ORGANIZATIONAL STRUCTURES FOR INTERNATIONAL OPERATIONS: AN EXPERIENTIAL ACTIVITY Developments In Business Simulation & Experiential Exercises, Volume 17, 1990 193 ORGANIZATIONAL STRUCTURES FOR INTERNATIONAL OPERATIONS: AN EXPERIENTIAL ACTIVITY Lee A. Graf, Illinois State University Masoud Hemmasi, Illinois State University INTRODUCTION In multinational business ventures, as in domestic operations, organizational structure is determined by corporate strategy-structure follows strategy. The portion of the strategic plan related to international operations may range from simple export to worldwide operations. Resultantly, the organization structure used to carry out the strategy may range from a small export department to a chart reflecting a fully integrated multinational operation based on geography, product, or function. The purpose of this experiential exercise is to give participants the opportunity to extend their understanding of the organizing function to international applications. Specifically, you are asked to draw the organization charts for a hypothetical firm, Koca Cola, as it evolves through various stages from early international involvement of production and marketing through subsidiaries companies in host countries.11 Stage 1: Early Export Koca Cola (KC) is an American soft drink manufacturer that has had considerable market success in the slowly expanding soft drink market. KC’s strategic plan has always placed heavy emphasis on product superiority. “Koke”, as it is sometimes called, has recently decided to expand its market by selling its soft drink in a large South American country. However, the company wants to get a better “handle” on the true demand for its product before establishing a marketing subsidiary abroad. Draw an organization chart that reflects the above outlined strategy. Stage 2: Later Export KC has now been exporting its product to Kantagua (our hypothetical South American country) for 14 months. Unfortunately, the import house being used also services a number of other clients from whom, we have surmised, it feels it can gain greater economic advantage. Resultantly, the import house has done an acceptable but not outstanding job of servicing our product line. Fortunately, however, by working through the import house arrangement, we have become far more aware of the untapped sales potential In Kantagua. The time seems ‘ripe” to set up marketing subsidiaries in the three major cities in Kantagua (Kan, Tag, and Gua). In addition, you see growing opportunity for export to sister country, Tankagua, and decide to market your product line through a manufacturer’s representative in that country. Draw the organization chart that reflects the revised strategy (all other strategic issues remain as they were in Stage 1.) 1 NOTE: Background information and instructor’s materials were omitted from this abbreviated version of the exercise. They will be made available at the 1990 ABSEL Conference or can be obtained by contacting Lee Graf, Department of Management and Quantitative Methods, 339 Williams Hall, Illinois State University, Normal, Illinois 61761. Stage 3: Early International Production Three years have now passed since setting subsidiaries in Kantagua and establishing a relationship with a relationship with a manufacturer’s rep in Tankagua. During this time Kokes product line has expanded significantly. Koke’s competition has also grown considerably. There is far less certainty today regarding business activity than has existed in the past. In addition, implementation of the first diversification strategy at home has resulted in the purchase of two other companies, “Folks” and “Jokes,” each with a radically different product line utilizing different production facilities and marketing channels than that of Koke. Folks is a manufacturer of whole-hog sausage; Jokes, a company that produces and markets novelty items (gag and party gifts). While thought has been given to exporting the products of Folks and Jokes to foreign markets, no decision has yet been made. The only firm international decision made by corporate management is that it will establish a joint venture arrangement with Tagua Industries located in the city of Kan to produce Koke for sale and distribution in Kantagua’s three major cities (Kan, Tag, and Gua) and in the expanding markets in more rural areas. Draw the organization chart that reflects this revised strategy (all other strategic issues remain as they were in Stage 2). Stage 4: Later International Production Three additional years have now passed since initiating production of Koke through a joint venture in Kantagua and exporting it from the U.S. to Tankagua. One of the lessons well learned over these years was that while in close proximity to each other, Kantagua, Tankagua, and all of its South American neighbors have major differences in markets, cultures, and laws. These national variations necessitate that business ventures in each country be handled very differently. During this period, company executives have learned a great deal about the wants and desires of the people of Kantagua; they also have had the opportunity to assess more accurately the market for Koke in Tankagua. Furthermore, executives in Tankagua’s northern neighbor, Guatanka, have expressed interest in setting up a bottling plant in that country. Government regulations in Guatanka, however, prohibit foreign (U.S. in this case) firms from owning or managing production facilities. Licensing arrangements for production and marketing are legal in Guatanka and such an agreement is reached with this group of executives. Because of significantly improved relations with government officials in Tankagua and very flexible laws associated with business practices there, Koke’s corporate officials have decided to build a bottling facility and establish sales Outlets in Nat, Tankagua’s capitol. This will be a wholly Owned subsidiary of Koca Cola. Company officials have also succeeded in negotiating an import arrangement for Folks sausage with the import house that had previously handled the Koke account in Tankagua. Because of the significant growth in international activity (now generating more than 35% of the net profit of the corporation), the company has decided to divisionalize its international operations, separating it from its domestic businesses. Draw an organization chart that reflects the above outlined strategy (all other strategic issues remain as they were in Stage 3). Table of Contents Volume 17, 1990 The Impact of Decision Support Systems on the Effectiveness of Small Group Decisions - Revisited The Relationship Between Financial Performance and Other Measures of Learning on a Simulation Exercise Use and Effectiveness of an Analogy-Based Expert System Suggestions for Computerized Business Authors Dealing with Power: An Experiential Exercise Using Movie and Personal Diary Analysis Techniques A Model for Developing Student Skills and Assessing Outcomes Through Outdoor Training Computer-Aided Exercises Versus Workbook Exercises as Learning Facilitator in the Principles of Marketing Course An Exposition of Guilford's Si Model as a Means of Diagnosing and Generating Pedagogical Strategies in Collegiate Business Education Formal Planning and Simulation Team Performance: A Cross Sectional Approach Cases: Real Organizations in Real Time in the Classroom An Empirical Investigation of the Internal Validity of Marketing Simulation Game An Empirical Evaluation of the Pedagogical Value of Playing a Simulation Game in a Principles of Marketing Course Factors Affecting Effective Teaching of Strategic Planning: Some Preliminary Evidence An Experiential Exercise for Learning About the Relationship Between Organizational Form & the Project Management Process Accounting Communication Skills can be Taught in the Auditing Course Modeling Cost Functions in Computerized Business Simulation: An Application of Duality Theory and Sheppard's Lemma A Life Cycle Analysis of Decision Making for a Strategic Management Team What's the Problem? A Dynamic Model for Teaching Problem Solving Skills Experientially International Currency Fluctuations: Money$im, A Simulation Superstores: A Specialized Retailing Simulation Within a Specialized Marketing Curriculum Factors Affecting Student Perceptions of Learning in a Business Policy Game VC + EL = VL The Name Game: An Experiential Exercise in Intergroup Relations The Effects of Experiential Accounting Work Experience on Student Performance in Intermediate Accounting Courses The Results of Using the Experiential Activity Group Performance Evaluation in a Business Policy Setting Using a Legal Database to Describe the Legal Environment of Marketing (and Business) Matching Environmental Uncertainty and Organizational Configuration An Instructional Computer Simulation of Tampering in QC Executive Evaluation of Student Learning in the Looking Glass Simulation Group Personality Composition and Total Enterprise Simulation Performance An Expert System for Selecting Analytical Techniques for Analyzing Marketing Research Data Effects of Cognitive Styles on Responses in an In-Basket Simulation A Psychometric Analysis of Kolb's Revised Learning Style-Inventory Selecting and Developing Experiential Exercises Using Movies Application of a Real-World Strategic Management Model in the Classroom Demand Equations which Include Product Attributes Consumption as the Objective in Computer-Scored Total Enterprise Simulations The Effects of Decision Format and Evaluation on Simulation Performance, Decision Time, and Team Cohesion The Effects of Computer Related Assignments on Student Performance in Business Administration The Money Game: A Dynamic Simulation Including Random Shocks for Money and Banking Courses Methods for Evaluating Performance on Business Simulations: A Survey The Effects of Synergogy on the Policy Course: Significant Improvements in Student Learning and Teacher Evaluation Conditions and Outcomes of Trust in a Two-Person Bargaining Exercise Bankgame Enhancing Computer Business Simulation with the Use of VGA Graphics An Experiential Approach to Entrepreneurship An Advanced Simulation Method (ASM) for Multiple Objective Problems The Influence of Experiential learning Techniques on Student Recognition of Non-Primary Learning Styles Negotiating Mergers and Acquisitions: A Cocktail Napkin Approach Identification of Unintended Effects in Experiential Laboratory Exercises An Experimental Comparison of Paper and Pencil and Computer Aided Decision Support Tools Porting a Simulation from the IBM World to the Macintosh World A Transaction Cost Analysis of Experiential Learning The Development of Experiential Exercises for Courses in Entrepreneurship and Small Business Management The Assessment Center as and Experiential Classroom Exercise Pricing Strategy Algorithms for Playing Business Simulations Organizational Structures for International Operations: An Experiential Activity Simulation Emphasis in the Business School Capstone Course An Integrated Approach to Computerizing the Business Curriculum Cross-Cultural Business Negotiations Exercise Organizational Socialization and Gender Differences in Students at Work Understanding Student Work Experience: A Content-Analytic Approach Introducing Executive MBA Programs with Management Games An Analysis of Improvement in Business Decision Outcome with Sequential Use of Two Simulation Games Teaching Business Policy Utilizing Mass Lecture and Individual Case Labs Potholes Along the Road to Evaluating Learning Outcomes: The Case of Outdoor Management Training Experiential Learning for Interior Design Students: Using CADD, Lotus 1-2-3, and Wordperfect Cognitive Learning Using a Computer-Based, Qualitative Interactive Business Simulation Sex Discrimination: Does the Woman get the Job or Does the Best Man Win? A Search for Visual Aids to Support Experiential Learning Through the 1990's An Experimental Analysis fo the Effectiveness of Student Role-Playing in Sales Training How to Have Students Learn from their Term Projects Self-Evaluation Exercise (SEE): An Assessment of Class Contribution A Study of the Influence of Team Formation on Attitudes and Performance in Management Games A Hardware Based CIM Simulation Laboratory Model Test Substance Abuse in Organizations Micro Computer Training Models Teaching Forecasting, Cash Budgeting and Inventory Model Building Using SBTools A Comparison of the Effects of Experiential Learning Activities and Traditional Lecture Classes An Adjunct Writing Instruction Assistant, The Computer; With an Illustration Classroom Software for ABC Analysis Utilizing Information Processing Technology to Enhance the Business Policy Simulation Experience Progressive Cases Realistic Job Previews Vs. Traditional Job Previews: Experiencing the Differences and Understanding the Consequences Investment Analysis Using the Pragmatic Multiplier Approach A Computer Simulation Interface for Competitive and Firm Analysis Self-Assessment of Ethical Decision Making Predispositions Preparing Managers for Overseas Assignments An Inquiry into Japanese Marketing: Workshop on Teaching Japanese Marketing The Performance Appraisal Feedback Interview: A Role Play for Human Resources Management Teaching Counselor Selling techniques Using Experiential Techniques to Teach International Topics International Management Simulation Gaming: Current Status and Future Developments A Realism Comparison of Simulation Technologies/Methodologies A Time-Efficient Game to Illustrate Concepts Taught in Management Courses and Management Development Programs Teaching the Management of Technology The Concept of Face and the Applicability of Experiential Exercises in an Oriental Culture's