Globalization and Organization design

globalisation and Organization designIntroductionNowadays, Globalization is the indispensable trend of many companies. What motivates them to splay inter contently? They do business on global scales in order to expand their markets, increase sales and increase profits. In other side, Organizations have to face up a lot of challenges from globalization much(prenominal) as communication, culture, technology and transportation etc. It requires surmount leaders must(prenominal) be having a global outlook, creating global strategies and structure designs for global advantage. So how managers design the organization for international environment?ContentWhat motivates organization to expand internationally? in that location ar 3 major factors which motivate companies to expand internationally Economies of scale, Economies of scope, Low-cost take factors.The economies of scale refer to reduction in the cost per unit by increasing the scale of output. It nitty-gritty producing in t he freehanded-volume by smart technologies and production methods. The second factor is economies of scope. This factor refers to increasing the number and variety of products and services which community offers. In other hand, company also increase the number and variety of regions, countries, and markets it servers. The third factor is Low-cost production relates to factor of production. Nowadays, a lot of companies in the world, special in USA, commonly invest aboard to get the lowest cost of labor, raw materials and other resources.Those factors show that this is necessary for organization to instruction on globalization. In virtually industries, a company can be successful only by succeeding on global scale.Stages of International Evolution boncestic = International = Multinational = Global.There are a lot of ways to precede foreign markets and each company has their own strategies. However, organizations should grow up step by step, from domestic to global. In the firs t stage, the Domestic stage, the company has to focus on domestic market which is limited and is their home country. They build basically structure in domestic and compete with foreign sales by an trade department. From this stage, the company collects experiences to expand abroad.The next stage is the international stage. In this stage, the company begins to focus on export much seriously and begins to think Multi-domestically. They enter into multiple countries and have to deal with each country individually because each country has independent competitive issues. So the export department has replaced by an international category and specialists who are hired to handle sales, service, and warehousing abroad.In stage trio, the multinational stage, company expands into some international markets and establishes marketing, manufacturing, or research and development facilities in several foreign countries. And they have business units scattered some the world along with supplier s, manufacturers and distributors. Thats why company obtains a large percentage of revenues from sales outside the home country. We call this stage of development is explosion and structure is worldwide geographic product. Example of multi-national companies is Coca-cola in United States, Sony of Japan, Wal-MartThe net stage is the global stage. In this stage, company has inner force and experiences enough to transcend any singer country. They become stateless corporations which have market in the whole world. They have subsidiaries which are interlinked to the point where competitive position in one country significantly influences activities in other countries in whole world. experience global company make their structure to be matrix or transnational sham. The example is Nestl, Unilever.ect. They appear in more than a hundred countries.How to enter new markets?Globalization gives organizations a lot of opportunities and it also give them a lot of challenges. One of a lot quest ions which it gives organization is How can expand globally? But firstly, we have to answer this question How to enter new markets? And weve find out one of the most popular ways which company uses to enter the new markets is through International strategic alliances licensing, joint ventures, and consortia.They joint venture with their partners such as customers, suppliers or even competitors to share development and production costs and sharp-worded new marketsFor example, the Joint Venture that Canadian mining company Placer Dome has with Newmont Mining and the result helps lower operating costs at their Nevada gold-mining operations. The subsidiary is Placer Dome Turquoise Ridge Inc. and Placer Dome owns 75% while Newmont owns 25%. The project expects to mine 300,000 ounces per year of gold with gold everywhere $300 an ounce, this deal is cost $90 million annually (Tuesday, January 6, 2004-Torontostar newspaper).They also can limit risks and take the money from selling licen ses when entering new markets by licensing. The example is Saks Fifth path and Barneys New York. Saks has licensed stores in Riyadh and Dubai, Saudi Arabia, and Mexico. Barneys has licensed stores in Japan. Both of them as well as other US- based department stores, are currently making a strong international push in light of weak sales and stiff competition in the United States (OConnell, section Stores Tough Sell Abroad).Another typical alliance is that companies become involves in Consortia, groups of independent companies including suppliers, customers, and even competitors. Companies join together to share skills, resources, cost, and opening to anothers markets.There is a difference between joint ventures and consortia that in a joint venture, the partners will create a legal corporate entity to carry out the activity with an reason that the parent companies have controlling interests.The difference between alliances and consortia is that consortiums are usually created fo r a specific short term project, whereas alliances can take place over many years and involve multiple aspects of the relationship whereas consortiums usually are arranged for one specific topic or project.Global strategyTo carry through and develop in International environment, an organizations structure must fit its situation by providing sufficient information processing for coordination and control while focusing employees on specific functions, products, or geographic regions. Managers must choose and decide whether to emphasize global standardisation or national responsiveness (globalization strategy or multi-domestic strategy).The standardization strategy means that product design, manufacturing, and marketing strategy are standardized throughout the world (Kenichi Ohmae, Managing in a Borderless World). But the advertising and marketing gather up to be adapted for different regions, Think globally, and Market locally. For example, Coca-cola uses that Converging customer needs and preferences and sells the same Coke beverage worldwide. But they also changed a subatomic in their logo and the style of glass bottle. They make their own special characteristics which associate a strong and cross-cultural brand image. In other hand, Globalization strategy can help manufacturing company gains economies of scale efficiencies by standardizing product design and manufacturing or using common suppliers. It introduces products around the world faster, coordinating prices, and eliminating cooccur facilities. For example, Coca-cola gains economies through the competent running of a large-scale franchising brass for its bottling operations.The multi-domestic strategy means that company deals with each national market independently of other national markets and tailors products to individual countries to meet the need of people in different countries. In this strategy, there is decentralization of decision making and local RD department takes responsibility for innovations. near companies have products and services which fit for a multi-domestic strategy, which means taking advantages through differentiation and customization to meet local need. For example, Kraft, which is a Food Company, has recognized that they must tailor their cookies and crackers to different markets. Krafts Oreo, which is the top-selling cookie in the United States, had poor peoplely result in China until the company re-changed itself to suit local tastes. And now, Krafts Oreo also is the top seller in China (Julie Jargon, Kraft Reformulated Oreo, Scores in China, The Wall Street Journal (May 1, 2008), B1, B7).For entering global market, organization designs should suit to the need twain(prenominal) of global standardization and national responsiveness depending on situation, type of product and service.etc.How to design the structure fit to globalization?To meet the need of globalization, the top managers must design the organizations structure which is adaptive with the changing environment. Firstly, we should understand the meaning and purpose of organizational structure which formally determines the hierarchy within an organization. There are three most common structural types among global organizations are Functional structure, Divisional structure and Global matrix structures.Functional structure groups people together into useable departments such as marketing, finance, RD, operations etc. Functional structures are the most common organizational model are apply domestically.Divisional Structure is depleted down into some sub-types global product division structure and global geographic division structure.The product division takes responsibility for global operations in their specific product area in global product structure. It provides a fairly straightforward way to efficaciously manage a variety of businesses and products around the world. And each divisions manager is responsible for planning, organizing, and controlling a ll functions for the production and distribution of its products for any market in the world. The global product structure is great for standardizing production and sales but it also has some problems such as the product divisions do not work well together, competing instead of cooperating in some countries and some countries may be ignored by product managers. These problems are solved by Eaton Corporation. They use country coordinators who have a clearly defined portion is a superb wayThe global geographic structure groups people together based on specific geographic location. Each geographic division reports to the CEO and has full control of functional activities within its geographic area. To apply geographic structure, the organization must be large with mature product lines and permanent technologies. This structure suits to organizations that use multi-domestic strategy. This means that products and services will be successful if they are tailored to local needs and cultur es. For example, Nestl uses a geographic structure to focus on the local needs and competition in each country (Carol Matlack, Nestl is starting to slim down at last but can the worlds No.1 nutriment colossus up its profits as it slashes costs? Business week (October 27, 2003), 56). Other example is IBM they are creating new regional division for developing markets such as the Middle East, Asia, the Americas, Africa, and Eastern Europe. IBM tailors software and services to meet the needs of these emerging and fast-growing information technology markets (William M. Bulkeley, Spinning a Global plan, The wall street Journal (February 14, 2008), B1).http//www.unc.edu/nielsen/soci410/nm13/m7009.gifThe global matrix structure groups people by both of product division and geographic division. This structure works best when the public press for decision making balances the interests of both product standardization and geographic localization and when coordination to share resources is im portant. Global matrix structure is the most complex of the different organizational structures. There are many international firms such as ABB, Colgate, IBM, Nestl, or Eaton Corp which are using a global hybrid or combine structure.Finding the right structure for organization that works best for particular company is very important. If using the wrong structure, organization will have the poor communication, poor product development, poor customer service and a lot of other problems.http//www.unc.edu/nielsen/soci410/nm13/m7010a.gif international modelTransnational model is the most advanced kindly of international organization. It allows for the attainment of benefits inherent in both global and multi-domestic strategies. The key of a transnational organization is adaptation to all environmental situations and achieving flexibility by capitalizing on knowledge flows, which take the form of decisions and value-added information, and two-way communication throughout the organizatio n. Decision making and knowledge generation are distributed among the units of a transnational organization. Transnational firms usually enter into strategic alliances with their customers, suppliers, and other business partners to save time and capital. There are five implementation tactics which used for implementing the transnational modelMass customization-synergies through global research and development (e.g., American Express, Time Warner, Frito-Lay, MCI).Global sourcing and logistics (e.g., Benetton, Citicorp).Global intelligence and information resources (e.g., Andersen Consulting, McKinsey Consulting).Global customer service (e.g., American Express).Global alliances (e.g., British Airways and US Air KLM and Northwest).For example, Nestl CEO Peter Brabeck recently questioned the idea of a so-called global consumer. The company appears to be successfully implementing a transnational strategy by making centralization decisions based partly on whether value-chain activities ar e upstream or downstream. According to Brabeck, The closer we come to the consumer, in branding, pricing, communication, and product adaptation, the more we decentralize. The more we are dealing with production, logistics, and supply-chain management, the more centralized decision making becomes. After all, we want to leverage Nestls size, not be hampered by it (Wetlaufer, 2001).Information technology in global organizationFirstly, we should know what is the information system? This is an integrated set of components for collecting, storing, processing, and communicating information. Its more than just figurer program. Information and communications technologies are playing an increasing role in meeting the needed information of organization. Information systems refer to the wider systems of people, data and activities, both computer-based and manual, that efficaciously gather, process, store and disseminate organizations information.There are several types of information systems E xecutive Information System (EIS), Management Information System (MIS), Decision conduct system (DSS) and Transaction Processing System (TPS).A management information system is used by managerial or mid-level managers. It provides mid-level managers with reports that summarize data and support casual decision making. There are two common types of reports such as Key-Indicator report and Drill-Down report. MIS is subset of the overall sexual controls. For example, at Harrahs casinos, an information reporting system keeps grade of detail information on each player and uses quantitative models to predict each customers potential long-term value.An Executive information system is used by highest levels of management. These systems are based on software that can convert large amounts of complex data into pertinent information and provide that information to top managers in a timely fashion. We can use the shortest words to define it as EIS requires only the summary of the whole busine ss. It requires the facts and numbers to be taken and easy access to both internal and external information. For example, Motorolas Semiconductor Products Sector, based in Austin, Texas, implemented an EIS using online analytical processing software so that more than a cat valium senior executives, as well as managers and project analysts in finance, marketing, sales, and accounting departments around the world, could quickly and easily get information about customer purchase trends, manufacturing, and so forth, right from their desktop computers, without having to learn complex and arcane search commands (Megan Santosus, Motorolas Semiconductor products Sectors EIS, Working Smart column, CIO, section 1 (November 15, 1998), 84).A Decision support system provides specific benefits to managers at all levels of the organization. This is the software which user can pose a series of what-if questions to test the possible alternatives and based on assumptions used in the software or spe cified by user. It helps managers choose the alternative that will have the best outcome.A Transaction processing systems used at operational level of an organization for making transactions through online processing. For example, paying a utility bill from bank account or sales and tellThose are several IT systems which are useful for organizations, especially global organizations. We can recognize that most successful organizations which are knowledge-based organizations are generally those that most effectively apply information technology. IT has enable creation of the network organization structure and also help the top managers design organization which is smaller, decentralized and improved internal and external coordination.ConclusionGlobalization gives top managers a lot of challenges, especially in designing organization which fits the needs of globalization. Organization must follow the go form domestic to global. It helps organization have a sound basis to face with th e changing and competitive global environment. Besides that, top managers should understand the qualification and the weakness of organization or market to find out the right strategy to enter new market and the structure which flexible and effective with changing environment. To do this, IT is the best choice to invest in. It provides the needed information both of internal and external organization and this is the most effective way to communicate both inside and outside company.