Organization of Organization of Multinational OperationsMultinational Operations

Basic Principles of Basic Principles of OrganizationOrganization

DEPARTMENTALIZATIONDEPARTMENTALIZATION

UNITY OF COMMANDUNITY OF COMMAND

DepartmentalizationDepartmentalization

- group activities that have similar characteristics and functions from the lowest levels of the firm and proceed upward

- tasks are clustered into jobs - jobs are combined to form

departments- departments are put together to

create business units

Organizational structure in the Organizational structure in the early stage of international early stage of international

expansionexpansion AdvantagesAdvantages No commissions for specialized No commissions for specialized

foreign trade agencies foreign trade agencies Better coordination and control Better coordination and control

to the whole activityto the whole activity

DisadvantagesDisadvantages subordinationsubordination to the to the marketing marketing

departament departament No direct connections with No direct connections with

production, financial or research production, financial or research and development departmentsand development departments

subordinationsubordination to the domestic to the domestic sectorsector..

RecommendationRecommendation Companies with a narrow line of Companies with a narrow line of

productsproducts,, and for which revenues and for which revenues from the international activity are from the international activity are smaller than the revenues from smaller than the revenues from domestic productiondomestic production

International Division International Division StructureStructure

AdvantagesAdvantages Top management attention to foreign Top management attention to foreign

business business Concentration of international Concentration of international

management expertise at management expertise at headquartersheadquarters

DisadvantagesDisadvantages An inherent conflict between the An inherent conflict between the

goals of the domestic and goals of the domestic and international divisioninternational division

Domestic functional specialists are Domestic functional specialists are reluctant to give priority to foreign reluctant to give priority to foreign customerscustomers

A high degree of internationalization A high degree of internationalization make very difficult a global make very difficult a global coordination of resources coordination of resources

Recommendation : Recommendation : to be used by the to be used by the companies with few specialists in companies with few specialists in international business and international business and internationalized in a limited internationalized in a limited geographical areageographical area

Global Product Division Global Product Division StructureStructure

AdvantagesAdvantages Allows the companies to add new Allows the companies to add new

products without disturbing the rest products without disturbing the rest of organization of organization

Fast response to the global Fast response to the global competitive pressures against specific competitive pressures against specific product lines product lines

DisadvantagesDisadvantages Wasteful duplication of management, Wasteful duplication of management,

sales representations and plant sales representations and plant capacity utilization within regions.capacity utilization within regions.

The production managers tend to The production managers tend to consider more the internal marketconsider more the internal market

RecommendationsRecommendations : : To be used by the companies with a To be used by the companies with a

diversified product line and growth diversified product line and growth opportunities and have different opportunities and have different clients. clients.

It is the most suitable for the It is the most suitable for the companies which use advanced companies which use advanced technologiestechnologies

Global Area Division Global Area Division StructureStructure

AdvantagesAdvantages High decision power of local High decision power of local

managers managers Create the opportunity for economies Create the opportunity for economies

of scale of scale Local managers could find faster Local managers could find faster

better solutions to solve local better solutions to solve local problems problems

DisadvantagesDisadvantages Duplication of functional and product Duplication of functional and product

specialists among the regions specialists among the regions Lack of interest of area divisions to Lack of interest of area divisions to

promote new products realized at promote new products realized at headquarter or in another regional headquarter or in another regional departmentdepartment

Recommendations :Recommendations : to be used by to be used by companies with mature business and companies with mature business and narrow product lines narrow product lines

Suitable for beverages, food, Suitable for beverages, food, cosmetics or pharmaceutical cosmetics or pharmaceutical companies companies

Global Functional Division Global Functional Division StructureStructure

AdvantagesAdvantages Global activities could be controlled Global activities could be controlled

by a small number of managersby a small number of managers Functional design permits Functional design permits

functional line managers to control functional line managers to control directly all activities. directly all activities.

DisadvantagesDisadvantages Difficult global coordination of Difficult global coordination of

functional departmentsfunctional departments Inherent divergence of objectives Inherent divergence of objectives

among production and marketing among production and marketing managers which need to be solved managers which need to be solved at headquartersat headquarters

RecommendationsRecommendations To be used by companies with To be used by companies with

narrow, standardized product line narrow, standardized product line Most suitable for companies Most suitable for companies

involved in raw materials extractive involved in raw materials extractive industry. industry.

Global Matrix Division Global Matrix Division StructureStructure

AdvantagesAdvantages It allows the efficient use of It allows the efficient use of

organizational resources, sharing organizational resources, sharing them across multiple projects or them across multiple projects or countriescountries

Improved interaction both Improved interaction both vertically and laterally. vertically and laterally.

Frequent contacts between Frequent contacts between members from different areas members from different areas expedite decision making and expedite decision making and enhance management flexibilityenhance management flexibility

DisadvantagesDisadvantages A built-in tension between country A built-in tension between country

managers and product managers managers and product managers who are in competition for control who are in competition for control over the same set of resources over the same set of resources

The time-consuming nature of The time-consuming nature of shared decision making systemshared decision making system

Strategic Business Unit Strategic Business Unit StructureStructure

AdvantagesAdvantages

Equal importace between different Equal importace between different products or product lines products or product lines

Full decision decentralization Full decision decentralization Strong personnel specializationStrong personnel specialization

DisadvantagesDisadvantages Duplication of functions and Duplication of functions and

managerial positionsmanagerial positions

RecommendationsRecommendations To be used by big companies with To be used by big companies with

diversified product line diversified product line Most suitable for companies who Most suitable for companies who

need decentralization.need decentralization.

Global Network Division Global Network Division StructureStructure

AdvantagesAdvantages

Improved cooperation between Improved cooperation between vertically integrated companies vertically integrated companies

Enhance the group global Enhance the group global competitivity competitivity

Enhanced flexibility and Enhanced flexibility and reactivity reactivity

““Key-competences”Key-competences”

DisadvantagesDisadvantages Strategic difficulties Strategic difficulties

Recommendations :Recommendations : To be used by big companies with To be used by big companies with

complex objectives. complex objectives.