Chapter Six Designing Organizations for the International Environment

Chapter Six Designing Organizations for the International Environment 1

Four Stages of International Evolution I. Domestic II. International Strategic Orientation Domestically oriented Export-oriented, multidomestic Multinational Global Stage of Development Initial foreign involvement Competitive positioning Explosion Global Structure Domestic structure plus export department Domestic structure plus international division Worldwide geographic, product Matrix, transnational Market Potential Moderate, Large, mostly domestic multidomestic Very large, multinational Whole world Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7 -8; and Theodore T. Herbert, “Strategy and Multinational Organization Structure: An Interorganizational Relationships Perspective, ” Academy of Management Review 9 (1984): 259 -71. III. Multinational IV. Global 2

Matching Organizational Structure to International Advantage When Forces for Global Integration are. . . And Forces for National Responsiveness are. . . Low Strategy Structure Low Export International Division High Low Globalization Global Product Structure Low High Multidomestic Global Geographic Structure High Globalization and Multidomestic Global Matrix Structure 3

Domestic Hybrid Structure with International Division CEO Human Resources Electrical Products Division Corporate Finance Scientific Products Division Medical Products Division Research & Development International Division Europe (Sales) Brazil (Subsidiary) Mid East (Sales) Staff (Legal, Licensing) 4

Partial Global Product Structure Used by Eaton Corporation Chairman Law & Corporate Relations Engineering President Finance & Administration International Regional Coordinators Global Automotive Components Group Global Industrial Group Global Instruments Product Group Global Materials Handling Group Global Truck Components Group Source: Based on New Directions in Multinational Corporate Organization (New York: Business International Corp. , 1981). 5

Global Matrix Structure International Executive Committee Business Areas Germany Norway Country Managers Argentina/ Brazil Spain/ Portugal Power Transformers Transportation Industry Local Companies 6

Building Global Capabilities The Global Organizational Challenge Increased Complexity and Differentiation Need for Integration Knowledge Transfer Global Coordination Mechanisms Global Teams Headquarters Planning Expanded Coordination Roles 7

Cultural Differences in Coordination and Control National Value Systems Power Distance Uncertainty Avoidance Three National Approaches to Coordination and Control Centralized Coordination in Japanese Companies European Firms’ Decentralized Approach The United States: Coordination and Control through Formalization 8

Transnational Model of Organizations Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships. Structures are flexible and ever-changing. Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole. Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems 9