for how managers across the world determine the optimal degree of work specialization. First developed in the 1920s, hierarchical structures have provided a powerful framework that has guided the international expansions of thousands of companies. The absolute clarity of hierarchy enables companies to develop sophisticated planning and control systems. Supporters of a hierarchy system of organization recognize that technological and other changes require some adaptation in structure, but not the discarding of the basic principles.

Counterpoint:In contrast, some argue that a new organizational form helps companies identify and exploit opportunities ahead of their competitors. Often, hierarchy organizes information flows in ways that work against integrating all the pieces. Hyperarchy can unleash the intrinsic motivation of employees and increase innovation. The hyperarchy structure also provides a format that remedies the intrinsic limitations of the hierarchy as well as positions a company to better deal with the emerging environment of globalization. In the end, the main purpose of organization is to allow the company to implement its strategy. Changes in the environment have ushered in a need for organizational change.

Coordination and Control Systems

Systems are the framework of processes and procedures used to ensure that an organization can fulfill all tasks required to achieve its objectives. MNEs use several coordination and control tools to manage the strategic performance of their value chains. Coordination systems link the various activities of a company to counteract the tendency of different groups of managers and employees to develop different concerns and orientations based on their location and immediate responsibilities. In addition, every MNE must regulate what its employees can and cannot do in order to avoid spinning out of control. Control systems must ensure that people are doing what they are supposed to do and not doing what they are not supposed to do. In this section you will learn about the different approaches to coordination and the control methods utilized.

Organization Culture

Organization culture is a system of shared values about what is important and beliefs about how the world works. In this section you will learn about the importance of the culture in an organization, and its challenges and pitfalls.

Looking to the Future: The Role and Rise of Corporate Universities

Many companies believe that managers must develop and monitor their shared values. This has led to a variety of new approaches, most notably the corporate university. Corporate universities are growing by leaps and bounds in the United States, thriving in Europe, and developing in Asia. Operationally, some are centrally located at headquarters, while others operate as "virtual universities." The goal of coupling executive learning to the company's strategy drives the recent and projected growth of the corporate university model. Now a growing mandate for corporate universities is integrating diverse workforces and developing future leaders for the company. Whether real or virtual, the growing power of the corporate university as an agent of ideas may ultimately usher in a new crucible of company strategy.

Starting here is the question

Closing Case Study: Avon Calls on Foreign Markets

Founded in 1886, Avon is one of the world's largest manufacturers and marketers of beauty-related products. This case study describes Avon's push into foreign markets via a combination of nationally responsive and globally standardized marketing strategies. The company has its own sales operations in sixty-six countries and territories, and it distributes to another fourty-four. More than 75 percent of its sales come from outside the US Avon seeks to develop a global image of being a company that supports women and their needs. It relies heavily on independent salespersons who sell directly to individual customers. Avon emphasizes standardized products that carry its global brand, but allows product lines and brand names to vary by country if needed. In addition, each country operation sets its own prices to reflect local market conditions and strategic objectives. Whenever possible, Avon transfers organizational learning and successful practices from one country to another.

QUESTIONS:

The chapter describes different marketing orientations. Discuss the applicability of each to Avon's international operations.

What are the major competitive advantages that Avon has? How easily might other companies duplicate these advantages?

Avon does not sell within the United States in retail establishments (with the exception of kiosks handled by some of its reps). What are the pros and cons of distributing this way?