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Organisational Structures in Emerging Markets

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Organisational Structures in Emerging Markets 2004:082 SHU MASTER’S THESIS Organisational Structures in Emerging Markets Cases from Multinational Telecommunication Firms in Russia THERESE DAHLÉN ANN-CHRISTIN FORSMAN Social Science and Business Administration Programmes INTERNATIONAL BUSINESS AND ECONOMICS PROGRAMME Department of Business Administration and Social Sciences Division of Industrial Marketing and e-Commerce Supervisor: Manucher Farhang 2004:082 SHU • ISSN: 1404 – 5508 • ISRN: LTU - SHU - EX - - 04/82 - - SE Acknowledgements It is great to have finally completed our Master’s thesis. We have gained much knowledge within the interesting area of organisational structures for emerging markets, and developed our skills in academic writing. During the process of writing the thesis, we have experienced both drawbacks and progress. However, we have always been able to motivate ourselves since the area of research was very interesting. We would like to thank our supervisor Manucher Farhang, Associate Professor at the Department for Industrial Marketing at Luleå University of Technology, who helped us through some of the difficulties we have encountered during the process. Furthermore, we would like to thank Saku Berg, project manager at TeliaSonera, and Catrin Düsing, vice president of people and culture in the market unit of Eastern Europe and Central Asia at Ericsson, for providing us with good valuable information in the interviews. We also want to thank our respondents for setting aside time for us and for answering our emails with follow-up questions. Finally, we want to give our deepest gratitude to our classmates for providing us with plenty of valuable and constructive criticism. We hope that this thesis will be interesting and useful reading material for other students, researchers, and people who are interested in the area of research. Luleå University of Technology, January 2004 Therese Dahlén Ann-Christin Forsman Abstract As many parts of the world markets are becoming saturated, it is becoming increasingly important for companies to seek new unexploited markets. Many emerging markets are currently undergoing significant economic growth, which makes them suitable targets for these companies. However, for a multinational company (MNC) venturing into an emerging market is seldom a straightforward task, as these countries often have little similarities to the home markets of the companies. Consequently, following a decision on a suitable way to enter the emerging market, the MNC has to adapt the organisational structure as well as its operations to suit the local characteristics. The purpose of this thesis is to get a deeper understanding of how companies adapt their organisational structure to suit emerging markets. The focus is on the desired degree of control the company wants over its operations in the emerging market, the types of organisational structure it uses, and finally, the factors influencing the choice of organisational structure used. In order to reach this purpose, interviews were conducted for case-studies in two Swedish companies in the telecommunications industry. The most significant finding of the study is the fact that there is no ultimate organisational structure for companies operating in emerging markets. Other main findings reveal that the organisational structure adopted to a high degree, depends on the mode of entry used, which is closely related to the desired degree of control the company wants over its operations in the emerging market. MNCs operating in emerging markets are generally complex in their nature, which can be related to the companies’ size and geographical spreading. In addition, companies that choose to enter the emerging markets in close cooperation with a local firm will have to adopt more of the characteristics of a firm originating in an emerging market. Finally, the study also shows that the local environment is the factor most heavily influencing the organisational structure. This is a significant factor to consider since the environment in many emerging markets is dynamic and influences companies’ operations to a high degree. Sammanfattning Mättade hemmamarknader blir ett allt större problem för många företag runt omkring i världen, vilket belyser betydelsen av att hitta nya oexploaterade marknader. Den ekonomiska tillväxten som för tillfället kan skådas i flertalet utvecklingsländer indikerar en framtida potential som ny målmarknad för dessa företag. Det är dock inte helt enkelt att gå in i ett utvecklingsland för ett multinationellt företag, vilket kan relateras till de stora skillnaderna som finns mellan ett utvecklingsland och en mer västerländsk marknad. Följaktligen blir det viktigt att dels bestämma hur företaget skall gå in på den nya målmarknaden, men även att strukturera företaget på ett sätt som passar de speciella karaktärsdragen hos utvecklingslandet likväl som företaget själv. Syftet med denna uppsats är att nå en djupare förståelse för hur företag anpassar sin organisationsstruktur till utvecklingsländer. Fokus ligger på den grad av kontroll som företagen vill ha över sina förfaranden på den nya marknaden, de olika organisationsstrukturer som används, samt på faktorer som påverkar valet av organisationsstruktur. För att nå detta syfte har fallstudier utförts genom intervjuer på två svenska företag i telekommunikationsindustrin. Det huvudsakliga resultatet i denna studie är att det inte finns någon perfekt organisationsstruktur för företag som är verksamma i utvecklingsländer. Övriga resultat från studien visar att organisationsstrukturen som används till stor del beror på vilken typ av inträdesstrategi som används, vilket är närbesläktat till graden av kontroll som företaget vill ha över sina förfaranden i utvecklingslandet. Multinationella företag som är verksamma i utvecklingsländer är generellt komplexa vilket kan relateras till företagens storlek samt geografiska utspridning. Företag som väljer att gå in i utvecklingslandet i nära samarbete med ett lokalt företag måste anpassa sig mer efter vad som är typiskt för utvecklingslandet i fråga. Avslutningsvis så pekar denna studie på att den lokala miljön är den faktor som har kraftigast påverkan på valet av organisationsstruktur. Detta är en viktig faktor att ta hänsyn till då miljön i många utvecklingsländer är dynamisk och påverkar företagets verksamheter till en hög grad. Table of Contents 1 INTRODUCTION .............................................................................................................1 1.1 BACKGROUND ...............................................................................................................1 1.2 PROBLEM DISCUSSION ...................................................................................................2 1.3 PURPOSE .......................................................................................................................4 1.4 RESEARCH QUESTIONS...................................................................................................4 1.5 DEMARCATIONS OF THE STUDY......................................................................................4 1.6 STRUCTURE OF THE STUDY ............................................................................................6 2 LITERATURE REVIEW..................................................................................................7 2.1 THE DEGREE OF CONTROL’S INFLUENCE ON COMPANIES’ ORGANISATIONAL STRUCTURE.........................................................................................................................8 2.1.1 Complexity.............................................................................................................8 2.1.2 Centralisation ........................................................................................................9 2.1.3 Formalisation ......................................................................................................11 2.1.4 Normative Integration..........................................................................................12 2.2 TYPES OF ORGANISATIONAL STRUCTURES....................................................................13 2.2.1 Mechanistic and Organic Structures ....................................................................13 2.2.1.1 The Mechanistic Structure...................................................................................................................... 13 2.2.1.2 The Organic Structure ............................................................................................................................ 14 2.2.2 Mintzberg’s Five Basic Structures........................................................................15 2.2.2.1 The Simple Structure.............................................................................................................................. 15 2.2.2.2 The Machine Bureaucracy...................................................................................................................... 16 2.2.2.3 The Professional Bureaucracy................................................................................................................. 17 2.2.2.4 The Divisionalised Form ........................................................................................................................ 18 2.2.2.5 The Adhocracy....................................................................................................................................... 19 2.2.3 Schein’s Three Organisational Dimensions..........................................................21
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