Designing the Global Corporation

Rating:
Summary: Organizations of third-generation strategies.
Review: "Most companies do not have the capabilities to institute the multidimensional organizations that are required by their strategies and necessary to serve their global customers. In one memorable conversation,...Chris Bartlett summed up the situation well, stating that companies pursue third-generation strategies using second-generation organizations staffed with first-generation human resources. When first-generation managers attempt to institute third-generation multidimentional organizations, they fail and attribute the failure to the organizational form, not to their lack of capability. They then call for a return to simple, first-generation organizations. These simple organizations will work if the companies follow first-generation strategies in clear and stable industries. However, if a company wants to enter complicated countries like China, create value for the global customer desiring solutions, and be competitive in converging industries, it must pursue a third-generation strategy. This book is intended for those who wish to design the third-generation organizations required by third-generation strategies...I believe in 'keeping it simple' but with two twists. First, I believe we should keep it simple for the customer; a company should work toward being easy to do business. Second, I believe we should keep it simple for front-line employees-those people with direct customer and product contact...The new mandate to keep it simple for customers and front-line employees makes management's job difficult and complex; how to organize in order to manage this complexity is addressed in this book...Some firms, like ABB, IBM, and Citigroup, believe that the winning companies are going to be those that can manage global complexity. It is for these firms that this book is written" (from the Preface).

In this context, Jay R. Galbraith:

* highlights some of the reasons for adopting a global organizational capability as well as some of the inherent challenges in doing so, and also spotlights some of the managerial and business-environment mind-set that can prevent these strategies from being embraced and employed to full advantage.

* argues that the global organizations are complex and multidimensional networks as a result of balancing many strategic factors; and then describes these factors in four categories: level of international development, amount of cross-border coordination, activity of host local institutions, and diversity of international business porfolio.

* argues that the level of international development-one of the strategic factors that influence how a company organizes its international operations-consists of three dimensions: the role of subsidiaries, the mode of participation in the local economy, and the proportion of assets and employees located outside the home country; and then defines the different types of competitive advantages, and focuses on the different levels of international development and how a firm changes from one level to another.

* argues that after exporting, the next level of international development is investment in foreign countries with a partner; and then focuses on the partnering process itself and the organizational skills-particularly the organization design.

* describes six tasks of geographical division: (1)transfer advantages from existing geography, (2)localize the success formula, (3)build a local business, (4)communicate with and educate the home country, (5)champion the new subsidiaries, (6)build international capabilities; and also describes the organizational design decisions involved in performing these tasks.

* reviews the variety of multidimensional structures chosen by companies, like Nestle, ABB, HP, and DuPont, by varying strategic factors, like fixed costs, markets, products, customers, competitors, transportability, and portfolio diversity.

* defines the lateral organization as an informational and decision-making process that coordinates activities whose components are located in different organizational units, and describes different types and amounts of lateral network coordination related to the strategic factors.

* argues that the easiest lateral organization is the informal or voluntary organization, and management's role in this self-organizing process is to create the appropriate context and remove any barriers to free-flowing contacts. In the next level, management-building on the informal networks-designs formal cross-border groups to manage shared functions, coordinate business units, and create global products; and then describes what makes the groups formal, and discusses the design issues involved in creating formal groups that coordinate across borders.

* discusses the factors that are creating transnational form as the last level of international development, and then elaborates organizational-design issues of this in an example.

* argues, the full complexity facing many companies involves simultaneously managing functions, geographies, product lines (or business units), customers, and solutions-at the very least. These companies must use multidimensional structures, with the dynamics of global business requiring that these multiple dimensions be reconfigurable. Different customers require the services of different combinations of business units and country subsidiaries; to be competitive, a company must be able to configure and reconfigure its profit centers to create value for customers. And then presents the framework for organizing around multiple dimensions, with focusing on the customer and customer solutions in cases of Citibank and IBM.

Finally, he writes,"Regardless of whether globalization continues, stalls, or even reverses, the models described in this book should continue to guide organizing choices. The most likely new level of international development will probably be a consrtium or some type of electronic or virtual combination of local companies".

I highly recommend this invaluable study.

Rating:
Summary: Geography is History!!
Review: Background: Geography is History!! So went an advertisement from a telecom company a few years ago. And as globalization proceeds to breakdown national boundaries, open up cultures and increases access for economic activity, an awareness of this process of breakdown of geography has become a necessity for any corporation wanting to grow and flourish. Increasing size in this dynamic environment brings with it many challenges including increasing structural complexity, need for quick and seamless communication to manage this complexity, as well as an ability to assess and predict the changing external world, recognize opportunities therein and fashion nimble responses to gain competitive advantage. 'Designing the Global Corporation' is a book written to address such issues in an attempt to help managers structure their thinking towards an increasingly boundaryless world.

Synopsis: Jay Galbraith begins his book by arguing against the KISS principle (Keep It Simple, Stupid!) of organizational design. He recognizes that increasing foreign direct investment (FDI), breakdown of trade barriers and improved communications via media like the Internet along with a corporations need to reach customers globally have increased the complexity of doing business. Corporations could fight this complexity and simplify their operations, or learn to accept, manage and in fact use this complexity as a competitive advantage against simpler competitors.
He then goes on to inject great precision into the concept of a globalization for a corporation and defines 5 different levels of international development in increasing order of complexity. A corporation may develop a competitive advantage in its home country and then try to export this advantage to international destinations, evolving through different levels of international development. Or, a corporation like Logitech, may be designed as a transnational corporation from its very inception, with hardware R&D located in Switzerland, software development in California, manufacturing in Taiwan and sales in every country. Evolution from level 1 to level 5 may not be inevitable and/or desirable, with many companies deciding to settle into a particular niche depending upon the nature of their business and their long-term goals.
The rest of the book is devoted to a very clear, well-illustrated nuts and bolts description of designing global corporations with different levels of internationalization. The geographical entity headed by a country manager, multinational single business units and the multinational multi dimensional organizations are described in great detail. Underlying theme of this entire discussion is that the structure of the organization has to cater to its overall strategy, and the former has to change as the latter evolves.
The author spends considerable time and space on the need and means for developing informational and decision-making networks within such complex organizations. Here again he describes 5 different types of networks in increasing order of complexity beginning with informal voluntary communication and going up to a formally structured matrix organization. He discusses the advantages and limitations of each and how such networks may be used to propagate the agenda of the corporation. As a corporation increases its level of internationalization, it has to deal with increasingly complex networks that transcend geography, business function and culture.
He ends the book by describing the 5 dimensions that a global corporation must learn manage in order to remain successful. These 5 dimensions are managing functions, geographies, product lines (or business units), customers and solutions.
Finally, he writes, "Regardless of whether globalization continues, stalls, or even reverses, the models described in this book should continue to guide organizing choices.....and as businesses struggle to compensate and thrive on their ever expanding journey, the ideas and structures presented in this book can serve as a road map."

Critique: The author has presented his ideas very clearly and illustrated them with many examples from real companies. The organization of the book follows a logical flow of thoughts and the language used makes it fairly readable. Having said that, the complexity of many of the concepts presented in this book precludes it from being a casual bedtime reading, rather it demands full concentration and a careful attention to detail from the reader.

Rating:
Summary: Full of valuable insights for managers and scholars alike
Review: Galbraith has succeeded in filling the gap that he intended to fill in that specific area of management literature where organization theory and international business research interact. Although I was initially rather skeptical of the scholarly value of the book - since it appears to be particularly aimed at practitioners - I was pleasantly surprised at the wealth of novel theoretical insights that I was able to extract from it. Although it clearly builds on Galbraith's earlier work (for which he is renowned), it definitely adds something to the field. This book will leave those interested in international business (both practice and theory!) with an enhanced understanding of some of the organizational aspects of the multinational corporation that seem to me to be relatively underresearched.

Rating:
Summary: Highly Recommended!
Review: Globalization has become such an overused buzzword that it has become nearly devoid of meaning. Here, author Jay R. Galbraith injects new precision into the concept: Going international means plenty of hard work and painstaking attention to detail. Because every company's strategy, market and competitive advantage is unique, it's impossible to define one single, perfect, organizational structure for an international business, but Galbraith provides some fascinating alternatives to consider. Although Galbraith's book is jargon-filled and dense, it is full of useful, illustrative examples. He manages to reduce international business to its simplest form: A company develops an edge, and then tries to take it abroad. This involves many challenges, which Galbraith describes in rich detail. So if your company is multinational - or wants to be - we at getAbstract recommend this book to you. It is tailor-made for executives who are involved in international business - or who hope to expand their global reach.

Rating:
Summary: A Compass and a Map...Not a Blueprint
Review: Let's begin with Galbraith's concluding remarks: "The new development process for global products [and services] is one of the key organizational capabilities that a firm must master when evolving into a multinational company. Even without the global challenge, the product development process has become complex: products [and services] have to not only meet market requirements but also be manufacturable, reliable, serviceable, useable, and recyclable, and meet target costs in shorter and shorter cycle times." If this brief excerpt describes the situation your organization is in now or one to which it hopes to relocate ASAP, this brilliant book is "must reading."

In a very real sense, Galbraith functions as both a management consultant and an architect. The emphasis on the principles of "design" is intentional and eminently appropriate. Here are some of questions he answers:

What is the challenge of organizational complexity? How to overcome it?

How to organize the global corporation?

What are the levels of international development?

What does partnering require? When and why is it beneficial?

What is the significance of geographical division?

Which multidimensional structures are most important? Why?

What are the most effective strategies for coordination between and among networks?

What are cross-border formal networks? What are their significance?

What are the most effective ways to shift power across networks?

What is the "transformational form"? What is its significance?

What is a "multidimensional multinational"?

What are the most effective organizational strategies to serve the global customer?

What is a "front-back hybrid organization"?

After "A Look Ahead", Galbraith provides an Appendix ("The New Global Process of New-Product Delopment") which, all by itself, is well worth the price of the book. To repeat, I consider it "must reading" for organizations already embarked upon globalization or which are now preparing to begin that perilous journey. There is another category of organizations which can also derive substantial benefit from this book: Those who now do business with or plan to do business with others now active in the global marketplace. With all due respect to Galbraith, there is no single "design" which is appropriate for all or even for most organizations. Moreover, today's appropriate design may well prove inadequate in the near future, if not by tomorrow. Therefore, I suggest that you use Galbraith's book to identify the questions which must be asked and then answered, to take full advantage of the advice he provides and of the guidelines he suggests, and to view the design process as a unique opportunity to energize (or re-energize) everyone involved. Galbraith asserts (and I agree) that companies CAN transform themselves to design local products or devise local services that capture global scale yet fit local-market requirements. Only those which do will prosper. The choice is theirs. It really is.

Rating:
Summary: A Compass and a Map...Not a Blueprint
Review: Let's begin with Galbraith's concluding remarks: "The new development process for global products [and services] is one of the key organizational capabilities that a firm must master when evolving into a multinational company. Even without the global challenge, the product development process has become complex: products [and services] have to not only meet market requirements but also be manufacturable, reliable, serviceable, useable, and recyclable, and meet target costs in shorter and shorter cycle times." If this brief excerpt describes the situation your organization is in now or one to which it hopes to relocate ASAP, this brilliant book is "must reading."

In a very real sense, Galbraith functions as both a management consultant and an architect. The emphasis on the principles of "design" is intentional and eminently appropriate. Here are some of questions he answers:

What is the challenge of organizational complexity? How to overcome it?

How to organize the global corporation?

What are the levels of international development?

What does partnering require? When and why is it beneficial?

What is the significance of geographical division?

Which multidimensional structures are most important? Why?

What are the most effective strategies for coordination between and among networks?

What are cross-border formal networks? What are their significance?

What are the most effective ways to shift power across networks?

What is the "transformational form"? What is its significance?

What is a "multidimensional multinational"?

What are the most effective organizational strategies to serve the global customer?

What is a "front-back hybrid organization"?

After "A Look Ahead", Galbraith provides an Appendix ("The New Global Process of New-Product Delopment") which, all by itself, is well worth the price of the book. To repeat, I consider it "must reading" for organizations already embarked upon globalization or which are now preparing to begin that perilous journey. There is another category of organizations which can also derive substantial benefit from this book: Those who now do business with or plan to do business with others now active in the global marketplace. With all due respect to Galbraith, there is no single "design" which is appropriate for all or even for most organizations. Moreover, today's appropriate design may well prove inadequate in the near future, if not by tomorrow. Therefore, I suggest that you use Galbraith's book to identify the questions which must be asked and then answered, to take full advantage of the advice he provides and of the guidelines he suggests, and to view the design process as a unique opportunity to energize (or re-energize) everyone involved. Galbraith asserts (and I agree) that companies CAN transform themselves to design local products or devise local services that capture global scale yet fit local-market requirements. Only those which do will prosper. The choice is theirs. It really is.

Rating:
Summary: Designing the Global Corporation
Review: The author has the ability to digest what could be a complex subject into simple, easy to read information. The book is as broad as it has to be to cover all pertinent bases, yet it's as deep as it can be within the allotted space. Consistent reference to other books and studies are provided throughout. This book gives a straightforward overview for those considering the options available for establishing international organizations.

Rating:
Summary: Designing the Global Corporation
Review: The author has the ability to digest what could be a complex subject into simple, easy to read information. The book is as broad as it has to be to cover all pertinent bases, yet it's as deep as it can be within the allotted space. Consistent reference to other books and studies are provided throughout. This book gives a straightforward overview for those considering the options available for establishing international organizations.