Week_9_Course_Materials

Week_9_Course_Materials - The Organization of International...

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The Organization of International Business
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Vertical Differentiation h Concerned with where decisions are made. h Where is decision making power concentrated? h Two Approaches h Centralization h Decentralization
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Centralization h Pros: h Facilitate coordination. h Consistency of decisions. h Easier to make changes. h Avoids duplication.
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Centralization h Cons: h Overburdened top management. h Motivational research favors decentralization. h Decentralization permits flexibility. h Decentralization lets decisions be made closer to the information source. h Decentralization can increase control.
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Strategy and Centralization h Global strategy - centralization. h Multi-domestic firms - decentralization. h International firms - centralize for core competencies (R&D) and decentralize for operating decisions. h Transnational - use both.
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Vertical Differentiation - Decentralization h Top is over-burdened and makes poor decisions. h Increased motivation at lower levels. h Greater flexibility. h Better on-the-spot decisions. h Increased accountability and control.
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Horizontal Differentiation h How a firm divides itself into sub- units - value creation activities. h Demands to great for one individual. h Firm diversifies its product offerings. h Typically: function, business area or geography.
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Horizontal Differentiation h Usually firms start with an international division. h Leads to coordination problems, and h Conflict between domestic and foreign operations.
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A Typical Functional Structure Purchasing Manufacturing Marketing Finance Top Management Buying units Plants Branch sales units Accounting units
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A Typical Product Division Structure Department Purchasing Department manufacturing Department marketing Department finance Buying units Plants Branch sales units Accounting units Division product line A Headquarters Division product line B Division product line C
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One Company’s International Division Structure Domestic Domestic
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Week_9_Course_Materials - The Organization of International...

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