2 management - School of International Business and ...

Günter S. Heiduk
nologies, new competitors in emerging economies, unforeseeable external shocks require a shift in
international managers’ thinking and acting: continuous instead of intermittent change, openness
instead of isolation, multiculturalism instead of the Western cultural monopoly. The resulting risks
may lead to a threat generating organizational instability of MNCs. This reflects the current con-
flicts of the globalizing society manifested in inclusion versus exclusion of communities, plurality of
cultures versus cultural pluralism, nationalism versus regionalism. The most striking evidence of
instability of cross-border institutions in private business is the high rate of failed joint ventures and
mergers. Depending on the definition 50 – 80% have failed [e.g. Heckscher, 2007, p 306].
The two basic organizational modes in international business are expatriation and integration. The
former extends operations across borders by transplanting offices, branches, production facilities.
The latter creates transnational network alliances by cross-border mergers, acquisitions or joint
ventures. Both modes are compatible with different organizational structures (Figure 16). The
international organization model is characterized by a strong headquarter that is managing the
overseas operations as appendages to a central domestic corporation. The linkages between the
headquarter and the subsidiaries are tight and controlled by formal management systems. Even
decentralized decisions are controlled from the headquarter. The multinational organization model
differs in terms of the headquarter-subsidiary relations. Overseas operations are managed as a
portfolio of independent businesses. This requires decentralization of many key assets, responsi-
bilities and decisions, and therefore results in informal relationships between the headquarter and
the subsidiaries overlaid with simple financial control. The management in the global organization
model treats overseas operations as delivery pipelines to a unified global market which requires
tight central control of the subsidiaries regarding resources, decisions, information. This structure
looks more like a hub-and-spoke relation than a relation at eye level. The integrated network model
demands coordination, cooperation between the independent units in order to make full use of the
geographically dispersed highly specialized resources and capabilities. Managing large flows of
products, parts and components, natural, financial, human resources, and information is a demand-
ing challenge.
Each organizational structure of an internationally operating company is the result of management
decisions that either follow or run ahead the path of globalization. Organizing a global company
is an evolutionary process that should never stop as long as firstly external economic, political,
social and technological trends and bifurcations challenge internal organizational structures and
secondly entrepreneurial spirit discovers organizational innovations. Thanks to the ICT revolution
the speed of globalization has increased considerably. Managing ongoing organizational transfor-
mation seems to be more important than achieving one of the aforementioned models. Therefore,
international management needs to be based on a systematic approach to guarantee a »living«or-
ganizational globalization of the company. But changing the organizational form of a company in
terms of business as usual would not be enough to cope with the risks of global competition. Trans-
forming the paradigm of what a manager is belongs to the overall strategy as well [Groothuis and
Akbar, 2007, p.48].
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