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Organization

Organization. Acer’s Organizational Evolution. Stage 1: Centralization Stage 2: Decentralization Stage 3: Global Matrix Stage 4: Global Business Units Stage 5: Separation of DMS from ABO. Stage 2: Decentralization. Separation SBUs and RBUs Client-Server model Fast food model “21 in 21”.

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Organization

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  1. Organization

  2. Acer’s Organizational Evolution Stage 1: Centralization Stage 2: Decentralization Stage 3: Global Matrix Stage 4: Global Business Units Stage 5: Separation of DMS from ABO

  3. Stage 2: Decentralization • Separation SBUs and RBUs • Client-Server model • Fast food model • “21 in 21”

  4. Pros and Cons of Stage 2 Pros: • More local initiative • Better adaptation to local markets Cons: • Lack of vertical coordination • Lack of horizontal coordination • Duplication • Competition

  5. Stage 3: Global Matrix Effort at solving coordination problems of stage 2 But slow decision making

  6. Lines of Business SBU/ RBU Other Business Semi conductors Peripherals PCs AA AE ACLA ACI IPG AP

  7. Stage 4: Six GBUs • AIPG (IP + Europe and US RBUs) • Acer Peripherals • Acer International Service Group (ACI + ACLA RBUs) • Acer Sertek • Acer Digital Services • XBUs

  8. Pros and Cons of GBUs • Better vertical and horizontal coordination • Interference between OEM and branded operations

  9. Stage 5 • Acer Brand Operations • Acer Design, Manufacturing and Service • Holding and Investment Business

  10. Adaptation/Standardization dilemma Adaptation = duplication = high cost but high price Standardization = poor fit = low cost but low price

  11. Decentralization • Good when locals know more than HQ • Encourages initiative But • Suboptimization • Duplication • Competition

  12. Centralization • Good when HQ knows better than the locals But • Low incentives • Poor local adaptation

  13. Choice between centralization and decentralization depends on Product Target Market Experience

  14. Four interdependent levers • Organizational structure • Management processes • HRM policies • Corporate culture

  15. Fundamentals of Organization Design • Decomposition principle • Match between strategy and structure

  16. Decomposition principles The way the firm is organized determines what employees see and do Group together strongly interacting units and separate them from weakly interacting units Link weakly interacting units with soft structures (committees, task forces)

  17. Three dimensions of organizational structure • Functions • Areas • Products

  18. Four structural templates • Functional • Area • Global • Matrix • (Mixed)

  19. A B C Others Asia D America Europe Management/services R&D Marketing Manufacturing Organizational Dimensions Business/ products Geography Function

  20. Products A B C D Countries France Belgium Netherlands Germany Fragmented Structure

  21. Fragmented Structure • Result from frequent acquisitions • Little coordination at area level • Little coordination at product level

  22. Functions A B C D Countries France Belgium Netherlands Germany Functional Structure

  23. Functional Structures • Single product manufactured and sold the same way in all countries • High economies of scale • Low volume

  24. Products A B C D Countries France Belgium Netherlands Germany Area Structure

  25. Area Structure • Advised if.. • products have similar technologies and similar end users in a given area • need to adapt all products to each area • potential product scale economies are low • Pros and cons • good adaptation to local conditions • good interface with local stakeholders • lack of inter-country coordination • give up product scale economies

  26. Products A B C D Countries France Belgium Netherlands Germany Product Structure

  27. Product Structure • Advised if.. • Products require different technologies and have different end users • No need to adapt products to a given area • Potential scale economies are large

  28. Product Structure • Pros and cons... • Captures scale economies • Worldwide product consistency • Ethnocentric bias • Not responsive to local-only opportunities • Lack of coordination and potential duplication within a country • Poor interface with local stakeholders

  29. Products A B C D Countries France Belgium Netherlands Germany Mixed Structure

  30. Mixed Structure • Advised if... • Some products require adaptation to areas while others do not

  31. Products A B C D Countries France Belgium Netherlands Germany Matrix Structure

  32. Lines of Business SBU/ RBU Other Business Semi conductors Peripherals PCs AA AE ACLA ACI IPG AP

  33. Matrix Structure • Advised if.. • Products benefit at the same time from adaptation to areas and rationalization across areas • Pros and cons • Makes it possible to choose for each product the precise mix of adaptation and rationalization • Confusion, conflict and paralysis as some managers have two bosses

  34. Strategy Standardization Adaptation Standardization for some products, adaptation for others A bit of both for all Structure Product divisions Area divisions Mixed Matrix Strategy and Structure

  35. Management Processes • Information systems • E.g. Citibank • Strategic Plan • Budgeting • Compensation

  36. HRM policies • Local vs. Expatriate Managers • National or Multicountry careers

  37. Culture • Language • Values

  38. Organizational Evolution of MNEs • Ethnocentric • Polycentric • Geocentric

  39. Conclusion • Everything is a tradeoff • Organization must change • as conditions change • as strategies change

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