Organization of Multinational Operations Organizational structure in the

Organization of Multinational Operations

Organizational structure in the early stage of international expansion Advantages n No commissions for specialized foreign trade agencies n Better coordination and control to the whole activity Disadvantages n subordination to the marketing departament n No direct connections with production, financial or research and development departments n subordination to the domestic sector. Recommendation n Companies with a narrow line of products, and for which revenues from the international activity are smaller than the revenues from domestic production

International Division Structure Advantages n Top management attention to foreign business n Concentration of international management expertise at headquarters Disadvantages n An inherent conflict between the goals of the domestic and international division n Domestic functional specialists are reluctant to give priority to foreign customers n A high degree of internationalization make very difficult a global coordination of resources Recommendation : to be used by the companies with few specialists in international business and internationalized in a limited geographical area

Global Product Division Structure Advantages n n Allows the companies to add new products without disturbing the rest of organization Fast response to the global competitive pressures against specific product lines Disadvantages n n Wasteful duplication of management, sales representations and plant capacity utilization within regions. The production managers tend to consider more the internal market Recommendations : n n To be used by the companies with a diversified product line and growth opportunities and have different clients. It is the most suitable for the companies which use advanced technologies

Global Area Division Structure Advantages n High decision power of local managers n Create the opportunity for economies of scale n Local managers could find faster better solutions to solve local problems Disadvantages n duplication of functional and product specialists among the regions n Lack of interest of area divisions to promote new products realized at headquarter or in another regional department Recommendations : to be used by companies with mature business and narrow product lines n Suitable for beverages, food, cosmetics or pharmaceutical companies

Global Functional Division Structure Advantages n n Global activities could be controlled by a small number of managers Functional design permits functional line managers to control directly all activities. Disadvantages n n Difficult global coordination of functional departments Inherent divergence of objectives among production and marketing managers which need to be solved at headquarters Recommendations n n To be used by companies with narrow, standardized product line Most suitable for companies involved in raw materials extractive industry.

Global Matrix Division Structure Advantages n It allows the efficient use of organizational resources, sharing them across multiple projects or countries n Improved interaction both vertically and laterally. n Frequent contacts between members from different areas expedite decision making and enhance management flexibility Disadvantages n A built-in tension between country managers and product managers who are in competition for control over the same set of resources n The time-consuming nature of shared decision making system

Strategic Business Units Structure

Global Network Division Structure