PowerPoint by
Kristopher Blanchard
North Central University
© 2006 Prentice Hall 8-1

There is no permanent organization chart for the world. . . . It is of supreme importance to be ready at all times to take advantage of new opportunities.
—Robert C. Goizueta, (Former) Chairman and Ceo, Coca-Cola Company
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Internationalization is the process by which a firm gradually changes in response to international competition, domestic market saturation, and the desire for expansion, new markets, and diversification.
Structural Evolution (Stages Model) occurs when managers redesign the organizational structure to optimize the strategy’s changes to work, making changes in the firm’s tasks and relationships and designating authority, responsibility, lines of communication, geographic dispersal of units and so forth
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Basic Organizational Structures
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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High
Organizational Consequences of
Internationalization
Aircraft
Cameras
Consumer electronics
Computers
Telecommunications
Aerospace
Automobiles
Synthetic fibers
Steel
Clothing
Low Cement Packaged goods
Low
Pressure for local responsiveness
High
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Basic Organizational Structures (cont.)
Global Structural Arrangements
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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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Domestic structure plus export department
Domestic structure plus foreign subsidiary
International division
Global functional structure
Global product structure
Global Geographic Structure
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International Division Structure
Chief Executive Officer
Production
Domestic
Division
Paint
Marketing Finance Personnel
Domestic
Division
Tools
International
Division
Domestic
Division
Furniture
Domestic
Division
Hardware
Japan Australia Italy
Office
Operations
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Marketing Government
Relations
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Multinational Matrix Structure
Chief Executive Officer
Production Marketing Finance Personnel
North America Industrial Goods
Manager,
Industrial Goods
North America
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Manager,
Industrial Goods
Europe
Europe
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The global functional structure is designed on the basis of the company’s functions – production, marketing, finance, and so forth. Foreign operations are integrated into the activities and responsibilities of each department to gain functional specialization and economies of scale.
Matrix Structure is a hybrid organization of overlapping responsibilities – it is used by some firms but has generally fallen into disfavor recently
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If you misjudge the market [by globalizing], you are wrong in 15 countries rather than only in one.
—Ford European Executive
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Two opposing forces in structural decisions
– The need for differentiation (focusing on and specializing in specific markets)
– The need for integration (coordinating those same markets)
Globalization – a specific strategy that treats the world as one market by using a standardized approach to products and markets
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Organizing to facilitate a globalization strategy typically involves rationalization and the development of strategic alliances
Organizing for global product standardization necessitates close coordination among the various countries involved
The problem facing companies in the future is that the structurally sophisticated global networks leave the organization exposed to the risk of environmental volatility from all corners of the world
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The Chinese commonwealth is a form of global network that has become the envy of
Western multinationals
– Network of entrepreneurial relationships in
Asia primarily
– Includes mainland China, 1.3 billion citizens, and more than 55 million Chinese in Taiwan,
Indonesia, Hong Kong, and Thailand
– Estimated to control $2 Trillion in liquid assets
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Comparative Management Focus: Chinese
Global Network
Most observers believe that this China-based informal economy is the world leader in economic growth, industrial expansion, and exports
Comprises most mid-sized, family-run firms linked by transnational network channels
Channels move information, finance, goods, and capital
Network alliances bind together and draw from the substantial pool of financial capital and resources available in the region
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Inter-organizational networks
The global e-corporation network structure
The transnational corporation (TNC) network structure
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When does a company need to make a change in organizational structure?
–
Makes a change in goals or strategy
–
Makes a change in scope of operations
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Indications of organizational inefficiency
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Conflicts among divisions and subsidiaries
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Overlapping responsibilities
–
Complaints regarding customer service
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The establishment of a single currency makes it possible, for the first time, to establish shared, centralized accounting and administrative systems.
—Francesco Caio, CEO, Merloni Elettrodomestici
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Design of appropriate structures

Use of effective staffing practices
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Visits by head-office personnel

Regular meetings
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Sales quotas
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Budgets
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Other financial tools
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Feedback reports
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Factors likely to affect the appropriateness of monitoring systems include:
– Management practices
– Local constraints
– Expectations regarding: Authority, Time, and
Communication
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In deciding on appropriate monitoring and reporting systems, additional factors to be considered include:
• The role of information systems (adequacy of management information systems in foreign affiliates, non-comparability of performance data across countries)
• Evaluation variables across countries
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Views the various companies, subsidiaries, suppliers, or individuals as a relational networks
Allows the different network partners to adopt unique structures that are adapted to the local context
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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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Involves linking foreign operations to each other and to headquarters in a flexible way
– Leverages local and central capabilities
Not a matter of boxes on an organizational chart; it is a network of company units and a system of horizontal communication
Requires the dispersal of responsibility and decision making to local subsidiaries
Effectiveness is dependant on the ability and willingness to share current and new learning and technology across the network
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Chapter 9 – Staffing, Training, and
Compensation for Global Operations
– Staffing philosophies for global operations
– Global selection
– Training and development
– Compensating expatriates
– Compensating HCNs
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