The document discusses organizational structures and control systems for international business. It describes centralized vs decentralized structures and covers functional, divisional, product-based, and matrix structures. It also discusses global business planning, organizing, information, and control systems. The key aspects are integrating international business operations and choosing an organizational structure that implements strategy and balances centralized vs decentralized decision-making.

1. I B M Module 4
 Syllabi: Organizational structure and control system
for international business: Centralized Vs
decentralized structure-functional, divisional, product
based and matrix structure. Global business planning
system - global business organizing system—
information system-global business control system
Integration of international business.

2. Organization Structure in
International Business
Organization Structure
 It’s the formal arrangement of roles, responsibilities
and relationships within an organization. It’s a
powerful tool to implement strategy.

3. Centralization V/S Decentralization
Centralization is the degree to which high level
managers, usually above the country level, make
strategic decisions and pass them over to lower levels
for implementation.
 Decisions made at foreign subsidiary level are
considered decentralized, and those made at HQ are
considered to be centralized.

4. Centralization- characteristics
 Decisions made by senior level managers at HQ.
 Facilitates coordination of core values
 Ensures decisions are consistent with strategic objectives.
 Senior executives have authority to direct major change.
 Avoids duplication of activities
 Reduces the risk of making wrong decisions at low level
 Ensures consistent dealings with all stakeholders

5. Decentralization- characteristics
 Decisions made by employees, who are very close to
the situation
 Employees directly deal with customers, markets, etc
 Motivates employees to exercise major organizational
changes
 Enables more flexible response to environmental
changes
 Permits to fix better accountability

6. Discussion question
 What are the advantages and disadvantages of
Centralized and decentralized decision making?
( consider the following factors / criteria to discuss the
above question)
accuracy of decisions,
how fast the decision making,
 Flexibility in decision making,
duplication of activities involved in decision making

7. Types of Organizational Structures
1. Functional Structure
2. International Division Structure
3. Product Division Structure
4. Geographic (Area) Division Structure
5. Matrix Division Structure

8. Functional Structure
 Specialized jobs are grouped according to traditional
business functions.
 Ideal for companies having a narrow product line,
sharing similar technology.
 Helps maximize economies of scale
 Highly efficient.

9. Functional Structure
President
V P PRODUCTION
Worldwide
V P MARKETING
Worldwide
Subsidiary 1 Subsidiary 2 Subsidiary 3

10. 2. International division structure
 Grouping each international business activity into its
own division
 Creates international expertise
 Creates quick response to environmental changes
enabling them to deal with different markets
 Prevents duplication of activities
Demerits are ,
Often struggles to get resources
Frustrates to exploit economies of scale

11. International division structure
President
V P
Domestic
Division
V P
International
Division
Foreign
subsidiary 1
Foreign
subsidiary 2
Foreign
subsidiary 3

12. Product Division Structure
 These are popular among international companies with
diverse products.
 Similar products are grouped under one product head e.g.
1)Perfumes and Cosmetics, 2)Detergents etc.
 each CEO focusing on a single product segment for its
global market, suitable for a global strategy
The limitations are,
 There may be duplicate functions and activities among
divisions.
 No formal means by which one product division can learn
from another international expertise.

13. Product based structure
President
V P
Product 1
worldwide
V P
Product 3
Worldwide
Foreign
subsidiary 1
Foreign
subsidiary 2
Foreign
subsidiary 3
V P
Product 2
worldwide

14. Geographic (Area) Division
Structure ( Not in syllabus)
 These are used when foreign operations are large and
not dominated by a single country or region
 Useful when managers can gain economies of scale on
a regional rather than on global basis
 Drawback is the possibility of duplication of work
among areas as the company locates similar value
activities in several places rather than consolidating
them in the most efficient place

15. Geographic structure
president
V P
AREA 1
V P
AREA 2
V P
AREA 3
Subsidiary 2 Subsidiary 3Subsidary 1

16. Matrix structure
 The matrix organizational structure is more complicated
and complex than other kinds of organizational structure.
It is also known as a ‘hybrid structure’ and has features of
both functional and divisional/ area organizations, but is
different from both.

17. Matrix Division Structure-
Advantages
 Combines the advantages and overcome the
disadvantages of other alternative structures.
 Gives functional, product, and geographic groups a
common focus.
 It makes each group share responsibility for foreign
operations and enables each group exchange
information and resources more willingly.
 It helps develop cross-functional skill in employees.
 These are extremely efficient and help get the job done
with limited resources.

18. Matrix Organizational Structure Chart.
President
V P Pdt
line 1
Pdt A
Pdt B
V P
R&D
V P Sales &
Mktg
Pdt A
R&D Team
Pdt A
S &M Team
Pdt B
R& D Team
Pdt B
S&M Team

19. Disadvantages
A major disadvantage of the matrix structure is that many
of the team members get frustrated and irritated while
not knowing whom they are to follow, as there are more
superiors.
 This organizational structure also gives rise to conflict
between functional heads on issues relating to priorities
and deadlines.

20. Global business planning
 Global business plans resemble local and regional
business plans in format. But, a global business plans
differ from other business plans due to its global
operations.
 Therefore, components of a global business plan
differs due to global customers, global pricing and
currency issues, and international market legal factors
etc.

21. Global business planning system
 It helps you to identify your target markets
 Helps in understanding consumer need and to offer
products that satisfy their needs
 It gives clarity to who does what, when, where and how
 Forces you to think about both short term and long
term goals
 Looks your business as whole , allocates the resources
properly
 Provides a guide to measure progress and outcomes

22. Components of a global business
plan
 a business overview, which describes the company
 the projected market and the intended product or service
 financial results, such as capital and profits
 a market description that include market size, share,
positioning of products, competition etc.
 An operations and management plan discusses supply,
production, marketing and distribution in targeted
countries
 plan on organizational structure , that describes the
details of your organization's hierarchy of personnel

23. Global Business Organizing System
 The organization of international business refers to
the integrated function of formal organization
structure, coordination, control, processes, culture and
people. -Charles W.L. Hill”
Three factors in organization
 Division of the organization into subunits
 Decision-making responsibilities (centralized vs.
decentralized)
 The establishment of integrating mechanisms to
coordinate the activities.

24. Global business information system
 An information system can be defined technically as a
set of interrelated components that collect (or
retrieve), process, store, and distribute information to
support decision making and control in an
organization. In addition, information systems may
also help managers and workers analyze problems,
visualize complex subjects, and create new products
 Global information systems can change the vision of
how a business communicates. The use of electronic
data interchange(EDI) increases the speed with which
businesses can respond to their customers.

25. Global business information system
 Managers are increasingly using information
technology to coordinate work, communicate with
employees, and to provide information for decision
making.
 Now, the firms become digital, that all of the
organization's significant business relationships with
customers, suppliers, and employees are digitally
enabled.
 Core business processes are accomplished through
digital networks spanning the entire organization or
linking multiple organizations.

26. Business firms invest heavily in information systems to
achieve strategic business objectives such as
 operational excellence;
 new products, services and business models;
 customer and supplier intimacy;
 improved decision making;
 competitive advantage; and
 survival.

27. Global business control system
 Control refers to the task of ensuring that activities are
producing the desired results and is limited to
monitoring the outcome of activities, reviewing
feedback information about this outcome, and if
necessary, taking corrective actions".
Global business control systems are the metrics that are
used to measure the performance of sub-units and
make judgments on how well international firms
arefunctioning.

28. Levels of controlling
 Strategic control • How the international business
formulates achieves its strategic goals : Eg. Innovations
 Organization control :How the international business
response and acts to changes organization
environment : Eg: Advertising and promotion
 Operations control: How the international business
focus on operating systems in its subsidiaries Eg.
Storage and transport

29. Factors affecting controlling
 Domestic values and practices
 Communication systems
 Distance from head quarters
 Environmental differences
 Subsidiary performance and
 Quality of international operations

30. Under economic integration, the countries
work together with one other in order to
eliminate or reduce the barriers to the flow
of goods, labour or resources.
Economic Integration