3

Key points to consider
when redesigning the global organization

Although the global organization will need to be redesigned by world headquarters in Stage 4, there will be no universal solution. Chapter 3 will discuss the guidelines to be followed in considering a new global organization.

There are three points to be considered when redesigning the global organization:

1) Which functions require concentrated efforts and
which functions should be performed in a decentralized manner;
2) If the execution of a function is to be decentralized,
then what will be the smallest unit for performing the function; and
3) The location of the base.

Here, the term “function” may be replaced by “capability.” What is important is that the entities first realize the core capabilities required to win on the world market and subsequently envision the organization that would reinforce their core capabilities.

Obviously the global control centre functions of taking a bird’ s eye view of the world and determining global optimization need to be performed in a concentrated manner. However, as far as the other functions are concerned, whether such functions should be performed in a concentrated or a decentralized manner will depend on certain prerequisites (e.g. standardization). Consequently, it is preferable that the entity deliberately determines which functions require concentrated efforts and which functions require decentralized efforts, and then creates the conditions that will enable the performance of such functions.

When functions are to be decentralized, the smallest unit for its performance will not necessarily be the “region” overseen by the regional headquarters. For example, units based on markets will not necessarily be geographically adjacent but may expand beyond the framework of a particular “region.” Typical examples are the markets of the emerging countries. If an entity were to adopt the unit of the “Americas” and “EMEA,” the Americas would include the emerging countries of South America and EMEA would include the emerging countries of the Middle East / Africa (and in some cases, Russia). In order for an entity to reinforce its approach to the emerging markets, it may be necessary to adopt a separate unit for the emerging markets.

The four points to be considered when selecting a location are:
  1. Ease of doing business,
  2. Business costs,
  3. Access to superior human resources;
  4. Access to critical markets.
While the points to be emphasized will vary according to the function, the important thing is to determine the location for conducting the functions that would provide the greatest competitive edge.

Careful exploration of the above three points will provide the entity with a clear vision of the global organization to which it should aspire. As stated earlier, there is no universal solution. However, if we were to take the liberty of projecting our image of this organization, it would be “consolidated hubs”, where a hub that executes its functions globally and in a concentrated manner and a hub that conducts its functions in a decentralized manner through various units have been connected by networks.

This summarizes the points made in Chapter 4.