11-1
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11-2
International Management,
5th ed.
Part Three:
International Strategic
Management
McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
11-3
Hodgetts
and Luthans
International
Management,
5th ed.
Chapter Eleven
Organizing International
Operations
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11-4
Objectives of the Chapter
 EXAMINE the major types of organizational structures used in
handling international operations
 ANALYZE the advantages and disadvantages of each type of
organizational structure, including the conditions that make
one preferable to others
 DESCRIBE the recent, nontraditional organizational
arrangements coming out of mergers, joint ventures, keiretsus,
and other new designs including electronic networks and
product development structures
 DISCUSS the value of subsidiary boards of directors in
overseas operations
 EXPLAIN how organizational characteristics such as
formalization, specialization, and centralization influence how
the organization is structured and functions
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Basic Organizational Structures
11-5
 A number of basic structures exist that
permit an MNC to compete internationally
 Structure must meet the need of both the local
market and the home-office strategy of
globalization
 Contingency approach
 Balances the need to respond quickly to local
conditions with the pressures for providing products
globally
 Most MNCs evolve through certain basic
structural arrangements in international
operations
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Figure 11-1
Organizational Consequences of Internationalization
11-6
Pressure for globalization
High
Low
Aircraft
Cameras
Consumer electronics
Computers
Aerospace
Automobiles
Synthetic fibers
Steel
Clothing
Cement
Low
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Telecommunications
Packaged goods
High
Pressure for local responsiveness
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Basic Organizational Structures
(cont.)
11-7
 Global Structural Arrangements
 Global Product Division
 Structural arrangement in which domestic divisions are given
worldwide responsibility for product groups
 Global Area Division
 Structure under which global operations are organized on a
geographic rather than a product basis
 Global Functional Division
 Structure which organizes worldwide operations primarily
based on function and secondarily on product
 Matrix Organization Structure
 Structure that is a combination of a global product, area, or
functional arrangement
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11-8
Figure 11-2
Use of Subsidiaries during the Early
Stage of Internationalization
Chief Executive Officer
Production
Marketing
Finance
Personnel
V.P. International
Operations
France
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Japan
Egypt
Australia
Argentina
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11-9
Figure 11-3
International Division Structure
Chief Executive Officer
Production
Domestic
Division
Paint
Marketing
Domestic
Division
Tools
Japan
Office
Operations
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Finance
International
Division
Australia
Marketing
Personnel
Domestic
Division
Furniture
Domestic
Division
Hardware
Italy
Government
Relations
© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
Figure 11-4
Global Product Division Structure
11-10
Chief Executive Officer
Production
Product
Division
A
South
America
Marketing
Finance
Product
Division
B
Product
Division
C
Product
Division
D
Product
Division
E
Africa
Europe
Australia
Far East
Great Britain
Germany
Netherlands
Production
Production
America
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Personnel
Marketing
France
Italy
Finance
Personnel
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11-11
Figure 11-5
Global Area Division Structure
Chief Executive Officer
Production
North
America
Marketing
South
America
Great Britain
Germany
Finance
Europe
Asia
Personnel
Africa
France
Italy
Netherlands
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Figure 11-6
Global Functional Structure
11-12
Chief Executive Officer
Production
Domestic
Production
Product A
Product B
Product C
Product D
McGraw-Hill/Irwin
Foreign
Production
Product A
Product B
Product C
Product D
Marketing
Domestic
Production
Product A
Product B
Product C
Product D
Finance
Foreign
Production
Product A
Product B
Product C
Product D
© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
Figure 11-6
Global Functional Structure
11-13
Chief Executive Officer
Production
Domestic
Production
Product A
Product B
Product C
Product D
McGraw-Hill/Irwin
Foreign
Production
Product A
Product B
Product C
Product D
Marketing
Domestic
Marketing
Product A
Product B
Product C
Product D
Finance
Foreign
Marketing
Product A
Product B
Product C
Product D
© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
Figure 11-7
Multinational Matrix Structure
11-14
Chief Executive Officer
Production
Marketing
North America
Industrial Goods
Manager,
Industrial Goods
North America
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Finance
Personnel
Europe
Manager,
Industrial Goods
Europe
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Basic Organizational Structures
(cont.)
11-15
 Global Structural Arrangements (cont.)
 Transnational Network Structures
 Multinational structural arrangement that combines elements of
function, product, and geographic designs, while relying on a
network arrangement to link worldwide subsidiaries
 Dispersed subunits
 Subsidiaries that are located anywhere in the world where
they can benefit the organization
 Specialized operations
 Activities carried out by subunits that focus on a particular
product line, research area, or market area
 Designed to tap specialized expertise or other resources in
the company’s worldwide subsidiaries
 Interdependent relationships
 Share information and resources throughout the dispersed
and specialized subunits
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Nontraditional Organizational
Arrangements
11-16
 Mergers and Acquisitions
 Purchasing MNC attempts to promote synergy while
encouraging local initiative by the acquired firm
 Joint Ventures and Strategic Alliances
 Each party contributes to the undertaking and
coordinates its efforts for the overall benefit
 Keiretsu
 Large, often vertically integrated group of companies
that work closely with each other
 Members bound by cross-ownership, long-term
business dealings, interlocking directorates, and social
ties
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Figure 11-10
Comparison of Asian and Western
Management Features
11-17
WESTERN
Organization
WESTERN
Basic
Values
Individual
ASIAN
Legal
Confrontation Group
Analytic
Trust
Compromise
Fluid
Management
WESTERN Style
Formal
ASIAN
Fragmented
Hierarchical
Informal
Competitive Generalist
Integrated
Cooperative
Rationality
ASIAN
Structured
Directive
Relationships
Doing
Flexible
Adaptive
Understanding
WESTERN
Short Term
ASIAN
Control
Conflict
Long Term
One Product
Human Resource
Servicefocused Collaborative
Customerfocused
Action
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Nontraditional Organizational
Arrangements (cont.)
11-18
 Electronic Network Form of Organization
 Electronic freelancers
 Individuals who work on a project for a company, usually via
the Internet
 Move on to new employment at the completion of an
assignment
 Deliver outsourcing function on-line
 Organizational Synergy
 MNCs leverage their knowledge and resources
worldwide
 Increased movement toward making synergy work
correctly
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Nontraditional Organizational
Arrangements (cont.)
11-19
 Organizing for Product Integration
 Toyota’s system based on several organizational
mechanisms
 Mutual adjustment
 Direct, technically skilled supervision
 Integrative leadership
 Role of Information Technology (IT) in
Organizing
 Integration of IT into the overall organizing process can
have a dramatic effect on organizational performance
 Japanese leading the way on the use of IT
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11-20
Use of Subsidiary Boards of Directors
 Subsidiary board
 A board that overseas and monitors the
operations of a foreign subsidiary
 Used to:
 Advise, approve, and appraise local management
 Help the unit to respond to local conditions
 Assist in strategic planning
 Supervise the subsidiary’s ethical conduct
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Organizational Characteristics of
MNCs
11-21
 Formalization
 Use of defined structures and systems in decision
making, communicating, and controlling
 Specialization
 Organizational characteristic that assigns individuals to
specific, well-defined tasks
 Horizontal specialization
 Assignment of jobs so that individuals are given a particular
function to perform and tend to stay in this area
 Vertical specialization
 Assignment of work to groups or departments where
individuals are collectively responsible for performance
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Organizational Characteristics of
MNCs (cont.)
11-22
 Centralization
 Centralization
 Management system under which important decisions are
made at the top
 Decentralization
 Pushing decision making down the line and getting the lowerlevel personnel involved
 Putting Organizational Characteristic in
Perspective
 MNCs tend to organize international operations in a
manner similar to that used at home
 Future challenge is to bring subsidiary organizational
characteristics into line with local customs and cultures
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