Chp9

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Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009

Organizing strategy

Chapter 9

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Organizing strategy

• Objectives• Introduction• Organizational structures• Strategic management and organizing strategy.

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Introduction

• The FSA and CSA framework is related to the issues of organizational structure.– A centralized and hierarchical structure is usually

followed by firms in cell 1 pursuing economic integration.

– In cell 4, the strategy of national responsiveness may require a decentralized organizational structure.

– In cell 3, it may be necessary to combine the advantages of both a centralized and de-centralized organizational structure.

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Organizational structures

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Early organization structures

• When a company first begins international operations, it is typical for these activities to be extensions of domestic operations. – Primary focus continues to be the local market.

• As international operations increase, however, the MNE will take steps to address this growth structurally. – For instance, by having a marketing or export

department handle international sales or by using an overseas subsidiary.

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Figure 9.1 An export department structure

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Figure 9.2 Use of subsidiaries during the early stages of internationalization

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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.

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Figure 9.3 An international division structure

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Global organization 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.

• There are six basic types of global structures.

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1. Global product structure

• An arrangement in which domestic divisions are given worldwide responsibility for product groups.

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Figure 9.4 A global product structure

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2. Global area structure

• Primary operational responsibility is delegated to area managers, each of whom is responsible for a specific geographic region.

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Figure 9.5 A global area structure

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3. Global functional 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.

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Figure 9.6 A global functional structure

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4. Matrix structure

• An organizational arrangement that blends two organizational responsibilities such as functional and product structures or regional and product structures.

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Figure 9.7 Geographic matrix structure

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Figure 9.8 A multinational matrix structureSource: Allan R. Janger, Matrix Organizations of Complex Business (New York: The Conference Board, 1979), p. 31

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5. Mixed structure

• A hybrid organization design that combines structural arrangements in a way that best meets the needs of the enterprise.

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Figure 9.9 A mixed structure

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6. Transnational network structure

• Designed to help MNEs take advantage of global economies of scales while also being responsive to local customer demands.– Relies on a network arrangement to link the various

worldwide subsidiaries. • Three components:

(1) Dispersed subunits(2) Specialized operation(3) Interdependent relationships

• At the center of the transnational network structure are nodes, which are units charged with coordinating product, functional, and geographic information.

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Figure 9.10 Transnational network structure

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Strategic management andorganizing strategy

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Table 9.1 Factors that encourage centralization or decentralization of decision making in multinational operations

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