The document discusses different types of organizational structures used in international business. It describes centralization versus decentralization and the tradeoffs of each. There are five main types of organizational structures covered: functional structure, international division structure, product division structure, geographic (area) division structure, and matrix division structure. Each structure has advantages and disadvantages for coordinating and responding to activities in different markets and geographies.

1. Organization Structure in
International Business
PRESENTED BY:
JATIN VAID

2. Organization Structure
 Organization is defined by the formal
structure, coordination and control systems, and the
organization culture.
 It’s the formal arrangement of roles, responsibilities
and relationships within an organization.
 It’s a powerful tool with which to implement
strategy.

3. Vertical Differentiation: Centralization V/S
Decentralization.
 Vertical Integration: The issue of determining where
in the hierarchy, the authority to make decisions
stand.
 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 V/S Decentralization
Centralization Decentralization
 Decisions made by senior level  Decisions made by
managers at HQ. employees, who are closest to the
 Facilitates coordination of value situation.
chain  Employees who directly deal with
 Ensures decisions are consistent with customers, markets, etc
strategic objectives.
 Senior executives have authority to  Motivates employees to exercise
direct major change. initiative.
 Preempts duplication of activities  Enables more flexible response to
 Reduces the risk of making wrong rapid environmental changes.
decisions at low level  Permits to fix better
 Ensures consistent dealings with all accountability.
stakeholders.  Puts the org at risk for bad
 Discourages initiative among lower – decision making.
level employees.
 Cross – unit coordination is at
stake for favouritism.

5. Horizontal Differentiation: The Design of the
Formal Structure
 Horizontal Differentiation: The way a co. designs its
formal structure to perform the following functions;
1. Specify the set of organizational tasks.
2. Divide these tasks into jobs, departments,
subsidiaries and divisions to get the work done.
3. Assign authority relationships to get the work done
in a way that supports co. strategy.

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

7. 1. Functional Structure
 Specialized jobs are
grouped according to
traditional business
functions. CEO
 Ideal for Co. having a
narrow product line, Production Marketing
sharing similar
technology. India USA India USA
 Helps maximize
economies of scale
 Highly efficient.

8. 2. International division structure.
 Grouping each international
business activity into its own
division.
 Creates a critical mass of
international expertise.
 Creates quick response to
environmental changes enabling
them to deal with different CEO
markets.
 Prevents duplication of activities. Industrial
Division
Automotive
Division
Aerospace
Electronics
International
Division
Often struggles to get resources
Division

from domestic divisions. Diesel Electronics Brake
 This structure is suited for Company
(France)
Company
(France)
Company
(Mexico)
multidomestic strategies that
demand little integration and
standardization between domestic
and foreign operations.
 Frustrates its ability to exploit
economies of scale.

9. Product Division Structure
 These are popular among
international companies with
diverse products.
 Similar products are grouped
under one product head e.g.
Perfumes and Cosmetics, each CEO
focusing on a single product
segment for its global market.
 Suited for a global strategy Power Systems
Group
Industry And
Defense Group
 There may be duplicate
functions and activities Electric Elevatoe Construction
among divisions. Company
(Belgium)
Meter Company
(Argentina)
Company
(Belgium)
Products
Company (Italy)
 No formal means by which
one product divison can learn
from another international
expertise.

10. Geographic (Area) Division Structure
 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
CEO
regional rather than on global
basis. Europe and
Latin
America
North
America
and Pacific
Division Division
 Drawback is the potential of
duplication of work among U.K. Venezuela Italy U.S. Japan Canada
areas as the company locates
similar value activities in
several places rather than
consolidating them in the
most efficient place.

11. Matrix Division Structure
 This tries simultaneously to deal with
competing pressures for global
integration and local responsiveness.
 Institutes overlaps among functional
and divisional forms. CEO
 Gives functional, product, and
geographic groups a common focus.
 It makes each group share
responsibility for foreign operations Textile Agricultural Europe-
Latin
and enables each group exchange Groups Products Africa Group
America
Group
information and resources more Group
willingly.
 Drawbacks- Stop championing their
group’s unique needs, and thereby
eliminate the multiple knowledge- Mexico
generating and decision making U.K.
relationship that it is supposed to
engage.

12. Thank You!
jatinvaid@gmail.com