Exam 6: Designing Organizations for the International Environment

A company typically shifts its interest from domestic activity to exporting in the 3rd stage (multinational) of international development.

Case 6.0 It was reported in the Wall Street Journal that Ford Motor Co. was reorganizing to place its functions such as product development, sales, and engine/transmissions under their own executives with global authority. Alexander Trotman, chairman and CEO, wanted to create a structure that would avoid costly duplication in different parts of the world and that would foster Ford's developing models such as its Mondeo (Europe) and Contour (U.S.) which could sell worldwide with few modifications. Trotman wanted a company that was strong internationally in product development, manufacturing, and purchasing that could take advantage of where Ford's strength was around the world. The company had been organized geographically into three relatively independent divisions--Ford North America, Ford of Europe, and Ford Asia/Pacific. The new product cited above, the Mondeo and Contour, sapped $6 billion in development costs because of expensive coordination time between the sometimes-conflicting European and North American divisions. Elimination of duplication was a goal of the new structure. Simultaneously a new "program team facility" was being constructed so that all of Ford's new product development would be by teams. The new coupe Mustang was borne from an experimental cross-functional team that designed the product in less than three years compared to Ford's normal four to five year development cycle. Trotman emphasized that he wanted to change the process, not just the structure, by which new products were developed. Ford apparently found the team process convincing because the Mustang was developed on a budget about 30% lower than comparable project budgets. SOURCE: "Ford to Realign With a System of Global Chiefs," The Wall Street Journal, March 31, 1994, pages A3-A4. -Reference Case 6.0. Describe how Ford's proposed structural changes are rather different from the usual progression resulting from international development. Describe how Ford's proposed structural changes parallel the new designs for domestic and global advantage.

The transnational model is characterized by:

The global geographic division structure:

Describe the stages of international evolution in terms of their strategic orientation.

The second stage of international evolution, "International Stage," will usually be structured with a domestic structure with an export department.

The "not-invented-here" syndrome makes some managers reluctant to tap into the know-how and expertise of other units.

____ is a popular approach to sharing development and production costs and penetrating new markets.

Discuss the global matrix structure. Give an example.

The international stage of international development means that exports are taken seriously and that the company deals with the competitive issues of each country separately.

The globalization strategy means that product design, manufacturing, and marketing strategy are standardized throughout the world, whereas a multidomestic strategy means that competition in each country is handled independently of competition in other countries.

Case 6.0 It was reported in the Wall Street Journal that Ford Motor Co. was reorganizing to place its functions such as product development, sales, and engine/transmissions under their own executives with global authority. Alexander Trotman, chairman and CEO, wanted to create a structure that would avoid costly duplication in different parts of the world and that would foster Ford's developing models such as its Mondeo (Europe) and Contour (U.S.) which could sell worldwide with few modifications. Trotman wanted a company that was strong internationally in product development, manufacturing, and purchasing that could take advantage of where Ford's strength was around the world. The company had been organized geographically into three relatively independent divisions--Ford North America, Ford of Europe, and Ford Asia/Pacific. The new product cited above, the Mondeo and Contour, sapped $6 billion in development costs because of expensive coordination time between the sometimes-conflicting European and North American divisions. Elimination of duplication was a goal of the new structure. Simultaneously a new "program team facility" was being constructed so that all of Ford's new product development would be by teams. The new coupe Mustang was borne from an experimental cross-functional team that designed the product in less than three years compared to Ford's normal four to five year development cycle. Trotman emphasized that he wanted to change the process, not just the structure, by which new products were developed. Ford apparently found the team process convincing because the Mustang was developed on a budget about 30% lower than comparable project budgets. SOURCE: "Ford to Realign With a System of Global Chiefs," The Wall Street Journal, March 31, 1994, pages A3-A4. -Reference Case 6.0. Identify the strategy given in our textbook that Ford appeared to be adopting. Describe advantages and disadvantages of that strategy for Ford. Why do you think CEO Trotman moved to that strategy?