Global Organization Design and Integration Strategies

T.11 1. Is

the organization design of the MNE a function of its strategy or vice versa? Is both a function of its strategy and its design also drives its strategy. The objective of organization design is to provide, maintain, and develop the organizational structure that works best toward the achievement of firm’s strategic objectives into workable assignments of rights, duties, and responsibilities for the various units and individual positions that make up the organizational apparatus. The structure can represent a constraint on the firm’s mode of operations and in turn on its strategic thinking.

2. If you

were a top manager in a subsidiary in Mexico, would you expect similar to subsidiaries in London in authority, knowledge flow, or strategic importance? As a top manager for a subsidiary in Mexico, I would expect real differences among subsidiaries in various countries. For example, subsidiaries may carry out various roles such as autonomous (subsidiary act independently), receptive (subsidiary functions are highly integrated with headquarters), or active (subsidiary activities are carried out locally but in close coordination to other subsidiaries). Knowledge-flow (global innovator, integrated player, implementer, or local innovator) and strategic importance (strategic leader, contributor subsidiaries, implementer subsidiaries or black hole subsidiaries) are equally diverse in terms of potential options and possibilities.

3. What

types of structure are available to MNEs for organizing global operations? Can you establish a link between an MNE’s international strategy and its organizational structure? The most commonly chosen structures include the international division, the global functional design, the global geographic design, the global strategy and the matrix design. Each of these designs has its own strengths and weaknesses. The main challenge is to provide an appropriate balance in terms of differentiation and integration across functional, product and regional lines – this ties directly to the company’s strategies. Organizational design gives clues about a firm’s strategies and reveals their priorities and potential vulnerabilities.

4. If you

were an executive at Sony’s headquarters, how would you integrate overseas activity? Sony is a very large and complex organization.. An executive would need to closely consider the design as a choice between differentiation and integration of the firm’s global operations. The need for diversification is rooted in the diverse requirements of different locals and business units, while the need for integration

T.81. Why

have world markets becoming more integrated today? How integration took place? Why U.S. gov push to form the NAFTA? The IMF and World Bank along with GATT have helped fundamentally to boost global economic integration and to erase barriers to free trade, investment, and service among countries. Meanwhile many regions of the world have established harmonized trading blocs within their respective territories. Intraregional trade and investments significantly increase as a result of reduction or elimination of various trade barriers. NAFTA was the first regional integration effort of its kind between industrial countries and a developing nation (Mexico), which explains why this pact is of such significant importance to other developing nations. The pact helps to improve the investment climate in North America and provides companies with a much larger market.

2. What role

does the WTO, the World Bank, and the IMF play in influencing the world economy? Are they “clubs” of rich nations? If not, why did thousands of people protest in Seattle against the WTO meeting? The WTO is the premier multilateral trade organization for the harmonization of trade and the reduction of trade barriers worldwide. The WTO’s primary objective is the establishment of rules for members’ trade policy, which help international trade to expand with a view to raising living standards. The IMF and the World Bank are often called the Bretton Woods Institutions because they were both established at Bretton Woods, 1944. The overall objectives of the IMF are to promote international monetary cooperation and expansion of international trade and to reduce disequilibrium in members’ balances of payments. The IMF seeks to promote exchange stability, maintain orderly exchange arrangements, avoid competitive exchange depreciation, and give confidence to member states by placing the general resources of the Fund subject to adequate safeguards. The World Bank refers to the International Bank for Reconstruction and Development (IBRD). It is owned by the governments of 160 countries, and it must lend only for productive purposes and must stimulate economic growth in the developing nations in which it lends, primarily through loans for infrastructure improvement. Its lending emphasis is on investment that can directly affect the well-being of the masses of poor people in developing countries by making them more productive and by integrating them as active partners in the development process. Some developing countries have viewed the WTO as a “club of rich nations,” because the benefits of trade barrier reduction are often unequal to individual nations. Third world nations often feel that they do not have a large enough voice in matters considered.

3. Why do people

debate if regional blocs (EU, MERCOSUR) are compatible with globalization? If you are an export manager in an Australian company, would you like to see blocs in other regions? Regional blocs have been shown, for the EU and NAFTA, to increase intraregional trade. Some view this trade diversion as an impediment to globalization. Other regional efforts have had a different result, often in a lowering of intraregional trade among developing nations. Both regional blocs and multilateral trading systems attempt to achieve substantial reductions of tariffs and other barriers to trade simultaneously. WTO rules require that any favorable treatment extended to one member nation also be extended to all WTO members. They also require that member nations have common trade policies with respect to third countries (outsiders), and that this policy should not be more restrictive than policies of individual members prior to the agreement. For WTO members, these rules make it possible for regional integration and global trading systems that cooperate (rather than conflict) with each other in reducing tariffs and other barriers to trade. For non-WTO members, regionalization of foreign markets may increase the barriers to their foreign trade, thus conflicting with their efforts in global integration. In other words, insiders gain much more benefits than outsiders from economic integration. An Australian export manager will probably see the world according to her (his) own regional perspective. If they have bloc advantages it would probably be in their own best interest to minimize further regionalization.

4. How should

MNEs strategically respond to regional integration? Why Siemens and Nokia diversified their presence while Hitachi and Toshiba have substituted FDI in Europe for export to Europe? Many MNEs realign their organizational structures and value-added activities to reflect a regional market. To prepare for the single European market, Siemens launched a radical corporate reorganization, with plans to concentrate on high-growth segments of its core electronics/electrical businesses, while expanding geographically in the European Community through a series of acquisitions. Other MNEs have generally responded with increased levels of FDI in the integrated region, such as Hitachi and Toshiba. If a MNE follows the defensive export substituting investment, then they will seek to strengthen their FDI positions in a region to substitute for market share previously achieved through exporting.