Processes, organizational Culture & People

Organization of international business

Nukhba Jurri 13024854-098Organization ArchitectureMaryam Nazir 13024854-073Types of structuresSonia Noreen 13024854-084Control System And IncentiveMarium Shabbir 13024854-083Processes, organizational Culture & PeopleGroup Members

If we talk about the Organization of international business then we refers to organization architecture Now lets define organization architecture : The totality of a firms organization, including formal organization structure, control systems and incentives, processes, organizational culture, and people

To be the most profitable, firms need to be sure: the different elements of the organizational architecture are internally consistent.the organizational architecture matches or fits the strategy of the firm.the strategy and architecture of the firm are consistent with each other, and consistent with competitive conditions.

Organization Architecture

Organization Architecture

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1. Organization structureDepartmentDivision Region make organization The location of decision-making responsibilities2. Control system & Incentives Measure performance of subunit Judgments about how well managers are running those subunits.Incentives are the devices used to reward appropriate managerial behavior 3.Process, Organization culture & PeopleProcesses are the manner in which decisions are made & work performed.Refers to the norms and value shared among the employees of organization.Organization architecture also made by people.

Interrelationship:Structure ProcessesIncentive & controlCulture

All these concentrate on the people to make organization performance well.

Organization structure Department, division ,region make organization the location of decision-making responsibilities

Further Organization structure have 3 dimension

Integrating MechanismVertical DifferentiationHorizontal Differentiation

Integrating Mechanism It can be define as coordination between subunits of organization. ( lowest co-ordination localization strategy) ( Highest co-ordination Transnational strategy)

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Formal :Direct contact.Liasion Roles.TeamsMatrix structuresInformal Knowledge networkAll information collected in one place.Types of Integration mechanism :

Continue. (2) Vertical DifferentiationIt enables the managers to locate the location of decision making.It has two type: Centralized Decision Making The decision making is done by only top management

Advantages: Facilitates coordinationEnsure decisions consistent with organizations objectivesGives top-level managers the means to bring about organizational changeAvoids duplication of activities

Continue.Decentralized Decision MakingDecision making power is distributed in different levels of managementAdvantages:Relieves the burden of centralized decision-makingMotivate individualsPermits greater flexibilityCan result in better decisionscan increase controlIt can be worthwhile to centralize some decisions and decentralize others

(3) Horizontal Differentiation: Horizontal differentiation is concerned with how the firm decides to divide itself into sub-unitsIt describes the division of organization

The decision is usually based on: functiontype of businessgeographical area

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TYPEs of structures:

Functional structureProduct divisional structureInternational division structureWorld Wide Product Division StructureWorld Wide Area Structure Global Matrix Structure

1. Functional structure Afunctionalorganization is a type of organizationalstructurein which the organization is divided into smaller groups based on specialize functionalareas

One product One head quarter One countrySmall firm

2. Product Divisional structure Thedivisional structureis a type of organizational structurethat groups each organizational function into a division.

More then one product .One headquarterLocal country Small & Large firm

3. International divisional structure When firms internationally expand production is known as international divisional structure.

More then product ( local production)Head quarter (domestic and international)Each product with own functional structure.Sometimes conflicts raise .

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4. World wide product division structureHighly diversified firm adapt this structure.More then one products Local and international production.Every subunits has its own functional structure.

Advantages:Value creation coordination with other units.Realized cost economy and location economies.Transfer core competencies.Not locally responsive.

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Low diversification and a domestic structure based on functionDivides geographic areasDecentralizes operational authoritylocal responsiveness Consistent with a localization strategy

5. Worldwide area structure:

ContinueHead quarter Division( country)1Division( country)2Division( country)3Product AProduct BProduct C

6. Global matrix structure Amatrixorganizationalstructureis a companystructurein which the reporting relationships are set up as a grid, ormatrix,. Employees have dual reporting relationships generally to both a functional manager and a product manager.

Advantages:Remove limitation of World wide area structure & worlds wide product structure.Differentiate product line and area vise Disadvantages:Result in conflict between areas and product divisionsFinger pointing.

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The International Structural Stages Model

Control System And IncentiveA firms leaders major task to ensure that the action of subunits are consistent with the firms overall strategy and financial objectivesThis is achieved through control and incentive systemEvaluate the performance of Organization and how effect on the control system

What is control?Definition:Control helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in a desired manner.

Types of Control SystemThere are four main type of control system:Personal Control:Direct control the subordinatesMostly use in the small firmsBureaucratic Control:This system through set the rules regulation that directs the action of subunitsThe most important bureaucratic control are budget and capital sending rules

Continue.3.Output Control:Setting goals for subunits and achieve them.Output more receive then control system more goodControl system is achieved by comparing actual performance against targets and intervening selectively to take corrective action 4.Cultural Controls:Norms , values, custom play major role for increase the performanceFirms with strong culture have less need for other forms of control

Incentive systemIncentive are the devices used to reward behaviorTie performance for output control => rewardIncentives depend on employer and nature of workCo-operation and co-ordination increase between manger and subordinatesDifferent nation and different culture use different devices

Concept of Performance Of AmbiguityThe key of understanding the relationship between international strategy, control systems and incentive systems is performance ambiguity which exist that subunits poor performance are not clear.

Performance ambiguity is mostly subunits performance depend on the other subunits performance

Processes: Processes can be define as the manner in which decisions are made and work is performedSometimes processes used across national boundaries as well as organizational boundaries.Can be develop anywhere within a firms global operational network.Integrating mechanisms can help firms leverage processes Formal => Exchange Ideas Helps in Leverage processes.Informal => Efficient working

Processes, organizational Culture & People

Culture refers to a systems of values and norms that are shared among peopleOrganizations have their own values and norms that employees are encouraged to follow.Organizational culture tends to change very slowly.

Organizational Culture

Organizational culture comes from:

Founders and important leaders of Organization.National social culture.The history of organization.Decisions made in past.

Creating Organizational Culture

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Organizational culture can be maintained through: Hiring on merit base Promotional practicesReward strategiesSocialization processesFormal ways (training programs)Informal ways(friendly Advices)Communication strategies

Maintaining Organizational Culture

When organization moves into international market it faces hurdles like different language, norms and beliefs, tastes and preferences etc. If the organization does not align itself with the prevailing culture then it cannot attain benefits of expansion.Strong culture:Not always goodMay not lead to high performanceCould be beneficial at one point, but not at another Adaptive cultures Companies with adaptive cultures have the highest performance.Flexible to decision making. Organizational Culture In The International Business

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The interrelationship between the four basic strategies

LocalizationInternational Global standardization +organization architecture Transnational

Architecture & Strategy

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Combination of Strategy, Structure, and Control Systems

Strategy And ArchitectureStrategies InterdependencyPerformance Ambiguity ControlLocalizationStrategy(locally responsive Pressure high) Low [local production & sale in international]Low [easily identify factors of error] Low [subunit manager understand better then headquarter management]International Strategy(Both pressure low)Medium [ subunit management tell the needs and demand of that area]Medium [nor easy not difficult to identify factors of error cause of low pressures]Medium [headquarter mgt & subunit mgt both take decisions]Global Standard Strategy (cost reduction pressure high)High[to achieve cost eco firm need to coordinate with subunits]High[difficult to identify factors of error ]High[headquarter mgt control the subunits]Transnational strategy (Both pressure are high)Very high[-Value addition from one country -locally responsiveness from all other countries]Very high [so difficult to identify factors of error]Very high [mgt should control al subunits]

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For a firm to succeed, two conditions must be met:

The firms strategy must be consistent with the environment and place in which the firm operates. The firms organization architecture must be consistent with its strategy. Environment, Strategy, Architecture, & Performance

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INERTIA: Property by which a thing continues its existing conditionOrganizations are difficult to changeSources of inertia include:The existing distribution of power and influenceThe current cultureSenior managers preconceptions about the appropriate business model.

Organizational Inertia

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Management should take necessary actions to chose structure of organization to enhance its positive effects.

Alliance the strategies with organizational structure and their requirement Organization of IB & Management :

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Thank you