Organization. Acer’s Organizational Evolution Stage 1: Centralization Stage 2: Decentralization...

Organization

Acer’s Organizational Evolution

Stage 1: CentralizationStage 2: DecentralizationStage 3: Global MatrixStage 4: Global Business UnitsStage 5: Separation of DMS from

ABO

Stage 2: Decentralization

• Separation SBUs and RBUs

• Client-Server model

• Fast food model

• “21 in 21”

Pros and Cons of Stage 2

Pros: • More local initiative • Better adaptation to local marketsCons:• Lack of vertical coordination• Lack of horizontal coordination• Duplication• Competition

Stage 3: Global Matrix

Effort at solving coordination problems of stage 2

But slow decision making

Lines of Business

PCs PeripheralsSBU/RBU

AA

AE

ACLA

ACI

Semiconductors

IPG

AP

Other Business

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

Pros and Cons of GBUs

• Better vertical and horizontal coordination

• Interference between OEM and branded operations

Stage 5

• Acer Brand Operations

• Acer Design, Manufacturing and Service

• Holding and Investment Business

Adaptation/Standardization dilemma

Adaptation = duplication = high cost but high price

Standardization = poor fit = low cost but low price

Decentralization

• Good when locals know more than HQ

• Encourages initiative

But

• Suboptimization– Duplication

– Competition

Centralization

• Good when HQ knows better than the locals

But

• Low incentives

• Poor local adaptation

Choice between centralization and decentralization depends onProduct

Target Market

Experience

Four interdependent levers

• Organizational structure

• Management processes

• HRM policies

• Corporate culture

Fundamentals of Organization Design

• Decomposition principle

• Match between strategy and structure

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)

Three dimensions of organizational structure

• Functions

• Areas

• Products

Four structural templates

• Functional

• Area

• Global

• Matrix

• (Mixed)

Organizational Dimensions

Function

Bu

siness/ p

rod

ucts

Management/se

rvices

R&D

Marketing

Manufacturing

A

B

C

D

EuropeAmerica

Others

Asia Geography

Fragmented Structure

A CB D

Products

Countries

France

Netherlands

Belgium

Germany

Fragmented Structure

• Result from frequent acquisitions

• Little coordination at area level

• Little coordination at product level

Functional Structure

A CB D

Functions

Countries

France

Netherlands

Belgium

Germany

Functional Structures

• Single product manufactured and sold the same way in all countries

• High economies of scale

• Low volume

Area Structure

A CB D

Products

Countries

France

Netherlands

Belgium

Germany

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

Product Structure

A CB D

Products

Countries

France

Netherlands

Belgium

Germany

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

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

Mixed Structure

A CB D

Products

Countries

France

Netherlands

Belgium

Germany

Mixed Structure

• Advised if...–Some products require adaptation

to areas while others do not

Matrix Structure

A CB D

Products

Countries

France

Netherlands

Belgium

Germany

Lines of Business

PCs PeripheralsSBU/RBU

AA

AE

ACLA

ACI

Semiconductors

IPG

AP

Other Business

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

Strategy and Structure

Strategy

Standardization

Adaptation

Standardization for some products, adaptation for others

A bit of both for all

Structure

Product divisions

Area divisions

Mixed

Matrix

Management Processes

• Information systems–E.g. Citibank

• Strategic Plan

• Budgeting

• Compensation

HRM policies

• Local vs. Expatriate Managers

• National or Multicountry careers

Culture

• Language

• Values

Organizational Evolution of MNEs

• Ethnocentric

• Polycentric

• Geocentric

Conclusion

• Everything is a tradeoff

• Organization must change –as conditions change

–as strategies change