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10-3a Creating an Export Department
ECONOMIC PERSPECTIVES Inflated Figures at Mahindra Satyam
Mahindra Satyam, formerly known as Satyam Computer Services Ltd., was founded in 1987 by B. Ramalinga Raju. The company offers consulting and information technology services spanning various sectors, and is listed on the New York Stock Exchange, the National Stock Exchange (India), and Bombay Stock Exchange (India). In January 2009, then company Chairman B. Ramalinga Raju resigned after notifying board members and the Securities and Exchange Board of India (SEBI) that Satyam’s accounts had been falsified. B. Ramalinga Raju confessed that Satyam’s balance sheet of September 30, 2008 contained inflated figures for cash and bank balances of $1.07 billion. B. Ramalinga Raju and his younger brother B. Rama Raju, Satyam’s former managing director, are in jail awaiting trial on fraud and other offenses. Ironically, Satyam means “truth” in Sanskrit.
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In June 2009, the company unveiled its new brand identity “Mahindra Satyam” after being purchased by the Mahindra Group’s IT arm, Tech Mahindra. The new managers have redesigned the company’s organizational structure, which was based upon B. Ramalinga Raju’s system of silos. The system was intended to motivate the leaders of each division by allowing them to function as separate businesses. However, the system was used by B. Ramalinga Raju to prevent anyone but him from getting a complete overview of the firm operations. In consequence, it is believed that the organizational structure helped B. Ramalinga Raju to mask his alleged fraud and inflict major economic damage to the company.
QUESTIONS:
1) Do you agree that the organizational structure under B. Ramalinga Ragu was conducive to fraud? 2) How would you propose to change the organizational structure to prevent fraud in the future? 3) The organizational structure of a company: a) does not affect business performance; b) is trivial to determine; c) is not important at all; d) can be lead to the company’s success or failure. 4) B. Ramalinga Raju used an organizational structure which can be described as: a) it was clear and transparent; b) it led to business productivity; c) it allowed the leaders of each division to function as separate businesses; d) it was not a system of silos. 5) The organizational structure used by B. Ramalinga
Raju: a) led to business productivity; b) was clear and transparent; c) could not be improved; d) helped him to mask his alleged fraud.
Source: Eric Bellman, “Mahindra Satyam’s New Owner Tries to Move Beyond Disgraced Founder,” The Wall Street Journal, July 23, 2009.
LO-3
Discuss the role that export departments and international divisions play in the organization of global businesses.
When one looks at how global businesses around the world are organized, one finds a wide variety of organizational structures. The early stages of a company’s process toward becoming globalized are represented by export departments and international divisions.
10-3a Creating an Export Department
The first step a domestic firm takes when entering the global arena is usually to export some of its products. This is typically done by one or two sales representatives, although sometimes the employees handling the exports may primarily work within another function such as Marketing or Operations. When the demand for the exported products grows, the number of people needed to handle the job increases as well, which leads to the formation of an export department.
