2. Learning ObjectivesLearning Objectives
factors that impact how globalfactors that impact how global
organizations are structured andorganizations are structured and
managedmanaged
Types of organizational structuresTypes of organizational structures
Controlling the global organizationControlling the global organization
3. Factors that impact structure andFactors that impact structure and
decision makingdecision making
Degree of involvement in internationalDegree of involvement in international
operations.operations.
Products that the firm markets.Products that the firm markets.
Size and importance of the firm’s markets.Size and importance of the firm’s markets.
Human resource capability of the firm.Human resource capability of the firm.
Corporate goals, Strategies and objectives.Corporate goals, Strategies and objectives.
4. Organizational StructureOrganizational Structure
Companies must change strategies as theirCompanies must change strategies as their
structures evolve from domestic to multinational.structures evolve from domestic to multinational.
The organizational structure, control systems,The organizational structure, control systems,
culture, and human resource managementculture, and human resource management
systems that together determine howsystems that together determine how
efficiently and effectively organizational resourcesefficiently and effectively organizational resources
are used.are used.
• All organizations require some form ofAll organizations require some form of
organizational structure to implement andorganizational structure to implement and
manage their strategiesmanage their strategies
• Firms frequently alter their structure as theyFirms frequently alter their structure as they
grow in size and complexitygrow in size and complexity
5. Designing Organizational StructureDesigning Organizational Structure
OrganizingOrganizing
The process by which managers establish workingThe process by which managers establish working
relationships among employees to achieve goals.relationships among employees to achieve goals.
Organizational StructureOrganizational Structure
Formal system of task and reporting relationshipsFormal system of task and reporting relationships
showing how workers use resources.showing how workers use resources.
Organizational designOrganizational design
The process by which managers create a specific type ofThe process by which managers create a specific type of
organizational structure and culture so that a companyorganizational structure and culture so that a company
can operate in the most efficient and effective waycan operate in the most efficient and effective way
6. Tall and Flat OrganizationsTall and Flat Organizations
Tall structures have many levels of authorityTall structures have many levels of authority
As hierarchy levels increase, communication getsAs hierarchy levels increase, communication gets
difficult creating delays in the time being taken todifficult creating delays in the time being taken to
implement decisions.implement decisions.
Communications can also become distorted as it isCommunications can also become distorted as it is
repeated through the firm.repeated through the firm.
Can become expensiveCan become expensive
Flat structures have fewer levels and wide spans of control.Flat structures have fewer levels and wide spans of control.
Structure results in quick communications but can leadStructure results in quick communications but can lead
to overworked managers.to overworked managers.
7. Tall and Flat OrganizationsTall and Flat Organizations
8. Product
Structure
Most often used by multinational corporations.
Improved cost efficiency is a major benefit.
Geographic
Structure
Second most used approach. Follows the marketing
concept most closely.
Functional
Structure
The simplest from the administrative viewpoint. A
variation is one that uses processes as a basis for
structure.
Market
Structure
Especially used if customer groups are dramatically
different.
Matrix
Structure
Integrates the various approaches. Most companies find
this arrangement problematic. Complexity of this
structure may increase the reaction time of a
company.
Types of Organizational StructuresTypes of Organizational Structures
9. Product StructureProduct Structure
Allows functional managers to specialize in one productAllows functional managers to specialize in one product
areaarea
Removes need for direct supervision of division byRemoves need for direct supervision of division by
corporate managerscorporate managers
Divisional managers have the responsibility for devisingDivisional managers have the responsibility for devising
an appropriate business-level strategy to allow thean appropriate business-level strategy to allow the
division to compete effectively in its industrydivision to compete effectively in its industry
Each product group is responsible for marketing, sales,Each product group is responsible for marketing, sales,
planning, and (in some cases) production and researchplanning, and (in some cases) production and research
and developmentand development
10. Product organizational structureProduct organizational structure
• Advantageous when product line constantly changesAdvantageous when product line constantly changes
with technological advanceswith technological advances
• Facilitates the development of global products andFacilitates the development of global products and
global roll-outsglobal roll-outs
• Appropriate when perceived differences involved withAppropriate when perceived differences involved with
marketing the various product lines are greater thanmarketing the various product lines are greater than
perceived differences in geographic marketsperceived differences in geographic markets
• Knowledge of specific geographic areas can be limitedKnowledge of specific geographic areas can be limited
and sensitivity to local market conditions can beand sensitivity to local market conditions can be
diminisheddiminished
11. Geographic organizational structuresGeographic organizational structures
Focus on regions of worldFocus on regions of world
Allows company to locate marketing and manufacturingAllows company to locate marketing and manufacturing
efforts in such a way as to take advantage of regionalefforts in such a way as to take advantage of regional
benefitsbenefits
Puts company in closer contact with distributors,Puts company in closer contact with distributors,
customers, and subsidiariescustomers, and subsidiaries
Managers locate different divisions in each of the worldManagers locate different divisions in each of the world
regions where the organization operates.regions where the organization operates.
12. Geographic organizational structuresGeographic organizational structures
• Separate unit for each GeographySeparate unit for each Geography
Extremely sensitive to local customs, laws, and needsExtremely sensitive to local customs, laws, and needs
Expensive!!!Expensive!!!
Many companies are phasing out country-basedMany companies are phasing out country-based
structures and are moving toward regional centersstructures and are moving toward regional centers
• Appropriate when company needs intimate knowledge ofAppropriate when company needs intimate knowledge of
its customers and their environmentsits customers and their environments
• Gives company opportunity to understand the localGives company opportunity to understand the local
culture, economy, politics, laws, and competitiveculture, economy, politics, laws, and competitive
situationsituation
13. Functional organizational structuresFunctional organizational structures
• Top executives in marketing, finance,Top executives in marketing, finance,
production, accounting, and research andproduction, accounting, and research and
development all have worldwidedevelopment all have worldwide
responsibilitiesresponsibilities
• Best for narrow or homogeneous productBest for narrow or homogeneous product
lines with little variation between productslines with little variation between products
or geographic marketsor geographic markets
14. Market StructureMarket Structure
• Groups divisions according to the particular kinds ofGroups divisions according to the particular kinds of
customers they servecustomers they serve
• Allows managers to be responsive to the needs of theirAllows managers to be responsive to the needs of their
customers and act flexibly in making decisions incustomers and act flexibly in making decisions in
response to customers’ changing needsresponse to customers’ changing needs
15. Matrix StructureMatrix Structure
• An organizational structure that simultaneously groupsAn organizational structure that simultaneously groups
people and resources by function and product.people and resources by function and product.
Results in a complex network of superior-subordinateResults in a complex network of superior-subordinate
reporting relationships.reporting relationships.
The structure is very flexible and can respond rapidlyThe structure is very flexible and can respond rapidly
to the need for change.to the need for change.
Each employee has two bosses (functional managerEach employee has two bosses (functional manager
and product manager) and possibly cannot satisfyand product manager) and possibly cannot satisfy
both.both.
• Developed to overcome drawbacks of geographic,Developed to overcome drawbacks of geographic,
functional, and product organization structuresfunctional, and product organization structures
• Allows for two or more dimensions of theoretical weight,Allows for two or more dimensions of theoretical weight,
e.g., importance to product and geographye.g., importance to product and geography
• Complexity can cause duplication of authority, confusionComplexity can cause duplication of authority, confusion
of responsibility and power struggleof responsibility and power struggle
17. Controlling the Global OrganizationControlling the Global Organization
1.1.Developing standardsDeveloping standards
Behavioral standardsBehavioral standards
Performance standardsPerformance standards
1.1.Measuring and evaluating performanceMeasuring and evaluating performance
2.2.Analyzing and correcting deviations fromAnalyzing and correcting deviations from
the standardsthe standards
4. Effective communication systems4. Effective communication systems
facilitate controlfacilitate control
18. Post-ClassPost-Class ActivityActivity
Why organizational issues for born-globalWhy organizational issues for born-global
firms differ from those for traditionalfirms differ from those for traditional
multinational companies.multinational companies.
Give examples of how technology can beGive examples of how technology can be
utilized to support internal globalutilized to support internal global
communications systems.communications systems.
Discuss the conflicts that can ariseDiscuss the conflicts that can arise
between international headquarters andbetween international headquarters and
national subsidiaries.national subsidiaries.
Global account management.Global account management.
Transnational network structure.Transnational network structure.
