Presented By:Jatin vaidOrganization Structure in International
BusinessOrganization StructureOrganization is defined by the formal
structure, coordination and control systems, and the organization
culture.Its the formal arrangement of roles, responsibilities and
relationships within an organization.Its a powerful tool with which
to implement strategy.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.CentralizationDecentralizationDecisions made by senior
level managers at HQ.Facilitates coordination of value chainEnsures
decisions are consistent with strategic objectives.Senior
executives have authority to direct major change.Preempts
duplication of activitiesReduces the risk of making wrong decisions
at low levelEnsures consistent dealings with all
stakeholders.Discourages initiative among lower level
employees.Decisions made by employees, who are closest to the
situation.Employees who directly deal with customers, markets,
etcMotivates employees to exercise initiative.Enables more flexible
response to rapid environmental changes.Permits to fix better
accountability.Puts the org at risk for bad decision making.Cross
unit coordination is at stake for favouritism.Centralization V/S
DecentralizationHorizontal Differentiation: The Design of the
Formal StructureHorizontal Differentiation: The way a co. designs
its formal structure to perform the following functions;Specify the
set of organizational tasks.Divide these tasks into jobs,
departments, subsidiaries and divisions to get the work done.Assign
authority relationships to get the work done in a way that supports
co. strategy.Types of Organizational StructuresFunctional
StructureInternational Division StructureProduct Division
StructureGeographic (Area) Division StructureMatrix Division
Structure1. Functional StructureSpecialized jobs are grouped
according to traditional business functions.Ideal for Co. having a
narrow product line, sharing similar technology.Helps maximize
economies of scaleHighly efficient.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 markets.Prevents duplication of
activities.Often struggles to get resources from domestic
divisions.This structure is suited for multidomestic strategies
that demand little integration and standardization between domestic
and foreign operations.Frustrates its ability to exploit economies
of scale.Product Division StructureThese are popular among
international companies with diverse products.Similar products are
grouped under one product head e.g. Perfumes and Cosmetics, each
focusing on a single product segment for its global market.Suited
for a global strategyThere may be duplicate functions and
activities among divisions.No formal means by which one product
divison can learn from another international expertise.Geographic
(Area) Division StructureThese 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 regional rather than on
global basis.Drawback is the potential of duplication of work among
areas as the company locates similar value activities in several
places rather than consolidating them in the most efficient
place.Matrix Division StructureThis tries simultaneously to deal
with competing pressures for global integration and local
responsiveness.Institutes overlaps among functional and divisional
forms.Gives functional, product, and geographic groups a common
focus.It makes each group share responsibility for foreign
operations and enables each group exchange information and
resources more willingly.Drawbacks- Stop championing their groups
unique needs, and thereby eliminate the multiple
knowledge-generating and decision making relationship that it is
supposed to engage.CEOThank [email protected]
