Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
OPENING CASE: P&G—Strength in Architecture
Summary
The opening case explores the extensive reorganization undertaken in 2014 by Proctor &
Gamble, the U.S. household products conglomerate. P&G is one of the world’s largest
companies, with customers in more than 180 countries and annual revenues in excess of $80
billion. In 2014, CEO Alan “A.G.” Lafley decided that the company would cut approximately
100 brands from its portfolio in order to focus on its most profitable product lines. Discussion of
the case can revolve around the following questions:
QUESTION 1: What type of strategy did P&G pursue until Alan “A.G.” Lafley decided to
streamline in 2014? What advantages did the company experience by having a more complex
structure prior to 2014?
ANSWER 1: Prior to 2014, P&G maintained a large portfolio of approximately 180 brands, each
QUESTION 2: What factors prompted Lafley to change the company’s strategy? What
advantages are there to streamlining the company’s operations?
ANSWER 2: Lafley argued that reducing the number of brands owned by P&G would make the
QUESTION 3: Consider P&G’s current emphasis on customer service, marketing, and
advertising. How does its changing structure reflect this emphasis?
ANSWER 3: P&G seeks to be an industry leader by devoting significant resources to advertising
Another Perspective: To explore P&G’s organizational structure in more depth, go to the
company’s website at
{http://us.pg.com/who_we_are/structure_governance/corporate_structure}.
CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: “The choice of strategy for a multinational firm must depend upon a comparison
of the benefits of that strategy (in terms of value creation) with the costs of implementing that
strategy (as defined by organizational architecture necessary for implementation). On this basis,
it may be logical for some firms to pursue a localization strategy, others a global or international
strategy, and still others a transnational strategy.” Is this statement correct?
ANSWER 1: Yes, this statement is correct. There is a cost–benefit trade-off with strategy choice.
QUESTION 2: Discuss this statement: “An understanding of the causes and consequences of
performance ambiguity is central to the issue of organizational design in multinational firms.”
ANSWER 2: Organizational design creates interdependence, which may lead to performance
QUESTION 3: Describe the organizational architecture a transnational firm might adopt to
reduce the costs of control.
QUESTION 4: What is the most appropriate organizational architecture for a firm that is
competing in an industry where a global strategy is most appropriate?
QUESTION 5: If a firm is changing its strategy from an international to a transnational strategy,
what are the most important challenges it is likely to face in implementing this change? How can
the firm overcome these challenges?
QUESTION 6: Reread the Management Focus on Walmart’s International Division and answer
the following questions:
a. Why did the centralization of decisions at the headquarters of Walmart’s international division
create problems for the company’s different national operations? Has Walmart’s response been
appropriate?
b. Do you think that having an international division is the best structure for managing Walmart’s
foreign operations? What problems might arise with this structure? What other structure might
work?
QUESTION 7: Reread the Management Focus on the rise and fall of the matrix structure at Dow
Chemical; then answer the following questions:
a. Why did Dow first adopt a matrix structure? What were the problems with this structure? Do
you think these problems are typical of matrix structures?
b. What drove the shift away from the matrix structure in the late 1990s? Does Dow’s structure
now make sense given the nature of its businesses and the competitive environment it competes
in?
ANSWER 7:
a. Dow Chemical initially adopted the matrix structure because it would allow the company to be
responsive to both local market needs and corporate objectives. However, when it was first
b. In the mid-1990s, Dow divested itself of its pharmaceuticals activities, and changed its
Another Perspective: To find out more about Dow Chemical’s current strategy and organizational
architecture, go to the company’s web site at {http://www.dow.com}.
QUESTION 8: Reread the Management Focus on Lincoln Electric; then answer the following
questions:
a. To what extent are the organizational culture and incentive systems of Lincoln Electric aligned
with the firm’s strategy?
b. How was the culture at Lincoln Electric created and nurtured over time?
c. Why did the culture and incentive systems work well in the United States? Why did it not take
in other nations?
ANSWER 8:
a. Lincoln Electric stresses that individuals should be rewarded for their individual efforts, and
b. Lincoln Electric has a long tradition of equality and fairness. Since 1934, employees have
c. In the United States, a country that encourages individualism, Lincoln Electric’s emphasis on
individual performance has been very successful. However, in other countries, this approach has
CLOSING CASE: Koninklijke Philips NV
Summary
The closing case explores how multinational giant Philips NV has evolved over time. The Dutch
company, which was internationally oriented almost from the start, moved to a national
organization approach during World War II. This approach, which allowed the company to tailor
its product line and marketing to each national market, remained in place for several decades,
however, by the 1970s, the duplication of effort the approach required began to cause problems
and Philips shifted toward a product division structure that established international production
centers. In the mid-1990s, a new CEO implemented significant changes replacing Philips’ 21
product divisions with just 7 global business divisions. This new structure was further refined in
2008 to establish three global divisions responsible for product strategy, global marketing, and
production decisions.
QUESTION 1: Why did Philips’ organizational structure make sense early on in its existence?
Why did this structure start to create problems for the company later on?
ANSWER 1: By the start of World War II, Holland’s Philips Electronics already had a global
QUESTION 2: What was Philips trying to achieve by tilting the balance of power in its structure
away from national organizations and toward the product divisions? Why was this hard to
achieve?
ANSWER 2: Philips was trying to achieve greater scale economies and hence lower costs by
QUESTION 3: What was the point of the organizational changes made by Cor Boonstra? What
was he trying to achieve? Do you agree with Frans van Houten's decision to keep the same three
divisions when he became CEO in 2011?
ANSWER 3: When Boonstra became CEO in the mid-1990s, he tried to streamline and
QUESTION 4: In 2008 Philips reorganized yet again. Why do you think it did this? What is it
trying to achieve?
ANSWER 4: In 2008, the CEO at the time believed that Philips was still not sufficiently focused
MHE INTERNATIONAL BUSINESS VIDEO LIBRARY
Please click here to visit our International Business Video Library on Pinterest, which is
updated on a monthly basis. While there, be sure to "like" the clips that work well for you, and
add notes that might be helpful to your colleagues.
INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {globalEDGE.msu.edu/} to complete the following exercises:
Exercise 1
Fortune conducts an annual survey and publishes the rankings of the world’s most admired
companies. Locate the most recent ranking available, and focus on the factors used to determine
which companies are most admired. Prepare an executive summary of the strategic and
organizational success factors for a company of your choice.
Exercise 1 Answer
Search phrase: World’s Most Admired Companies
Exercise 2
Exercise 2 Answer
