Have You Restructered for Global Success?

Harvard Business Review Reflection
Course name: Introduction to International Business
Subject matter: HBR Reflection
Details article
Title: Have You Restructered for Global Success?
Author: Nirmalya Kumar and Phanish Puranam
Journal: Harvard Busniss Review
Date of publication: October 2011

BHM Have You Restructured for Global Success?

Introduction
The article at hand ‘Have You Restructured For Global Success?’ written by Nirmalya Kumar, professor of marketing and Phanish Puranam, professor of strategy and entrepreneurship, at London Business School. They also are the codirectors of the school’s Aditya Birla India centre and the coauthors of India Inside: The Emerging Innovation Challenge to the West . It was published in the Harvard Business Review in October 2011, pages 123 – 128.

The article argues that companies should adapt to a new structure, the T-shaped country organization structure, since the existing structures are, according to the author, not sufficient enough to tap into the full potential of emerging markets.

Summary
Because of the enormous grow of emerging markets in the first decade of the 21st century multinationals were eager to develop new strategies. However, structural changes have been slow. According to the authors, the three existing structures (the front-end/back-end structures, the matrix structures and the transnational structures) are not sufficient enough to tap into the full potential of emerging markets because of three reasons. The first reason is; as of late China and India are major sources of demand with distinct consumer needs. Existing structures don’t longer anymore respond adequate to these needs in these two markets. The second reason is; China and India are becoming important sources of talent in innovation with a self-perpetuating character. The third reason is; because china and India are becoming now a company’s largest market and major source of innovation, companies have to Asianizate their top management . There are also several gaps between companies ambitions and achievements in emerging markets.

To deal with this, the authors of this article discuss a new structure, called the T-shaped country organization. This structure is a response to the fact that emerging markets are increasingly becoming lead markets as well as lead talent pools. This dual approach yields a T-shaped form (hence the name ‘T-shaped structure’). The horizontal stroke represents linkages across countries. Companies should use emeriging markets as a platform for globally segmented innovation, manufacturing and offshore services. The vertical stroke illustrates the need for depth in a country, frond-end operations must become highly localized. This means each country has to have its own area of expertise, and all areas will be necessary for developing new products and services.

Research has shown companies can use two complementary approaches to coordinate processes across geographies: separation and integration. The article concludes with three recommendations for managers.

Body text
The authors address an interesting subject. They state that companies are not adjusting their structures enough to get maximum benefit out of developing markets. This we think, is a critical observation of the business world as it is today. Further, the authors do have some strong observations and recommendations. We thought for example that the observation of the author that in China and India subsidiaries frequently complain about top management’s lack of commitment to their markets is a good remark. Another nice feature of this article is the scheme ‘What Kind of Multinational Structure Fits Your Company?’. It offers a playful way for managers to analyse the status quo of their company.

We also found some critical remarks to this article. Starting with the introduction and structure of the article. The approach of the authors was and still is not completely clear to use.
The article starts with an anecdote of Frits van Paaschen, CEO of Starwood Hotels, which is a nice anecdote but does in our opinion not contribute much the rest of the article. In the introduction we also miss a clear formulation of the purpose and structure of the rest of the article. There is no clear introduction, body text or conclusion.
This makes it really hard to read the article and understand the overall idea. For example, the part of the text ‘Falling into the Gaps’ contains some strong points, however, the contribution of this part to main idea of the article is not so clear. This brings us to the main idea, the T-shaped country organization structure. Where the rest of the article is described quite comprehensive the T-shaped structure remains relatively vague. Still, after reading the explanation and the article several times it stays tough to depict the T-shaped structure in our minds. Next time, maybe the authors could add a diagram or schema as images say more than thousand words. Further, it is also not clearly expressed where the authors base their ideas on. How did they come to these ideas? For instance, did they do research, what did they exactly investigate? What was the main question, which companies were examined?

We learned from this article that, according to the authors, companies are not tapping into the full potential of developing markets using existing structures. They should follow the example of a few companies who are showing the way and rewrite the way corporations should think about structures. We learned that R&D can be segmented vertically as horizontally and fractured geographically. It has evolved from an non-transferable FSA to an international co-operating transferable FSA. The companies are becoming somewhat ‘international projectors’ (slide 9, lecture 2). They try to benefit from global organized R&D on the back-end operations while trying to be more responsive to the home country on the frond-end operations.

This article offers to managers a new view on structure and set out some ideas and guide lines. The last part of the article deals with ‘Challenges for Top Teams’, here they mention some consequences for companies. However, this is all on a very general level and the article is not a throughout plea.

The article relates to the course Introduction to International Business because it deals with mounting pressures on multination companies’ organizational structures. The basic question of this course is where do you locate what type of activity in which way, and what effect does this have on firm and environment? The article offers some thoughts about how to locate activities as R&D and in which way.

Questions for the author

1. If you take an organization (for example a producer of clothing) that wants to be successful in a developing country like China, how do you suggest make successful use of the T-shaped structure?

2. Looking at the current situation, are there any companies that successfully use the T-shaped structure? If yes, which are the best examples and why?

3. Did you conduct research for the findings of this article? If so, what was the main question, what did you investigate and what were the limitations of the research?

References - Kumar, N. and P. Puranam, 2011. “Have you restructured for global success?”, Harvard Business Review, October, 123-128. - IB / Professor Dr. S. Beugelsdijk, 2012. Lecture 2: Competitiveness: firm and country factors, PPT, October, slide 9.

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References: - Kumar, N. and P. Puranam, 2011. “Have you restructured for global success?”, Harvard Business Review, October, 123-128. - IB / Professor Dr. S. Beugelsdijk, 2012. Lecture 2: Competitiveness: firm and country factors, PPT, October, slide 9. [pic]