Pr Salma CHAD

8-104/19/23

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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A number of basic structures exist that permit an MNC to compete internationallyStructure 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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Pressure for local responsivenessLow High

Pre

ssur

e fo

r gl

obal

izat

ion

Low

High Aircraft Cameras Consumer electronics Computers

Automobiles

Telecommunications

Aerospace

Synthetic fibers

Cement

Steel

Clothing

Packaged goods

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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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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PersonnelProduction Marketing Finance

Chief Executive Officer

DomesticDivision

Paint

DomesticDivisionTools

InternationalDivision

DomesticDivisionFurniture

DomesticDivision

Hardware

Japan Australia Italy

OfficeOperations

Marketing GovernmentRelations

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PersonnelProduction Marketing Finance

Chief Executive Officer

North America Industrial Goods Europe

Manager,Industrial GoodsNorth America

Manager,Industrial Goods

Europe

How would you redesign the structure of the Faculty of Management at AUL?

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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 decisionsThe 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 multinationalsNetwork 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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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

Indications of organizational inefficiency

Conflicts among divisions and subsidiaries

Overlapping responsibilitiesComplaints 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 Visits by head-office personnel Regular meetings

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Sales quotas Budgets Other financial tools Feedback reports

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Factors likely to affect the appropriateness of monitoring systems include:Management practicesLocal constraintsExpectations 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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How much autonomy and control you would want if you are a subsidiary manager, and when you run the home office?

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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 subsidiariesDispersed 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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