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FUNCTIONAL STRUCTURE WITH AN

EXPORT DEPARTMENT

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FOREIGN SUBSIDIARIES

Subunit of the multinational company that islocated in another country

Types of foreign subsidiaries

Minireplica subsidiary: smaller version of theparent companyUses the same technology and producing the same

products as the parent company

Transnational subsidiary: has no companywide

form or functionEach subsidiary contributes what it does best

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AN INTERNATIONAL DIVISION

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ORGANIZATIONAL STRUCTURES TO IMPLEMENT

MULTINATIONAL STRATEGIES

Reasons to abandon the international

division

Diverse products overwhelm capacities of

multinational

Not close enough to local markets

Cannot take advantage of global economies of

scale or global sources of knowledge Several options available to deal with these

shortcomings

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ROYAL VOPAK GEOGRAPHIC STRUCTURE

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WORLDWIDE PRODUCT STRUCTURE

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Both worldwide product structure and

worldwide geographic structure have

advantages and disadvantages

Product structure: supports global products

Geographic structure: emphasizes local

adaptation

Multinationals often want both abilitiesUse hybrids or matrix

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STOP FORD AND WELLS MODEL

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WORLDWIDE MATRIX STRUCTURES

Symmetrical organization with equal

emphasis on

Worldwide product groups and

Regional geographical divisions

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WORLDWIDE MATRIX STRUCTURES

Balances the benefits produced by area andproduct structures

Creates equal lines of authority for products

and areasWorks best with near equal demands from bothsides

Requires extensive resources for

communication and coordinationRequires middle and upper level managers

with good human relations skills

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EXHIBIT 7.9: WORLDWIDE MATRIX

ORGANIZATION

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MATRIX STRUCTURES

Problems emerging with worldwide matrix

structures

Slow decision making process

Too bureaucratic

Too many meetings and too much conflict

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MATRIX STRUCTURES (CONT.)

Result

Companies have redesigned their matrix

structures to be more flexible with speedier

decision makingOther companies have abandoned their matrices

and returned to product structures

Key issue is equal line of authority

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FRONT-BACK HYBRID STRUCTURE

The front side has units based on geographyto provide a multidomestic or regional focus

The backside has units based on product

groups to capture global economies of scalein R&D and production

Front end is decentralized with unit heads as

key decision makers and holding P&Lresponsibility

Back end is more centralized

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EXHIBIT 7.8: TETRA PAKS FRONT-BACK HYBRID

STRUCTURE

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P&G 4 DIMENSIONAL STRUCTURE

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THE TRANSNATIONAL-NETWORK STRUCTURE

Newest solution to the complex demand of

being locally responsive and taking

advantage of competitiveness of nation

Combines functional, product, and

geographic subunitsDispersed subunits

Specialized operations Interdependent relationships

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THE TRANSNATIONAL-NETWORK STRUCTURES

Has no symmetry or balance in its structural

form

Resources, people, and ideas flow in all

directions

Nodes or centers in the network coordinate

product, functional, and geographic

information

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GEOGRAPHIC LINKS IN THE PHILIPS

TRANSNATIONAL STRUCTURE

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PRODUCT LINKS IN THE SAME ORGANIZATION

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COMPONENTS OF THE TRANSNATIONAL-

NETWORK STRUCTURE

1. Dispersed subunits: subsidiaries locatedanywhere where they can most benefit thecompany

2. Specialized operations: subunits specializingin particular product, research areas, ormarketing areas

3.

Interdependent relationships: continuoussharing of information and resources bydispersed and specialized subunits

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HOW TO DECIDE ON ORGANIZATIONAL

STRUCTURE FOR MULTINATIONALS?

How geographically dispersed are

capabilities

How competent are people to work across

different geographies

These two questions decide what should be

the organizational structure for a

multinational organization

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Sharp

R&D and manufacturing in Japan,only international sales focus

Consumer products companies: Locate

manufacturing to low cost nations like Indiabut keep R&D centered in US

When GE develops new Jet engines, relieson China to design for manufacturing, usesIndia for analytics and material science andGerman Labs for wind tunnel testing

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COMPETENCE ACROSS GEOGRAPHIES

Large cultural and technical differencesexists across countries and within functionswhich a firm is unable to reconciliate Not

very competentCommon language and low cultural

differences people easily mobile acrossgeographies and countries Moderately

competent

People well adapt to work across products,functions and geographies

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Competence in

working across

countires

Low Medium High

Front back hybrid Global matrix Transnational/ T-Design

Geogrophic

dispersion

Low Medium High