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MNCs and Organizational Structure. From: Amit : 02 Dhruv :45 Mohit : 46 Ankur : 52 Deepankar : 54. Defining Organizational Structure. organizational structure - the formal framework by which job tasks are divided, grouped and coordinated. - PowerPoint PPT Presentation
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From:Amit : 02Dhruv :45Mohit : 46Ankur : 52Deepankar : 54
MNCs and Organizational MNCs and Organizational StructureStructure
Defining Organizational StructureDefining Organizational Structure
organizational structure - the formal framework by which job tasks are divided,
grouped and coordinated.
organizational structural designing - process of developing or changing an organization’s structure.
There is no permanent organization chart for the world. . . . It is of supreme importance to be ready at all times to take advantage of new opportunities.
- Robert C. Goizueta, (Former) Chairman and Ceo, Coca-Cola Company
Internationalization is the process by which a firm gradually changes in response to international competition, domestic market saturation, and the desire for expansion, new markets, and diversification.
Structural Evolution occurs when managers redesign the organizational structure to optimize the strategy’s changes to work, making changes in the firm’s tasks and relationships and designating authority, responsibility, lines of communication, geographic dispersal of units and so forth
Evolution and Change in MNC
Six key elements : Six key elements :
Work Specialization – the degree to which tasks in an organization are divided into separate jobs • individuals specialize in doing part of an activity rather than the entire activity – too much specialization has created human diseconomies – an important organizing mechanism, though not
source of ever-increasing productivity
Departmentalization – the basis by which jobs are grouped together • functional - groups jobs by functions performed • product - groups jobs by product line • geographical - groups jobs on the basis of territory or geography • process - groups jobs on the basis of product or customer flow • customer - groups jobs on the basis of
common customers
Span of Control
– number of employees that a manager can efficiently and effectively manage – determines the number of levels and managers in an organization – the wider the span, the more efficient the organization – appropriate span influenced by: • the skills and abilities of employees • the complexity of tasks performed • availability of standardized procedures • sophistication of organization’s information system
Centralization – the degree to which decision making is concentrated at a single point in the organization • top-level managers make decisions with little input from subordinates in a centralized organizationDecentralization – the degree to which decisions are made by
lower level employees – distinct trend toward decentralized decision making
Formalization
– the degree to which jobs within the organization are standardized • standardization - removes the need for employees to consider alternatives
– extent to which employee behavior is guided by rules and procedures
• employee allowed minimal discretion in highly formalized jobs
– explicit job descriptions
– clearly defined procedures
ORGANISATIONALORGANISATIONALSTRUCTURESSTRUCTURES
International Division StructureInternational Division Structure
Personnel Production Marketing Finance
Chief Executive Officer
Paint
DomesticDivision
DomesticDivision
Tools
InternationalDivision
DomesticDivisionFurniture
DomesticDivision
Hardware
Japan Australia Italy
OfficeOperations
Marketing GovernmentRelations
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Matrix Organisational StructureMatrix Organisational Structure
Controller Manufacturing VP
Marketing VP
PRESIDENT
Director of Product Design
Procurement Manager
Product Manager A
Product Manager B
Product Manager C
Product Manager D
FUNCTIONAL STRUCTUREFUNCTIONAL STRUCTURE
PRESIDENT
VICE PRESIDENTMARKETING
VICEPRESIDENT
ENGG.
VICEPRESIDENT
FINANCE
VICEPRESIDENT
MANUF.
VICEPRESIDENTPERSONNEL
VICEPRESIDENTLEGAL AFF
MARKETINGRESEARCH
SALES RECORDS SHIPPING & RECIEVING
PRODUCTION QUALTIYASSURANCE
PLANT1 PLANT2 PLANT3
SALESFORCE
RECORDCLERKS
RESEARCH GROUPS
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Strategic Business UnitStrategic Business Unit The idea was developed by Mckinsey & Co. (Consulting Firm) & General Electric in 1971. Separate operating entities within an organization. After defining mission, a company establishes SBU’s which is self contained division, product line or product department within an organization.
To be identified an SBU, an entity should, Be a separate identifiable business Have a distinct mission Have its own competitors Have its own executive group with profit responsibility
General Electric & its SBU’s are electrical motors, Major appliances, Jet Engines Lighting Equipments and Commercial Credit and
Broadcasting.14
Classification of OrganizationsClassification of Organizations
Sumantra Ghoshal&
Christopher A. Bartlett
The Study….The Study….3 countries3 industries9 companies with worldwide interestsMode : Both personal interviews and survey
questionnaires of key personnel.Aim : To develop a typology of organizations
operating in the international business environment.
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Based on their results, these scholars identified four forms of organizations used to manage international businesses.
They labeled these the multinational, global, international, & transnational corporations.
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Multinational Enterprise Global Enterprise International
Enterprise
Strategiccompetency Responsiveness Efficiency Transfer of learning
Structures
Loose federations ofenterprises; National subsidiariessolve all operativetasks and somestrategical.Decentralizedfederation
National Subsidiariesprimarily seen asdistribution centers;all strategic andMany operativeDecisions centralizedTightly centralized hub;
Somewhere inbetween multinationaland global enterprises;some strategic areascentralized, some DecentralizedCoordinated federation
The story so far……….
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…….and the problem.and the problem Multinational enterprise :
Differentiation as primary way to enhance performance.
Global enterprise :Scale and resulting cost leadership are the key sources of competitive advantage.
International enterprises :Innovation, Crated at HQ to reduce cost or increases revenue or both.
Each approach is partially true and has its own merits but none represents whole truth, the ideal-type thus created, they dubbed the transnational enterprisetransnational enterprise.
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Attributes of Transnational Attributes of Transnational Enterprise.Enterprise.
Selective decision, complex configuration of assets and capabilities that
are distributed, yet specialized. Seeks efficiency not for its own but…, It acknowledges the importance of local
responsiveness but…, Innovations are regarded as an outcome of a larger
process of organization learning that encompasses every member of the company.
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This thesis is thus consistent with the view that a
new, stateless corporate identity with a network of
systems and activities in different parts of the
world, deriving value from whichever location
provides it at the lowest cost, is emerging. (cf. Hedlund
|1986~; Perlmutter and Trist |1986~; Prahalad and Doz |1987~).
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CASE STUDIESCASE STUDIES
TATA GROUP (INDIAN CASE)CATERPILLAR (FOREIGN CASE)
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INDIAN BUSINESS HOUSES INDIAN BUSINESS HOUSES TATA GROUPTATA GROUP
Group Overview
India’s largest business house More than 85 companies 39 listed 8% of India’s market capitalization 2.6 Million shareholders 2,70,000 employees Turnover Rs 343 billion (1996-1997)
Metals Automobiles Energy Engineering Chemicals Pharmaceuticals IT and Communication Exports Finance
INDIAN BUSINESS HOUSES INDIAN BUSINESS HOUSES TATA GROUPTATA GROUP
Tata Heritage Jamsetji Tata
– Started textile mill in 1877– Inspired steel and power industry– Technical education and philanthropy
JRD Tata– Pioneered civil aviation– Funded Hom Bhabha’s nuclear programme– Guided the Tata group for over half a century
Ratan Tata– Present Chairman since 1991
HOLDING COMPANIESHOLDING COMPANIES
Tata Sons– Founded by Jamsetji Tata– Promoted many of the present Tata companies– 63% held by Tata philanthropic trusts
Tata Industries– 100% subsidiary of Tata Sons founded in 1945 – Managing agency till 1970– Promoted new Tata companies in technology based businesses
Cross holdings among other Tata companies
INDIAN BUSINESS HOUSES INDIAN BUSINESS HOUSES TATA GROUPTATA GROUP
Restructuring• Prompted by post 1991 changing environment• Need to identify and focus on core businesses• Resistance from satraps
– Russi Mody, Darbari Seth, Ajit Kerkar• Shrink number of companies
– From over 85 to about 30• Shrink number of core businesses
– From about 25 to around 10 or 12• Mergers and divestments• McKinsey hired as a consultants
RESTRUCTURING STRATEGIESRESTRUCTURING STRATEGIES
Keep and grow– Power, watches, metals, chemicals, telecom, hospitality, financial
services, infotech, emerging services, infrastructure, automobiles Forge strategic tie ups
– Tea and beverages, retailing Remain only as strategic investors
– Luxury cars, infotech, printing, cosmetics Sell
– Refrigeration, paints, textiles, trading, electronics, oil drilling, petrochemicals, pharma, specialty chemicals
Accelerating product introductions
Rapidly implementing changes
Improving time-to-market
Tightening Regulatory requirements
Efficiently transferring processes and best practices
More innovations
AUTOMOTIVE CHALLENGESAUTOMOTIVE CHALLENGES
To meet these challenges, the TATA adjust their product development as follows:– Reducing the period of development– Optimizing the in-house capabilities– Modularizing the product– Increasing the number of products/ variants– Improving product performance i.e. Durability, NVH, Safety, and Ride
quality
Some of the steps connected to these strategies are– Introduction of new working methods
(Simultaneous Engineering, Concurrent Engineering, use of NPI process)– Usage of highly sophisticated functions of CAD systems (Parametric, Feature based Design, Digital Mock Up)– Early concept evaluation
(Computation and Simulation)
STRATEGIES ADOPTEDSTRATEGIES ADOPTED
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CATERPILLAR Peoria, Illinois Highly Centralized before 1970 Blessings from Home!! Japanese and European Rivals – Hands-on Decisions
Traditional Structure
Engineering Manufacturing Finance Marketing Accounting
Huge Loses in International Market Share1985s
1/3(1970) 1/5(1988)Market GapMarket Growth (By 1990)
Change in Stance
International Division
Marketing Division
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1990 - 1995 - 2000 Caterpillar Financial Services, Tennessee
Capital Asset Underwriting of Global Business
Organization Redefined (….2000)
2nd Change in Stance
Functional Divisions
Essential Administrative Centers for Accounting, Legal and Regulatory Affairs and various Executive Support Systems
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13 Profit Centers 4 Service Centers
16 Integrated Profit Centers 5 Global Service Centers
1997 1997
Wheel Loaders and Excavators Division(WLED)• Tractor Dept + Heavy Equipment • Further branched acc. to customer groups such as mining(full P n L responsibility)
Functional Divisions
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CATERPILLAR
Gains Focus on Design, Manu., Procurement, Distribution, Service Strengthened Foreign Subsidiaries and Dealerships Customers contacts under local control Do away with International Division
Customer
Alliance Office/Dealership
Financing Available (through
Company’s Subsidiary)
Cross Border Customer
Places order to Illinois
Shipping
Financing through US Institutions
NEW WAY OLD WAY
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Each division – CFT Also part of Global Network PROPRIETERY Caterpillar Parts or Free to OUTSOURCE
Profits more, up by 20%, 1996 24% growth in net income,1997 Heavy investments for repositioning International Division with restructured subsidiaries, Foreign Sales improved considerably R&D across border to supplement Illinois R&D center
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“ BORDERLESS ORGANIZATION”
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THANKS
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