MNE organization structure and framework Exam Bank Solution Manual Already Passed

MNE organization structure and framework Exam Bank Solution Manual Already Passed Why do cross-border acquistions fail? - Answers - overpaying for targets (managerial hubris) - integration problems (difference in management philosophies) - Inefficiencies (double departments = redundancies) - culture clashes How to avoid failure? - Answers 1. Pre-acquistion screening: finances, operations, management techniques, to find the right firm. Due diligence on the firm 2. Post-acquistion integration planning: merger of management, systems and operations... Organizational architecture - Answers Overall framework of an MNE. Structure, processes, culture and incentives, control systems. Why is organizational architecture important? - Answers - must be consistent throughout the company - Good architecture needed for good deployment of strategy. Organizational structure - Answers A model which provides a guide for the application of the management process. What does organizational structure determine? - Answers - how an organization is divided into subunits - the relationships and communication between subunits - coordination and control of the activities of subunits - where the locus of decision making is Vertical differentiation - Answers The locus of decision making (heaquarters or subsidiaries?) Horizontal differentiation - Answers The division and segmentation of the firm (subunits) Centralization - Answers Responsibility of decision making is on upper level managers, usually at the headquarters In favour of centralization - Answers 1. consistency/uniformity 2. easier coordination 3. Avoids duplication 4. easier to make radical changes (absolute power) Against centralization - Answers 1. If something goes wrong, will affect the whole firm 2. Higher degree of control leads to poorer work morale Decentralisation - Answers Decision making responsbility is delegated to lower level managers in subsidiaries. In favour of decentralisation - Answers 1. Increases motivation and innovation 2. increase responsibility and commitment 3. reduces pressure on top management 4. fosters flexibility and strategic agility Challenges of decentralisation - Answers 1. Harder to ensure that subsidiaries stick to company values 2. lack of consistency 3. scope for variation Mixed control - centralize... - Answers 1. standards and procedures 2. financial management 3. procurement 4. production? Mixed control - decentralise - Answers 1. strategy and HR 2. marketing 3. production HQ factors that will help decide - Answers 1. expertise 2. confidence in subsidiary 3. interdependence 4. importance of foreign market Subsidiary factors - Answers 1. performance 2. ownership structure Host country factors - Answers 1. laws 2. culture 3. env complexity 4. institutional difference and constraints Control mechanisms (HQ -- subsidiaries) - Answers Bureaucratic: reporting, systems, procedures etc.. - everyone working towards the same standards and values output control (measurable results) help to allocated: - resources - budget - allocated depending on performance Culture control: - control what happens through "expect this culture" Why are emerging markets important to MNEs? - Answers Serve several needs such as labour and raw materials Subsidiary control in emerging markets: - Answers 1. more important due to institutional weakness 2. scandals can damage reputation of whole MNE example of emerging market control - Answers 1. Chiquita is a banana company operating in over 70 countries 2. Bandex - colombian subsidiary 3. paid paramilitary group to surpress unions advocating for rights 4. Forcefully acquired banana farms, evicted residents at gunpoint 5. Chiquita fined Institutional distance: - Answers Difference in the institutional conditions between countries