CHAPTER 7
MARKETING ORGANIZATION, IMPLEMENTATION,
AND CONTROL
Chapter Outline
A. Organizational Structure
1. Organizational Design
2. Evolution of Organizational structures
B. Implementation
1. Locus of Decision Making
2. Factors Affecting Structure and Decision Making
3. The Networked Global Organization
4. Promoting Internal Cooperation
5. The Role of Country Organizations
C. Control
1. Types of Controls
2. Exercising Control
Chapter Objectives
This chapter begins by explaining the role of organization in the international context. Most
firms have little or no organization when initiating their internationalization efforts.
However, as the importance of international operations grows, an international division may
be formed. Global organizations typically evolve out of competitive necessity. These may
be formed along different dimensions, such as product, area, customer, function, or process.
Matrix structures are used to cut across enormous organizational complexities in order to
promote cooperation among business units and to achieve synergistic effects. To improve
organizational unity and ability to encourage local initiative, many multinationals have put
into effect networked global organizations, which may change little structurally but call for
major change in roles within that structure.
An important aspect of an organizational discussion is the locus of decision making. The
basic forms of centralization and decentralization (=autonomy) are outlined. To fit the
discussion on networking, coordinated decentralization is introduced as an alternative.
Organizational control is important for management in order to achieve integration of the
various functions performed by different entities. Its purpose is to reduce uncertainty,
increase predictability, and ensure behavior that is compatible from one part of the
organization to the next. Controls can either be bureaucratic, based on limited and explicit
set of regulations and rules, or cultural, based on shared beliefs and expectations. Output
controls measure corporate performance based on established benchmarks, while behavioral
controls focus more on the human dimension. U.S. firms tend to focus more on the
bureaucratic and output controls, while others focus more on cultural and behavioral
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part.
controls. This difference is a function of different views of personnel, different turnover
rates, and different priorities.
Suggestions for Teaching
The chapter on organization is often perceived as lacking in interest and excitement. The
subject has to be brought closer to them to show the importance of this area to international
operations. One way to accomplish this is through a guest speaker from a company that has
extensive international operations or one that has undergone a change to adjust better to the
international environment. For example, companies like IBM adjust their organizations
every now and then to maintain their agility and responsiveness.
Annual reports may be used to outline how different companies approach international
operations from the organizational point of view. By comparing the organizational
structures of firms with different emphases, e.g., consumer vs. industrial, firms that are only
in a few countries vs. those involved around the world, an appreciation develops for the
complexities of organizational issues.
It is also useful to remind students that people tend to concentrate on those tasks which they
know best. Therefore, there may be subtle discrimination against foreign activities, since
work in that area requires constant alertness and new learning. It is necessary for
management to emphasize the importance of international activities, one way being through
organizational structure and control.
The issue of types of controls always provides topics for class discussion. Particularly if the
instructor points out the fallibility of relying on benchmarks alone, students begin to have a
better appreciation for the need for cultural and behavioral controls. This fact can be
highlighted even more if students are asked to think about the control circumstances in their
own environments where they realize most of the control to take place informally.
Group projects may be concentrated on company analyses: organizational structure and
control mechanisms used. If data are available, the development of a firm's organizational
structure during the various stages of its internationalization may be attempted. One
industry may be chosen, groups may be formed and each group can be assigned a company
sufficiently different from one another by size, stage of internationalization, number of
markets covered, etc.
Key Terms
Product structure: An approach to organizational structure that gives worldwide responsibility
to strategic business units for the marketing of their product lines.
Area structure: An approach to organizational structure based on geographical areas.
Functional structure: An approach to organizational structure that emphasizes the basic tasks of
the firm – for example, manufacturing, sales, and research and development; this approach works
best when both products and customers are relatively few and similar in nature.
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Process Structure: An approach to organizational structure that uses processes as a basis for
structure; common in the energy and mining industries, where one entity may be in charge of
exploration worldwide and another may be responsible for the actual mining operation.
Customer structure: An approach to organizational structure that is based on the customer
groups that are served—for example, consumers versus businesses versus governments.
Mixed structure: An approach to organizational structure that combines two or more
organizational dimensions simultaneously; also called a hybrid structure.
Matrix structure: An approach to organizational structure where business is driven by a
worldwide business unit and implemented by a geographic unit.
Decentralization: When a firm grants its subsidiaries a high degree of autonomy; controls are
relatively loose and simple.
Centralization: When a firm maintains tight controls and strategic decision making is
concentrated at headquarters.
Coordinated decentralization: A system under which overall corporate strategy is provided
from global or regional headquarters, but subsidiaries possess the discretion to implement it
within the range established in consultation between headquarters and the subsidiaries.
Glocalization: Building in organizational flexibility to allow for local/regional adjustments in
global strategic planning and implementation.
Best practice: An idea which has saved money or time, or a process that is more efficient than
existing ones; best practices are usually established by councils appointed by a company.
Intranets: A company network that integrates a company’s information assets into a single and
accessible system using Internet-based technologies such as e-mail, newsgroups, and the World
Wide Web.
Strategic leader: A role of a country organization; a highly competent national subsidiary
located in a strategically critical market.
Contributor: A role of a country organization with distinctive competence, such as product
development or regional expertise.
Implementors: A role of a country organization; although implementors are usually placed in
smaller, less-developed markets, they provide the opportunity to capture economies of scale and
scope that are the basis of a global strategy.
Black hole: A situation that the international marketer faces because they have read the market
incorrectly or because government may restrict its activities.
Bureaucratic controls: A limited and explicit set of regulations and rules that outline desired
levels of performance.
Cultural controls: Are less formal, and are the result of shared beliefs and expectations among
members of an organization.
Budgets: Short-term financial guidelines in such areas as investment, cash, and personnel.
Plans: Formalized long-range financial programs with more than a one-year horizon.
Questions for Discussion
1. Firms differ, often substantially, in their organizational structures even within the same
industry. What accounts for these differences in their approaches?
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part.
This question lends itself to be conducted as a class project. Students should use as their aid
Naylor, Thomas, "The International Strategy Matrix," Columbia Journal of World Business,
(Summer 1985), 11-19.
Companies develop new structures in stages as their product diversity develops and the
share of foreign sales increases. With increases in product diversity and in the importance of
the foreign marketplace, companies develop global structures to coordinate subsidiary
operations and rationalize worldwide production.
Multinational corporations have adopted the matrix structure to facilitate planning,
organizing, and controlling interdependent businesses, critical resources, strategies, and
geographic regions. For example, Alcoa's international strategy matrix consists of the
geographic dimension and the business dimension. The geographic dimension is concerned
with the unique characteristics of cultures and host governments of a particular country or
region. The business dimension links operating companies that produce the same product or
products, each of which may have different ownership and be geographically separated.
2. Discuss the benefits gained in adopting a matrix approach in terms of organizational
structure.
The following is adopted from Dow Chemical's materials. The matrix structure integrates
the functional and product/market organization approaches thereby reducing the
organizational complexities. In the matrix structure, functional departments that are
responsible for the efficiency of their respective units coexist with project teams which
employ the staff of these functional departments. These project teams are created as needed
to carry out specific programs. As a result, employees within the matrix structure report to
two supervisors - the functional manager and the project manager. The advantage of this
approach is that it minimizes the problem of coordination between departments, hereby
allowing the firm to tackle projects in the most efficient manner. In addition, this structure
also gives the firm greater flexibility as each project is only assigned the number of people
actually needed. This in turn enables the firm to be more cost-effective and to avoid
duplication of effort.
However, if this approach is focused only on one organizational variable - formal structure -
the resulting management process can become slow, acrimonious, and costly. The matrix
must be seen more as something that exists in managers' minds and attention should be
focused on developing administrative systems, communication channels, and interpersonal
relationships. For a thorough discussion, see Christopher A. Bartlett and Sumantra Ghoshal,
Managing Across Borders, Boston, MA: Harvard Business School Press, 1998, chapter 2.
3. What changes in the firm and/or in the environment might cause a firm to abandon the
functional approach?
The functional approach is most effective for companies which have a limited product line
(usually smaller companies) because it maximizes the use of available resources. Some of
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part.
the disadvantages of the functional approach are that delays may occur in obtaining quick
decisions or actions due to the separate functional entities of the firm. Bottlenecks may also
occur because of the sequential task performance, and conflicts over product priorities may
occur as well. The functional approach may become inefficient because these disadvantages
are more apparent as the firm grows - either by increasing its product line, obtaining more
diverse customers, or by expanding geographically. Other factors which may cause a firm
to restructure itself are competitive pressures and changes in the general environment. The
company may need to react more quickly to meet or beat competition or environmental
changes than the functional approach allows.
4. Is there more to the "not-invented-here" syndrome than simply hurt feelings on part of those
who believe they are being dictated to by headquarters?
It can be argued that globalized programs are often perceived by subsidiaries as cutting into
their autonomy and the dictatorial approaches taken by headquarters. Country managers are
treated more like subordinates rather than customers; i.e., no internal marketing is even
attempted. The fruitful dialogue that characterizes a relationship between equal partners
does not occur. The likelihood of NIH occurring is heightened due to organizational
changes, many of which may be perceived as threats.
An internal marketing program to avoid "N.I.H." could include the following elements:
o Ensure that local managers participate in the development of marketing strategies and
programs for global brands.
o Encourage managers to generate ideas for possible regional or global use.
o Maintain a product portfolio, which includes local brands as well as regional and global
brands.
o Allow country managers continued control over their marketing budgets to respond to
local customer needs and counter global competition
In implementation, five different degrees can be used depending on the company and the
products it markets. These levels could vary from national autonomy to central control.
5. How can systems that are built for global knowledge transfer be used as control tools?
While designing the control system, two major objects of control are indentified. These
include the output control and the behavioral control. An organization can exercise controls
over global knowledge transfer through bureaucratic or cultural means. Bureaucratic control
emphasizes formal reporting and evaluating benchmark data. Benchmarking relays
organizational learning and sharing of best practices throughout the corporate system to
avoid the costs of reinvesting solutions that have already been discovered. Cultural controls
use norms and values that are understood by individuals and entities that compose the
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corporation. By transferring knowledge globally, corporations are able to provide a
framework of actions to verify and correct actions that differ from established plans
throughout the organization. U.S. firms typically rely more on bureaucratic controls,
whereas multinational corporations headquartered in other countries frequently control
operations abroad through informal means and rely less on stringent measures.
6. “Implementors are the most important country organizations in terms of buy-in for effective
global marketing strategy implementation.” Comment.
The problem of motivation and acceptance can be avoided when decision makers are also
the implementors of the strategy. They form the “critical mass” that is needed for a strategy
to be truly global. However, in most situations headquarter managers perceive themselves
as coordinators of key decisions and controllers of resources while subsidiaries are treated as
implementors and adapters of global strategy in their respective local markets. Thus, if these
subsidiaries do not buy in to the strategy, it will either be badly implemented or become a
country-specific strategy. Especially smaller country organizations need to be involved
throughout the strategic planning process to ensure their proper motivation.
Internet Exercises
1. Improving internal communications is an objective for networked global organizations.
Using the Web site of the Lotus Development Corporation, (http://www.lotus.com) and its
section on solutions and success stories, outline how marketers have used the Lotus Domino
Express to interactively share information.
The Lotus Domino Express Software helps to streamline the business process and enhance
information sharing. It provides e-mail, calendaring, instant messaging and support for a
wide range of business applications at an affordable price to small and midmarket businesses.
Three critical features are paramount: (1) there needs to be a device to share organizational
memory; (2) best practice needs to be updated and adjusted to new situations, and (3) their
use needs to be made part of corporate culture.
The Web site is indicative of how different companies have benefited from this tool.
Students could identify three companies and can work in groups to prepare a summary report
of how this tool was used to interactively share information.
2. Using company and product information available on its Web sites, determine why Siemens
(http://www.siemens.com/index.jsp) have opted for global product/business
structures for its organizations.
With increases in product diversity and in the importance of the foreign marketplace,
companies develop global structures to coordinate subsidiary operations and rationalize
worldwide production.
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part.
Considering the Web site, Siemens seems to have opted for the global product/business
structure for its organization. This structure provides various benefits. A few of them being:
Improved cost efficiency through centralization of manufacturing facilities.
Ability to balance the functional inputs needed by a product and to react quickly to
product-specific problems in the marketplace.
Brings about the development of a global strategic focus in response to global
competition.
Students could come up with additional pointers based on their
findings from the Web site.
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part.
