Global
Structure & Design
International Business
Strategy
301LON
Unit: 10 Knowledgecast: 2
Module Learning Outcomes
•
Demonstrate a sound
management concepts
appreciation
of
current
strategic
•
Communicate an in-depth understanding of the complexity of
the environment and its applications on decision-making
process
•
Integrate and apply strategic approaches to practical situations
in various types of organisations
•
Assess current developments in the organisational environment
and alternative responses related to strategy
International Strategy and
Organisation Design
• The objective of organisational design
and structure (OD&S) is to provide,
maintain, and develop organisational
structures that work toward the
achievement of corporate goals.
• OD&S helps create a workable
structure of tasks and positions that
create the physical organization and
jobs.
International Strategy and
Organization Design
• Organisational structure is ultimately
driven by strategy; in the near term
however, strategy is shaped by
organisational structure, because
structure provides a constraint to
action.
• Structure is relatively immobile in the
short run; in the longer term, it can
(and does) change.
Organizational Architecture
The totality of a firm’s organization, including
the structure, control systems and incentives,
processes, culture and people
Organizational Architecture
3 Conditions Required for
Superior Enterprise Performance
• Different elements of the organizational
architecture are internally consistent
• Organizational architecture matches or fits the
strategy of the firm
• Strategy and architecture of the firm are
consistent with each other, and consistent
with competitive conditions
Organizational Structure
• Formal division of the organization into subunits
• Location of decision-making responsibilities
within that structure (centralized versus
decentralized)
• Establishment of integrating mechanisms to
coordinate the activities of subunits including
cross-functional
teams
or
pan-regional
committees
Organizational Structure
Three Dimensions
• Vertical Differentiation
– Location of decision-making responsibilities within a
firm
• Horizontal Differentiation
– Formal division of the organization into subunits
• Integrating Mechanisms
– Mechanisms for coordination between subunits
Vertical Differentiation
Centralization And Decentralization
• Vertical differentiation determines where in the
firm’s hierarchy is the decision-making power
concentrated
Vertical Differentiation
• Facilitates coordination
• Helps ensure that decisions are consistent
with the organization’s objectives
• Gives top-level managers the means to
bring about organizational change
• Avoids duplication
subunits
of
activities
across
Vertical Differentiation
• Arguments for Decentralization
• Relieves the burden of centralized decisionmaking
• Individuals with freedom and control are
motivated
• Permits greater flexibility to environmental
changes
• Results in better decisions made closer to
the situation
• Increases control by creating subunit
accountability
Strategy and Centralization
• The choice between centralization and
decentralization is not absolute and depends
on the:
– type of decision being made
– firm’s strategy
Horizontal Differentiation:
The Design of Structure
• Concerned with how the firm decides to divide
itself into sub-units
• The decision is usually based on:
– organizational function
– type of business
– geographical area
Organizational challenges of
international expansion
•
•
•
•
•
•
Configuration
Compatibility
Coordination
Modularity
Complexity
Structure of interfaces
An export department structure
Use of subsidiaries during the early
stages of internationalization
International Divisional
Structure
CEO
Domestic Operations Support International
services Division
Marketing
Some support
services
Area 1 Area 2 Area 3 Area 4
International Divisional Structure, with domestic
business and all international operations shifted to a
“specialist” international division
The international division
• The international division structure
centralizes all the international operations
Advantages:
• It reduces the CEO’s burden of direct
operation of overseas subsidiaries and
domestic operations
• It raises the status of overseas operations to
that of the domestic divisions
International Division Structure
(Partial Organization Chart)
Chief Executive Officer
Home-office
departments
Production
Marketing
Finance
Human
Resources
Operating
divisions
Domestic
Division:
Plant
Domestic
Division:
Tools
Domestic
Division:
Hardware
Domestic
Division:
Furniture
Australia
Office
Operations
Marketing
International
Division:
Japan
Italy
Government
Relations
Global organizational structures
• As MNEs generate more and more
revenues
from
their
overseas
operations, their strategies and the
structures used to implement these
strategies become more global in focus.
Global organizational structures cont’
The Global Product Structure locates
manufacturing and value creation activities in
appropriate global locations to increase
efficiency, quality, or innovation.
Global divisions are responsible for Global
Product Design and operate in divisional,
cluster, or holding company formats.
Global Product Structure
For Product-diversified Firms
Global
HO
Product Group A
Global functions
Product Group B
Product Group C
Product Group D
Group support functions
Columbia
Argentina
USA
Columbia Argentina Brazil
Venezuela
Marketing
Operations
•Distribution
•Sales
•After sales
•Production
•Procurement
Support
services
•Personnel
•Office services
•IT
•Legal services
The Global Product Structure
The Global Product Structure
• Supports a global strategy in treating each
product division as a stand-alone entity with
full worldwide— as opposed to domestic—
responsibilities for its activities.
• Facilitates attention to pressures for cost
efficiencies in allowing for consolidation on a
worldwide (or regional) basis and reduction of
inefficient duplication in multiple countries.
• Problems:
• It is the opposite of the geographic area
structure: Little local responsiveness.
Global area structure
• Primary
operational
responsibility
is
delegated to area managers, each of whom is
responsible for a specific geographic region
Global area structure cont’s
• Organizes the MNE according to different
geographic areas (countries and regions).
• Is the most appropriate for a multidomestic
strategy.
• Its ability to facilitate local responsiveness is
both a strength and a weakness.
Problems:
• While being locally responsive can be a
virtue,
it
may
also
encourage
the
fragmentation of the MNE into highly
autonomous, hard-to-control “fiefdoms.”
Global function structure
• Builds around the basic tasks of the organization. For
example,
in
manufacturing
firms,
production,
marketing, and finance are the three primary functions
that must be carried out for the enterprise to survive
Mixed structure
• A hybrid organization design that combines structural
arrangements in a way that best meets the needs of the
enterprise. The Mixed Structure is most common in the
Multinational Enterprise. It uses localization in product
development, marketing, sales, and service. At the same time
functions that benefit from scale advantages, like purchasing,
are centralized
Global Matrix Structure
The Global Matrix Structure
An organizational arrangement that blends two
organizational responsibilities such as functional and
product structures or regional and product structures.
The Global Matrix Structure contains simultaneous,
intersecting differentiation bases, with employees
reporting to a functional and a product manager
simultaneously
The Global Matrix Structure
Organization chart of the Dow Chemical Company
The Global Matrix Structure
• Is often used to alleviate the disadvantages
associated with both geographic area and
global product division structures.
• Is intended to support the goals of the
transnational strategy—in practice, it is often
difficult to deliver.
• Problems
• May add layers of management, slow down
decision speed, and increase costs while not
showing
significant
performance
improvement.
Knowledgecast Summary
•
Demonstrate a sound
management concepts
appreciation
of
current
strategic
•
Communicate an in-depth understanding of the complexity of the
environment and its applications on decision-making process
•
Integrate and apply strategic approaches to practical situations in
various types of organisations
•
Assess current developments in the organisational environment
and alternative responses related to strategy
Seminar
End of Module Assessment – Evaluating internationalization
Strategy (Management Brief) (Unit 10)
Preparation – Preparing the Final Draft
This session will provide you with the opportunity to discuss your final
draft with your module tutor and ensure all your questions are answered
as you finalize your submission.
Although this is an independent piece of work giving and receiving
feedback from your peers is an essential skill, which will be of great
value in the workplace.
Be prepared to provide constructive feedback on other’s work and
receive feedback which can inform your progress.
Group Activity
Module Review
In this session you will be required to give feedback on the module
via the usual course evaluation mechanisms. This may include a
consideration of the following questions.
1. Which of the units of the module have been most interesting to
you?
2. How will your study of international business strategy affect your
future business practice?
3. What do you consider to be the challenges for those involved in
international business strategy?