The Organizational Structure of a Multinational Company

Phạm Thị Huỳnh Như Lê Thị Như Thuỷ Nguyễn Bá Hải Bằng Hồ Việt Dũng Lê Chung Thanh Thảo Lê Hoàng Anh Thư Lâm Cẩm Ngọc Hoàng Trần Đức Hồng Trần Ngọc Hiền Nguyễn Phương Thảo

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History of TNCs The Organizational Structure The rises of TNCs in the 21st

century Example

A transnational corporation (TNC) is a huge company that does business in several countries.

Examples:  Nestlé

 Cadbury-Schweppes

 Unilever

 BP-Amoco

From the Origins to the Second World War

 The search for resources including minerals,

petroleum, and foodstuffs. For example:  The US agribusiness giant United Fruit Company: controlled 90 per cent of US banana imports by 1899.  Royal Dutch/Shell accounted for 20 per cent of Russia's total oil production.  In Japan: Mitsui and Mitsubishi – “financial clique”

1950s: Banks ->Industrial stocks

Shipping, transport (especially by air), computerization, and communications

In 1906 there were two or three leading firms with assets of US$500 million

New advertising capabilities helped TNCs expand market shares.

In 1971 there were 333 such corporations, one-third of which had assets of US$1 billion or more.

TNCs had come to control 70-80 per cent of world trade outside the centrally planned economies

1970

Today

• 7,000 parent TNCs

• Jumped to 38,000. 90% of them are based in the industrialized world----control over 207,000 foreign subsidiaries.

 Top 100 firms which in 1992 had US$3.4 trillion in

global assets.  The top 100 TNCs also account for about one-third of the combined outward foreign direct investment (FDI) of their countries of origin.  Between 1988 and 1993, worldwide FDI stocks: grew from US$1.1 to US$2.1 trillion

TNCs: the embodiment of modernity and the prospect of wealth: full of technology, rich in capital, replete with skilled jobs. Less-industrialized world: burdened by debt, low commodity prices, structural adjustment, and unemployment.

1992

1993

1994

• Over US$50 billion • Jumped to US$71 billion • US$80 billion

This is most important tasks for top managers of any company. “If everyone in a company is «in place» and knows his duties, if there are rules of interaction between departments, company's activities will remind a tuned mechanism which works with maximum results and minimal costs.” “Michael Newman”

Organizational structure  A scheme consisting of units

and individual officers of the company.  Located by levels of importance and responsibility.  Depending on the stage of company development require different approaches to build the organizational structure.

Subsidiary Model  The most basic structural

models  The subsidiaries are selfcontained units with their own operations, finance and human resource functions.  Allowing them to respond to local competitive conditions and develop locally responsive strategies

Subsidiary Model  The major disadvantage  The decentralization of strategic decisions that makes it difficult for a unified approach to counter global competitive attacks.

Product Division  Each product has its own

division that is responsible for the production, marketing, finance and the overall strategy of that particular product globally  Allows the multinational company to weed out product divisions that are not successful

Product Division  The major disadvantage  The lack of integral networks that may increase duplication of efforts across countries.

Area Division  Each geographical region is

responsible for all the products sold within its region.  All the functional units for that particular region namely finance, operations and human resources are under the geographical region responsibility  Allows the company to evaluate the geographical markets that are most profitable.

Area Division  The major disadvantage  Communication problems, internal conflicts and duplication of costs

Functional Structure  Functions such as finance,

operations, marketing and human resources determine the structure of the multinational company  All the production personnel globally for a company work under the parameters set by the production department

Functional Structure  The advantage  There is greater specialization within departments and more standardized processes across the global network.  The disadvantages  The lack of inter department communication and networking that contributes to more rigidity within the organization.

Matrix Structure

 Overlap between the

functional and divisional structures.  Dual reporting relationships in which employees report both to the functional manager and the divisional manager.  Involve cross-functional teams from multiple functions such as finance, operations and marketing

Matrix Structure  The advantage  There is more cross-functional communication that facilitates innovation  The decisions are also more localized.  The disadvantage  More confusion and power plays because of the dual line of command

Transnational network  Evolution of the matrix

structure  More on horizontal communication.  Information is now shared centrally  This structure is focused on establishing "knowledge pools" and information networks that allow global integration as well local responsiveness.

In the 1980s and 1990s

In 21st Century

 Globalization was largely

 Large multinational

driven by economies of the developed world  United States, Western Europe and Japan

companies headquartered in developing countries  China, Brazil and India  This trend is becoming more pronounced which impacted many developed economies.

Exhibit 1: Cross Border Purchases by Developed and Developing Economies

Exhibit 2: Cross Border Purchases by Emerging and Transition Economies in Developed Economies

Exhibit 1 and 2 show:  The share of cross-border buy-side transactions by developing economies.  Asian developing countries being the major force for this change.

Some major mergers and acquisitions across sectors like oil and gas, mining, automotive and financial services E.g.  The Indian conglomerate Tata Sons' acquisition of UKbased Corus Steel and Jaguar Land Rover  China-based Geely Automotive's takeover of Swedish auto giant Volvo  Mexican cement manufacturer CEMEX's acquisition of Australian cement company Rinker Group.

According to the United Nations Conference on Trade and Development (UNCTAD):  There were 80,000 transnational corporations (TNCs) in 2009  During the last few years, while developed countries accounted for the bulk of the TNCs across the globe, a paradigm shift has been occurring.  The transnationalisation of emerging market firms reflects the maturity in their business processes and their increasing appetite for international growth.

The diagram shows the network of the 295 TNCs among the top holders in 21th century

Exhibit 3: Motivations for Investments for Firms from Emerging Markets

 To reduce the risks associated with being

overdependent on limited market presence  To increase their market presence as well as achieve economies of scale

E.g.  In 2006: the China-based TCL Corporation's acquisition of Thompson and the acquisition of US-based IBM's PC business by China's Lenovo  In 2007, the leading Mexico-based cement manufacturer CEMEX gained a controlling stake in Australian counterpart Rinker Group for USD 14.7 billion => CEMEX also expanded its geographic presence in Australia and the Asia Pacific region

 Many enterprises from

emerging countries are in search of natural resources across the globe.  They acquire strategic resources worldwide for: oil, minerals and other raw materials => transnational routes also help enterprises internationalize and integrate their production facilities globally.

E.g.  In 2006, Brazilian mining giant Vale acquired Canadian-

based Inco, the largest nickel mining and processing company, thus expanding its production facilities in North America.  Indian petrochemical giant Reliance Industries Ltd acquired the shale gas assets of US-based Atlas Energy for almost USD 3.5 billion in early 2010 => Reliance now has the first mover advantage in exploring the

 Corporations need to operate

more efficiently and to increase productivity by vertically or horizontally integrating their processes.  Many firms from the emerging markets are:  Reassessing their internal

operations and their roles in the global value chain.  Investing in the developed economies to achieve efficiencies.

E.g.  In 2006, the acquisition of UK-based Corus Steel by

Indian steel manufacturer Tata Steel  Brazilian aircraft manufacturer Embraer acquired aircraft maintenance, repair and operations (MRO) service provider OGMA in Portugal.

 Developing markets had a construct to be among the

top economies by middle of the 21st century.  In line with their growth ambitions, many of these emerging market firms have expanded their horizons to developed economies and started to take the route of cross-border acquisitions.  Be able to leapfrog the maturity curve => to match the

needs of the developed markets in terms of : 

 

Technology and management advancements, Quality standards and certification, Most importantly, to overcome the psychological barriers with respect to brand perception.

3. TRANSNATIONAL HORIZON: AS WE SEE IT (CONT.) E.g. The Asian giants (China and India) along with Latam (Brazil) would dominate the cross-border firm creation scene => lead to a changing landscape of global economics, where there would be a gradual shift of corporate appetite for transnational growth from the developed to the developing markets

 eSys Information Technologies Pvt. Ltd. is

the world-leading information technology company, and business process outsourcing organization that envisioned and pioneered the adoption of the flexible global business practices that today enable companies to operate more efficiently and produce more value. Efficiency, reach and adaptability are the core values that define eSys business model for IT distribution. Since its incorporation in Singapore in the year 2000, eSys has set a scorching pace to become a major IT component distribution network in Asia and Europe with 32 in-country subsidiaries and more than 100 points of presence. With the presence in 32 countries and across 100 plus outposts the entire enterprise is run on one simple phrase: “Constant innovation that maximizes efficiencies to deliver enhanced value to our customers.” eSys PC has already been launched in India, Middle East, Korea, UK and USA.

“Relax,it’s FedEx.”

“We live to deliver.”

Introduction: FedEx provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services.

Integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand..

Functional Structure  The FedEx Corporation is the parent company over all the others, which provide support to all of the other companies :        

FedEx Express FedEx Ground FedEx Office FedEx Freight FedEx Custom Critical FedEx Trade Networks FedEx Supply Chain FedEx Services

Details of Functional Structure Units & Logos

The original overnight courier services, providing next day air service within the United States and timedefinite international service

Guaranteed daydefinite delivery within Canada and the United States at a cost savings as compared to timedefinite FedEx Express.

Less than truckload (LTL) and other freight services.

Offers copying and digital printing, professional finishing, document creation, Internet access, computer rentals, videoconferencing, signs and graphics, direct mail, Web-based printing, and FedEx shipping.

Provides services relating to customs, insurance, and transportation advice.

Delivers urgent, valuable, or hazardous items using trucks and chartered aircraft.

Provides logistics services including Critical Inventory Logistics, Transportation Management Services, Fulfillment Services, etc.

Provides global marketing, planning and information technology(IT) services for the other FedEx operating companies.

FedEx Express: A wholly owned company of FedEx , which is divided into five global regions: Asia Pacific (APAC) Canada Europe, Middle East, Indian Subcontinent and Africa (EMEA) 4. Latin American and the Caribbean (LAC) 5. United States 1. 2. 3.

FedEx Ground Area

FedEx Timeline 1900-1969

• 1913:C.J. Tower & Sons began operation as a customs broker in Niagara Falls, N.Y. • 1947: Roberts Cartage (now FedEx Custom Critical) is founded as a pickup and delivery trucking company in Akron, Ohio. • 1966: Viking Freight Inc. (now FedEx Freight West) is founded in San Jose, Calif.

1970-1979

• 1971: Federal Express Corporation is founded in Little Rock, Ark. 1973,relocatesd operations to Memphis, Tenn. • 1978: listed on the New York Stock Exchange; ticker symbol is FDX.

1980-1989

• 1983: FedEx becomes the first U.S. company to reach revenues of $1 billion without merger or acquisition. • 1989: FedEx purchases Flying Tigers to expand its international presence.

1990-1999

• 1990: FedEx becomes the first company to win the Malcolm Baldrige National Quality Award in the service category. • 1994:FedEx officially adopts "FedEx" as its brand for recognition as the worldwide standard for fast, reliable service. • 1998:FedEx acquires Caliber System Inc. and creates FDX Corporation

2000present

• 2000: Parent company FDX is renamed "FedEx Corporation." Services are divided into companies that operate independently yet compete collectively. • 2007:FedEx Kinko’s introduces Print Online, an innovative Web-based printing tool allowing customers to access the chain’s professional printing services from anywhere in the United States.

Values

People: We value our people and promote diversity in our workplace and in our thinking. Service: Our absolutely, positively spirit puts our customers at the heart of everything we do.

Loyalty: We earn the respect and confidence of our FedEx people, customers and investors every day, in everything we do.

Responsibility: We champion safe and healthy environments for the communities in which we live and work.

Innovation: We invent and inspire the services and technologies that improve the way we work and live.

Integrity: We manage our operations, finances and services with honesty, efficiency and reliability.

Strategy Compete collectively by standing as one brand worldwide and speaking with one voice.

Operate independently by focusing on our independent networks to meet distinct customer needs.

Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors.

Business Profit and Development Revenue

US$ 34 billion (2010)

Operating income

US$ 2.075 billion (2008)

Net income

US$ 1.2 billion (2010)

Total assets

US$ 25.633 billion (2008)

Total equity

US$ 14.526 billion (2008)

Employees

280,000+ (2009)

Achievements 2001-2010: • FedEx has ranked among the top 20 in the FORTUNE Most Admired Companies list.

03/2011 • FedEx ranks no.8 on FORTUNE’s World’s Most Admired Companies List