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Transnational Model of Organization

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Cassandra Glebavicius

on 11 February 2015

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Transcript of Transnational Model of Organization

Integrated structure achieves economies of scale (efficiency)
Differentiation allows for greater flexibility in overseas markets while maintaining interdependency
Global, interconnected business model allows for knowledge sharing and new learning to flow across units and borders
Transnational Model of Organization
Background
Illustrations & Examples
How Useful is Transnational?
Conclusion
Complex system
Means of reaching goals of global efficiency, responsiveness, and learning
Can be extremely successful

In your comments:
Are there any modifications that you think would make this model even more successful?
How does this model compare to your other organizational model preferences so far?
Introduction
Advanced, complex model
Best for large multinational companies
Integrates and links a network of operations together to achieve organizational goals
Literature Used
"Managing Across Borders"
Christopher A. Bartlett and Sumantra Ghoshal
" Transnational Transfer of Strategic Organizational Practices"
Tatiana Kostova
"Why Do Private Governance Organizations Not Converge?"
Luc Fransen
"Tracking the Transnational"
Jeff Hearn
What is a Transnational Organization?
Developed for idealized international organization
Differs in structure from traditional frameworks
Aims to achieve global efficiency, regional flexibility, and worldwide sharing of knowledge
Springs from managements realization that today's business environment requires a different kind of organization structure
Characteristics

Global departments highly integrated and interdependent
Mutual cooperation
Flexible coordination process
Some resources centralized, others distributed globally
Corporate culture and management styles guide organizational collaboration rather than structures
Roles of departments vary globally
Efficiency and innovation flow globally
Model Comparison

Strengths
Does the Theory Have Value and is it Applicable?
Efficiency as a means to compete on a global level
Management recognizes that in order to be competitive they must address various issues
Being transnational is complex, but when operated effectively, can be very successful
Looks at the broad picture of how the company operates
How Does Technology and Global Economy Affect it?
“Strategic organizational practices tend to be more complex and broad in scope, and more ‘people’ rather than ‘technology’ focused, because these characteristics are likely to make a practice less imitable and more critical for the competitive edge of a firm,” (310 Kostova).
However, technology is what makes this all possible
Communication is essential
Since the company is across the globe,
the economy of places will make an
impact
How Does it Compare to Other Theories?
Neither strictly centralized nor decentralized, but a combination of both.
Transnational coordinates processes of centralization, formalization, and socialization.
Does it Depend on Management?
Result of managements’ approach
Management must embrace and actively pursue its qualities
Challenges of managing a Transnational Organization:
1. Balance capabilities and perspectives
2. Build flexible coordination
3. Encourage vision and commitment
What if We Modified it?
Weaknesses
Strengths are also weaknesses
Extremely complex
Difficult to achieve and maintain
Takes extensive time to implement
Considerable degree of effort and change
Efficiency and flexibility would be negatively affected
Must allow locations the flexibility to operate on local and specialized basis that benefits the whole
If structured communication were to be eliminated, companies would lose the benefits of available resources and innovation
Examples
Application
Products have modular structures
Packaging subject to change based on location
Fill customer demand for same quality/cost globally
Products created by a subsidiary assume lead role for the organization
Challenges
Goal: Build flexibility, achieve responsiveness, maintain efficiency, and enhance competitiveness
Cannot use mechanical adoption of framework in differentiation of subsidiaries roles
Must foster development of processes
Challenges
Organizations do not have a "home" country
Transnational organizations have difficulty operating in emerging markets
Complex configurations of assets and capabilities
Subsidiary in Mexico may rely on materials from France; Worldwide subsidiaries may rely on finished products from Mexico
Becoming Transnational
Coordinate flow of parts, components, and finished goods
Manage flow of funds, skills, and other scarce resources
Link flows of intelligence, ideas, and knowledge together
Portfolio of coordinating processes
Centralization – substantive decision making by senior management
Formalization – institutionalization of systems and procedures to guide choices
Socialization – building a context of common purpose, values, perspectives among managers

Examples
Royal Dutch/Shell
- Explores for oil in 50 countries
- Refines in 34
- Markets in 100
- Sales equal to Iran's GDP
Chiquita / Dole / Del Monte
- Controls 2/3 sales Latin American bananas
Nestle'
- Swiss food company
- 91 % total assets, 98%sales, 97% workforce are foreign based
Bayer
- Health, Agrochemical, Biotechnology, Material Science company
- Net Income: EUR 2.446 billion (2012)
- Workforce: 110,500 employees worldwide
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