ORGANIZATION OF

INTERNATIONAL
BUSINESS
How to manage and strategize an organization in an International Market..

ANAND P

- 15AB04

DINESHBABU

- 15AB13

GOKULAKRISHNA

- 15AB15

SANJAY GANESH

- 15AB35

INTRODUCTION
Organization A social unit of people that is structured and
managed to meet a need or to pursue collective goals.
The organization is managed by ORGANIZATIONAL
ARCHITECTURE
Organizational architecture Totality of a firms
organization, which includes the following:
1. Organization Structure,
2. Control Systems and incentives,
3. Process,
4. Organization Culture and
5. People.

NEED TO STUDY ABOUT

ORGANIZATION ARCHITECTURE
Organizational architecture is important for a
Superior Enterprise Profitability.
Organizational architecture helps to achieve
this superiority by three methods:
Architecture

Strategy

Market
environmen
t

1. The elements of a firms architecture must

be internally consistent.
2. The organizational architecture must fit
the strategy of the firm.
3. The organizational architecture and
strategy must not only be consistent
internally but also throughout the
competitive environment.

ORGANIZATION
ARCHITECTURE
Organizational structure
Division of various units, power and mechanisms to
integrate the work of sub-units.

Firms
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ational
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incen
sse s a n d
culture, proce
people.
Structur
e

Control systems
Metrics used to measure and control performance
Incentives Rewards to control metrics

Processes
How the work is performed in an organization?

Process
es

Peopl
e

Organizational Culture
Norms and value systems shared among the employees

People
Not only the employee but also the strategies used to
manage the employees.

Culture

Ctrl and
incentiv
es

ORGANIZATIONAL STRUCTURE
Organizational structure is to be
planned in three dimensions:
1. Vertical differentiation
The location of decision-making
responsibilities within a structure.

2. Horizontal differentiation
The formal division of the
organization into sub-units

3. Integrating mechanisms
The mechanisms for coordinating
sub-units

VERTICAL DIFFERNTIATION
The choice between centralization and decentralization
is not absolute and varies depending on firms strategy.
Ex. Firms pursuing Global standardization strategy and
Firms pursuing Localization strategy.

lants
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Loca
lized
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r
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a
y
decided b
authority

Marketing ac
tivities
decentralized

Vertical Differentiati
on
-Two Techniques:
Centralization and
Decentralization

VERTICAL
DIFFERNTIATION

Centralization

Decisions made by senior level managers at HQ.

Ensures decisions are consistent with strategic objectives.

Advantages

Senior executives have authority to

direct major change to facilitate
growth.
Removes duplication of activities.
Reduces the risk of making wrong
decisions at low level.

Disadvantages

Ensures consistent dealings with all

stakeholders.
Discourages initiative among lower
level employees.

ntiation
Vertical differe
ecision
d
e
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w
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e
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of a n
making power
centrated
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is
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t
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iz
organ

Decentralization

Decisions made by employees, who are closest to the situation.

Employees who directly deal with customers, markets, etc.

Advantages

Motivates employees to be
initiative.
Enables more flexible response to
rapid environmental changes.
Permits to fix better
accountability.

Disadvantage

Puts the organization at risk for

bad decision making.
Cross unit coordination is at
stake for favoritism.

HORIZONTAL DIFFERENTIATION
The way a firm designs its formal
structure to perform the following
functions:
1. Specify the set of organizational
tasks.
2. Divide these tasks into jobs,
departments, subsidiaries and
divisions to get the work done.
3. Assign authority relationships to get
the work done in a way that
supports the firms strategy.

TYPES OF ORGANIZATIONAL STRUCTURES

DEPENDING ON RANGE OF
PRODUCTS

CEO

CEO

Productio
n

India

Marketing

USA

1.
Functional
Structure

India

Power
Systems
Group

USA

Electric
Company
(Belgium)

Industry And
Defense
Group

Meter
Company
(Argentina)

2. Product Divisional
Structure

Elevator
Company
(Belgium)

Construction
Products
Company
(Italy)

TYPES OF ORGANIZATIONAL STRUCTURES

DEPENDING ON
INTERNATIONAL BUSINESS
ACTIVITY

CEO

Industrial
Division

Automotive
Division

Aerospace
Electronics
Division

Internation
al Division
CEO

Diesel
Company
(France)

3.
International
Division
Structure

Electronics
Company
(France)

Brake
Company
(Mexico)

U.K.

North
America
and
Pacific
Division

Europe
and Latin
America
Division

Venezuela

Italy

4. World Wide
Area Division

U.S.

Japan

Canada

TYPES OF ORGANIZATIONAL
STRUCTURES
5. Global Matrix Structure

INTEGRATING MECHANISMS
Integration refers to coordinating the various activities
of the sub-units.
Integration are important because of the large diverse
and geographically dispersed nature of business
activities.
Different Task
Strategy
and
coordination
in
International
Business

Transnational
Strategy
Global Strategy
International
Strategy
Localization
Strategy

Production
managers
Impediments
to
Coordination

orientation

Marketing
managers
Different Goals

FORMAL INTEGRATING MECHANISMS

Increasin
g
Complexi
ty of
Business
operation
s

Direct
contact

This is the simplest integrating mechanisms.

Managers of the various subunits just contact each
other wherever they have a concern.

Liaison
roles

This is a bit more complex than direct contact. As

the need for coordination between subunits
increase, integration can be improved by assigning a
person in each subunit to coordinate with another
subunit.

Teams

When the need for coordination is greater still, firms

use temporary or permanent teams composed of
individuals from the subunits that need to achieve
coordination.

Matrix
Structur
e

When the need for integration is very high, firms

may institute a matrix structure, in which all roles are
viewed as integrating roles.

INFORMAL INTEGRATING
MECHANISMS
One of the Informal Integrating

Mechanisms is Knowledge Networks.

Knowledge network is a network for
transmitting information within an
organization that is based not on formal
organization structure, but on informal
contacts between managers within an
enterprise and on distributed
information systems.
KNs must adhere to common set of
norms and values that override differing
subunit orientations.

CONTROL SYSTEMS
A major task of the firms leadership is to control the
various subunit of the firm- whether they be defined on
the basic of function, product division, and geographic
area to ensure their action are consistent with the firm
of overall strategic and financial objectives.

TYPES OF CONTROL SYSTEM

1) Personal control
2) Bureaucratic control
3) Output control
4) Cultural control

INCENTIVE SYSTEM
Anincentive systemis a business management tool
that introduces a structured motivationsystemto
promote desired employee behaviors. Human resources
(HR) professionals are tasked with using employee and
organizational objectives to identify and implement the
best employeeincentiveprograms.

5 TIPS FOR DEVELOPING A WINNING

EMPLOYEE INCENTIVE SYSTEM
1. Make it easy to understand.
2. Employees should control theoutcome.
3. Align the systemwith company
objectives.
4. Bonuses haveto be a good amount.
5. Incentives must be paid out frequently.

Organizational Culture - Intro

Organizational culture refers to the values and norms that
employees are encouraged to follow and evolves from

founders and important leaders

national social culture
the history of the enterprise
decisions that resulted in high performance

Organizational culture can be maintained through

hiring and promotional practices

reward strategies
socialization processes
communication strategies

Organizational culture tends to change very slowly

13-19

What Is
Organizational Culture?
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
A strong culture
is not always good
may not lead to high performance
could be beneficial at one point, but not at another

Companies with adaptive cultures have the highest

performance
13-20

What Is The Link Between Strategy And

Architecture?
A Synthesis of Strategy, Structure, and Control Systems

13-21

What Is The Link Between Strategy

And Architecture?
1.

Firms pursuing a localization strategy focus on local

responsiveness

2.

they do not have a high need for integrating mechanisms

performance ambiguity and the cost of control tend to be low
the worldwide area structure is common

Firms pursuing an international strategy create value by

transferring core competencies from home to foreign
subsidiaries

the need for control is moderate

the need for integrating mechanisms is moderate
performance ambiguity is relatively low and so is the cost of control
the worldwide product division structure is common
13-22

What Is The Link Between Strategy

And Architecture?
3. Firms pursuing a global standardization strategy focus on
the realization of location and experience curve economies

headquarters maintains control over most decisions

the need for integrating mechanisms is high
strong organizational cultures are encouraged
the worldwide product division is common

4. Firms pursuing a transnational strategy focus on

simultaneously attaining location and experience curve
economies, local responsiveness, and global learning

some decisions are centralized and others are decentralized

the need for coordination and cost of control is high
an array of formal and informal integrating mechanism are used
a strong culture is encouraged
matrix structures are common

13-23

What Is The Link Between Environment,

Strategy, Architecture, And Performance?
For a firm to succeed
1. The firms strategy must be consistent with the
environment in which the firm operates
2. The firms organization architecture must be
consistent with its strategy

firms need to change their architecture to reflect changes in

the environment in which they are operating and the
strategy they are pursuing

13-24

How Can Firms Implement

Organizational Change?

To implement organization change

1. Unfreeze the organization through shock therapy

requires taking bold actions like plant closures or dramatic structural

reorganizations

2. Move the organization to a new state through

proactive change in architecture

requires a substantial and quick change in organizational architecture so

that it matches the desired new strategic posture

3. Refreeze the organization in its new state

requires that employees be socialized into the new way of doing things

. Organizations can be difficult to change because of

the existing distribution of power and influence, the
current culture, managers preconceptions about
the appropriate business model or paradigm,
and/or institutional constraints
13-25

THANK YOU