Entry Strategies &

Organizational Structure

WarrenDongWoo

Carlos

Goals• Describe how an MNC develops and implements

entry strategies and ownership structures.

• Analyze the advantages and disadvantages of

each type of organizational structure.

• Describe the recent, nontraditional organizational

arrangements.

• Explain how organizational characteristics

influence how the organization is structured.

Entry Strategies and Ownership Structures• Export/Import: Small investment. Transitional in

nature.

• Wholly Owned Subsidiary: Clear communications and shared visions. Large investment in one place.

• Mergers/Acquisitions: Quick expansion.

Entry Strategies and Ownership Structures• Alliances and Joint Ventures: Improve efficiency,

have access to knowledge, etc.

• Licensing: Avoid entry costs.

• Franchising: New stream of income.

Discussion• One of the most common entry strategies for

MNCs is the joint venture. Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice?

Terms

• 1. Initial Division Structures

• 2. International Division Structure

• 3. Global Product Division

• 4. Global Area Division

• 5. Global Functional Division

Terms

• 6. Multinational Matrix Structure

• 7. Transnational Network Structures

Discussion • A small manufacturing firm believes there

is a market for handheld tools that are carefully crafted for local markets. After spending two months in Europe, the president of this firm believes that his company can create a popular line of these tools. What type of organization structure would be of most value to this firm in its initial efforts to go international?

Discussion • The same company decides to expand into Asia

and North America, would you recommend any change in its organization structure?If yes, what would you suggest? if no, why not?

Discussion • If this same company finds after three years of

international effort that it is selling 50 percents of its output overseas, what type of organizational structure would you suggest for the future?

Nontraditional Organizational Arrangements

• Organizational arrangements from mergers and acquisitions

• Organizational arrangements from joint ventures and strategic alliances

• Organizational arrangements from Keiretsus

Joint Ventures & Strategic Alliances

• (Asian and Western Management Features)

Keiretsus• Vertically and/or horizontally integrated group of

Companies.•  Linked through cross-ownership, interlocking

directorates, long-term business dealings, and social ties.

Advantages• More reliable access to materials, capital, and

markets• Ensure Access to high quality inputs and just-in-

time delivery• Share of R&D costs and information• Cross-marketing of products and services

Other Example of New MNC Organizational

arrangement

• The Emergency of Electronic Network Form of Organization

• Organizing for Product Integration

• The Changing Role of Information Technology in Organizing

The Emergency of Electronic Network Form of

Organization

• Temporary contingent employees, they never see each other and communicate exclusively in an electronic environment

• Electronic Freelancers

• Temporary companies

• Ex) Internet class of Europe and North America UN

Organizing for Product Integration

• new approaches to organizing for production development

• Ex) Six organizational mechanisms used by Toyota1. Mutual adjustments2. Direct, technically-skilled supervisors3. Integrative leadership4. Technical training is provided in-house, and people are rotated within

only one for most, if not all, of their careers5. Complex forms and bureaucratic procedures6. Design standards are maintained by the people who are doing the

work and are continually changed to meet new design demands

• People, not systems, design cars

Changing Role of InformationTechnology in Organizing

Discussion• Why are keiretsus popular? What benefits do they

offer?

Organizational Characteristics of MNCs• Formalization: Use of defined structures and

systems in decision making, communicating, and controlling.

• Specialization: Assigns individuals to specific well defined tasks.

• Centralization: Important decisions are made at the top.

Discussion• In what way do formalization, specialization, and

centralization have an impact on MNC organization structures?

Getting In on the Ground Floor

• EU faces threat of American and Asian competition.

• Ruehter Laboratories = Hi-tech R&D firm

• Considering purchase of Dutch insulin maker.

• Ruehter plans to reorganize to work closely with Dutch firm.

Discussion• What type of organization design would you

recommend that Ruehter use?

• If there were joint R&D efforts, would this be a problem?

Questions?