Chapter Six
Designing Organizations for the
International Environment
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6-1
Motivations for Global Expansion

Economies of Scale
– large volume

Economies of Scope
– number of products /
countries

Low-cost Production
Factors
– labour, raw materials,
energy, capital, reg’s
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6-2
Four Stages of International
Evolution
I.
Domestic
II.
International
Strategic
Orientation
Domestically
oriented
Export-oriented,
multidomestic
Multinational
Global
Stage of
Development
Initial foreign
involvement
Competitive
positioning
Explosion
Global
Structure
Domestic
structure plus
export
department
Domestic structure
plus international
division
Worldwide
geographic,
product
Matrix,
trans-national
Market
Potential
Moderate,
mostly
domestic
Large,
multidomestic
Very large,
multinational
Whole world
Sources: Based on Nancy J. Adler, International Dimensions of
Organizational Behavior (Boston: PWS-KENT, 1991), 7-8;
and Theodore T. Herbert, “Strategy and Multinational Organization
Structure: An Interorganizational Relationships Perspective,”
Academy of Management Review 9 (1984): 259-71.
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© 2004
III.
Multinational
IV.
Global
6-3
Matching Organizational Structure to
International Advantage
When Forces for
Global
Integration
are . . .
And Forces for
National
Responsiveness
are . . .
Low
Strategy
Structure
Low
Export
International
Division
High
Low
Globalization
Global Product
Structure
Low
High
Multidomestic
Global Geographic
Structure
High
High
Globalization and
Multidomestic
Global Matrix
Structure
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6-4
Domestic Hybrid Structure with
International Division
CEO
Human
Resources
Electrical
Products
Division
Corporate
Finance
Scientific
Products
Division
Medical
Products
Division
Research &
Development
International
Division
Europe
(Sales)
Brazil
(Subsidiary)
Mid East
(Sales)
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Staff (Legal,
Licensing)
6-5
Partial Global Product Structure Used by
Eaton Corporation
Chairman
Law &
Corporate
Relations
Engineering
President
Finance &
Administration
International
Regional
Coordinators
Global
Automotive
Components
Group
Global
Industrial
Group
Source: Based on New Directions in Multinational Corporate
Organization (New York: Business International Corp., 1981).
Global
Instruments
Product
Group
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Global
Materials
Handling
Group
Global
Truck
Components
Group
6-6
Global Matrix Structure
International
Executive
Committee
Business
Areas
Germany
Norway
Country Managers
Argentina/
Brazil
Spain/
Portugal
Power
Transformers
Transportation
Industry
Local
Companies Thomson Learning
© 2004
6-7
Building Global Capabilities

The Global Organizational Challenge
Increased Complexity and Differentiation
Need for Integration
Knowledge Transfer

Global Coordination Mechanisms
Global Teams
Headquarters Planning
Expanded Coordination Roles
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6-8
Cultural Differences in Coordination
and Control

National Value Systems
Power Distance
Uncertainty Avoidance

Three National Approaches to Coordination and Control
Centralized Coordination in Japanese Companies
European Firms’ Decentralized Approach
The United States: Coordination and Control
through Formalization
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6-9
Transnational Model of
Organizations




Assets and resources are dispersed worldwide into highly
specialized operations that are linked together through
interdependent relationships.
Structures are flexible and ever-changing.
Subsidiary managers initiate strategies and innovations that
become strategy for the corporation as a whole.
Unification and coordination are achieved primarily through
corporate culture, shared visions and values, and
management style rather than through formal structures and
systems
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6-10