Incoterms 2010 and International Business - 101
International Business: Environments and Operations, 15e (Daniels et al.)
CHAPTER SIXTEEN: THE ORGANIZATION OF INTERNATIONAL BUSINESS
CHAPTER SIXTEEN: THE ORGANIZATION OF INTERNATIONAL BUSINESS
OPENING CASE: Organizing “People, Values, and Environment” at Johnson & Johnson
[See Fig 16.1]
Since beginning operations in 1886, Johnson & Johnson (J&J) has evolved into the most broadly based health-care corporation in the world. It sells its products in more than 175 countries, generates annual global revenues of more than $61 billion, and employs about 119,000 people (of which nearly 70,000 are located outside the United States). J&J’s business strategy aims for leadership in the firm’s three core areas: pharmaceuticals, medical devices, and consumer products. Formal planning at the business-unit level includes initiatives on major issues such as biotechnology, the restructuring of the health-care industry and globalization. Although J&J’s operating units are largely decentralized, headquarters managers are responsible for coordinating production and marketing on a global basis and dealing with issues common to many or all operating units. This streamlining of coordination and control activities, or moving some areas of control back to headquarters, allows operating units to focus on the issues that are most important to their day-to-day performance. Successful employees are rotated among units. Self-directed councils (research, operations, etc.) meet regularly to swap ideas. Since 1943, J&J has had a credo to guide employees in their responsibilities. The credo tells J&J managers who and what to care about and in what order. The credo is available in 36 languages.
Questions
16-1 Identify and explain three to five benefits of decentralized decision making with Johnson & Johnson. Discuss how these benefits might create strategic and operational difficulties.
Decentralized management allows managers who are closest to customers and competitors to make decisions, which enables operating units the authority to act as they believe best given local conditions. Decentralization gives people a strong sense of ownership, entrepreneurship, agility, and accountability. This enables the business to grow faster because they are driven to bring greater value to the marketplace through internal discoveries, technology, licensing, and acquisitions. The high degree of autonomy can at times create dilemmas when the directors of the foreign subsidiaries assume they have absolute power. Decentralization can also hinder the ability to integrate operations due to market trends, competitors’ moves, and changing technologies. (LO: 2, Learning Outcome: Describe the features of classical structures, AACSB: Analytical Skills)
16-2 Would you prefer to work in a decentralized or centralized company? What outlooks and competencies would make you a high-performing executive in your preferred choice?
The response to this question is subject to different interpretations by different students. (LO: 2, Learning Outcome: Describe the features of classical structures, AACSB: Analytical Skills)
CLOSING CASE
Infosys: The Search for the Best and Brightest
India produces about 300,000 engineers a year, putting the country at the forefront of the global offshore market. India’s offshoring sector is dominated by information technology (IT) services. Infosys was founded in 1981 and is headquartered in Bangalore, India. The firm is a global technology services firm that designs, defines, and delivers IT-enabled, end-to-end business solutions to clients worldwide. Infosys anchors its analysis in the value chain, disaggregating the various components into what it calls a Global Delivery Model. Most of the code writing is done in Bangalore; however, the company also stations its employees worldwide to deliver services onsite to customers. Infosys has grown from humble beginnings into a major IT powerhouse. Its profitability has attracted the attention of competitors from around the world. In addition to the challenges facing Infosys from competitors, the company faces three critical challenges. The first challenge is to become a proactive problem-solver, rather than react to the problems of customers. The second challenge is to become more multicultural by integrating people from different parts of the world on collaborative projects. And the last challenge is to continue to retain the soul of a small company in the body of a large corporation.
Questions
16-3 How might Infosys retain its founding values as it grows and globalizes?
Infosys may be able to retain its values by focusing on the mission statement and making sure that all employees understand the corporate mission. It appears that the organization has been proactively recruiting and training a globally diverse workforce that is made to understand not only the technical and competency requirements of a position, but also the integrity standards of the company. (LO: 1, Learning Outcome: Profile the evolving process of organizing a company for international business, AACSB: Analytical Skills)
16-4 What organizational problems do you think will prove troublesome to Infosys? How would you use the strengths of its current organization to manage them?
Infosys is a very multicultural organization having 75 nationalities represented in its workforce. The workforce speaks 40 different languages and the organization is constantly growing. All multicultural organizations face relational problems as people from different cultures and backgrounds interact. Cultural misunderstandings and personal biases will present Infosys with challenges to overcome. With its extensive employee training program and devotion to human resources, it seems reasonable to conclude that Infosys will be able to overcome these relational challenges. (LO: 4, Learning Outcome: Discuss the systems used to coordinate and control international activities, AACSB: Dynamics of the Global Economy)
16-5 Consider the options presented in the chapter regarding structural design, coordination and control, and corporate culture. Map the interplay among these dimensions at Infosys.
Answering this question will require some speculation or additional research on the part of the students since little information is provided in the case concerning these aspects of management. Students could be asked to create or propose the ideal structure, coordination and control, and corporate culture for the company. While India has had a love of bureaucracy in terms of organizational structure, from the case it appears that perhaps Infosys is somewhat different. The company may be designed along the lines of a product structure, or perhaps a matrix structure, which would seem to work best in an IT consulting environment. Coordination by mutual agreement or plan would perhaps work best here too. Control systems at Infosys will probably need to employ a number of different mechanisms, including reports, evaluative measures, technology, and perhaps some clan control. The corporate culture must continue to be strong and reinforce the basic founding principles, as well as stress the importance of respect for the individual and cultural diversity. (LO: 3, Learning Outcome: Describe the features of neoclassical structures, AACSB: Analytical Skills)
16-6 Based on our discussion of classical and neoclassical structure, what do you think the Infosys organization will look like in 2015?
Opinions will differ concerning this question. One significant event in the evolution of Infosys was the adoption of the Global Talent Program. Infosys realized that if it was to become a truly multinational organization that it would have to recruit employee talent from countries where the company does business. While the employees of Infosys in India may be speaking English, there are cultural nuances that often can be significant in dealing with clients. No one understands a culture as well as someone who has been raised in that culture and it was a wise move on the part of Infosys to develop a multicultural employee pool. In addition, Infosys clients will be coming from countries where English is not the first language and so having native speakers of several languages will facilitate client relations. Another significant event in the evolution of the company was acquiring the contract with Airbus for the A380. This event moved Infosys into a more sophisticated and potentially profitable market. (LO: 1, Learning Outcome: Profile the process of organizing a company for international business, AACSB: Analytical Skills)
16-7 How do you think classes at Infosys’s corporate university differ from those in a traditional Bachelor of Business Administration or MBA program?
The classes at Infosys would be more focused and specific to organizational and industry needs. Although portions of the training program appear to be based upon theory, there also appear to be opportunities for direct application of the material. Success within the program would also likely provide a more instant gratification career-wise, as those that perform well have immediate opportunities within the organization. (LO: 5, Learning Outcome: Profile the role and characteristics of organizational culture, AACSB: Reflective Thinking)
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