Learning Objectives factors that impact how global organizations are structured and managed Types of organizational structures Controlling the global organization
Factors that impact structure and decision making Degree of involvement in international operations. Products that the firm markets. Size and importance of the firm’s markets. Human resource capability of the firm. Corporate goals, Strategies and objectives.
Organizational Structure Companies must change strategies as their structures evolve from domestic to multinational. The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used. • All organizations require some form of organizational structure to implement and manage their strategies • Firms frequently alter their structure as they grow in size and complexity
Designing Organizational Structure Organizing The process by which managers establish working relationships among employees to achieve goals. Organizational Structure Formal system of task and reporting relationships showing how workers use resources. Organizational design The process by which managers create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way
Tall and Flat Organizations Tall structures have many levels of authority As hierarchy levels increase, communication gets difficult creating delays in the time being taken to implement decisions. Communications can also become distorted as it is repeated through the firm. Can become expensive Flat structures have fewer levels and wide spans of control. Structure results in quick communications but can lead to overworked managers.
Types of Organizational StructuresProduct Most often used by multinational corporations.Structure Improved cost efficiency is a major benefit.Geographic Second most used approach. Follows the marketingStructure concept most closely.Functional The simplest from the administrative viewpoint. AStructure variation is one that uses processes as a basis for structure.Market Especially used if customer groups are dramaticallyStructure different.Matrix Integrates the various approaches. Most companies findStructure this arrangement problematic. Complexity of this structure may increase the reaction time of a company.
Product Structure Allows functional managers to specialize in one product area Removes need for direct supervision of division by corporate managers Divisional managers have the responsibility for devising an appropriate business-level strategy to allow the division to compete effectively in its industry Each product group is responsible for marketing, sales, planning, and (in some cases) production and research and development
Product organizational structure • Advantageous when product line constantly changes with technological advances • Facilitates the development of global products and global roll-outs • Appropriate when perceived differences involved with marketing the various product lines are greater than perceived differences in geographic markets • Knowledge of specific geographic areas can be limited and sensitivity to local market conditions can be diminished
Geographic organizational structures Focus on regions of world Allows company to locate marketing and manufacturing efforts in such a way as to take advantage of regional benefits Puts company in closer contact with distributors, customers, and subsidiaries Managers locate different divisions in each of the world regions where the organization operates.
Geographic organizational structures • Separate unit for each Geography Extremely sensitive to local customs, laws, and needs Expensive!!! Many companies are phasing out country-based structures and are moving toward regional centers • Appropriate when company needs intimate knowledge of its customers and their environments • Gives company opportunity to understand the local culture, economy, politics, laws, and competitive situation
Functional organizational structures • Top executives in marketing, finance, production, accounting, and research and development all have worldwide responsibilities • Best for narrow or homogeneous product lines with little variation between products or geographic markets
Market Structure • Groups divisions according to the particular kinds of customers they serve • Allows managers to be responsive to the needs of their customers and act flexibly in making decisions in response to customers’ changing needs
Matrix Structure • An organizational structure that simultaneously groups people and resources by function and product. Results in a complex network of superior-subordinate reporting relationships. The structure is very flexible and can respond rapidly to the need for change. Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both. • Developed to overcome drawbacks of geographic, functional, and product organization structures • Allows for two or more dimensions of theoretical weight, e.g., importance to product and geography • Complexity can cause duplication of authority, confusion of responsibility and power struggle
Controlling the Global Organization 1.Developing standards Behavioral standards Performance standards 1.Measuring and evaluating performance 2.Analyzing and correcting deviations from the standards 4. Effective communication systems facilitate control
Post-Class Activity Why organizational issues for born-global firms differ from those for traditional multinational companies. Give examples of how technology can be utilized to support internal global communications systems. Discuss the conflicts that can arise between international headquarters and national subsidiaries. Global account management. Transnational network structure.