2. Global Structure & Design
International Business Strategy
301LON
Unit: 10 Knowledgecast: 2

3. Module Learning Outcomes
• Demonstrate a sound appreciation of current strategic management concepts
• Communicate an in-depth understanding of the complexity of the environment and its applications on decision-making process
• Integrate and apply strategic approaches to practical situations in various types of organisations
• Assess current developments in the organisational environment and alternative responses related to strategy

4. International Strategy and Organisation Design
The objective of organisational design and structure (OD&S) is to provide, maintain, and develop organisational structures that work toward the achievement of corporate goals.
OD&S helps create a workable structure of tasks and positions that create the physical organization and jobs.

5. International Strategy and Organization Design
Organisational structure is ultimately driven by strategy; in the near term however, strategy is shaped by organisational structure, because structure provides a constraint to action.
Structure is relatively immobile in the short run; in the longer term, it can (and does) change.

6. Organizational Architecture
The totality of a firm’s organization, including
the structure, control systems and incentives,
processes, culture and people

7. Organizational Architecture
3 Conditions Required for
Superior Enterprise Performance
Different elements of the organizational architecture are internally consistent
Organizational architecture matches or fits the strategy of the firm
Strategy and architecture of the firm are consistent with each other, and consistent with competitive conditions

8. Organizational Structure
Formal division of the organization into subunits
Location of decision-making responsibilities within that structure (centralized versus decentralized)
Establishment of integrating mechanisms to coordinate the activities of subunits including cross-functional teams or pan-regional committees

9. Organizational Structure
Three Dimensions
Vertical Differentiation
Location of decision-making responsibilities within a firm
Horizontal Differentiation
Formal division of the organization into subunits
Integrating Mechanisms
Mechanisms for coordination between subunits

10. Vertical Differentiation
Centralization And Decentralization
Vertical differentiation determines where in the firm’s hierarchy is the decision-making power concentrated

11. Vertical Differentiation
Facilitates coordination
Helps ensure that decisions are consistent with the organization’s objectives
Gives top-level managers the means to bring about organizational change
Avoids duplication of activities across subunits

12. Vertical Differentiation
Arguments for Decentralization
Relieves the burden of centralized decision-making
Individuals with freedom and control are motivated
Permits greater flexibility to environmental changes
Results in better decisions made closer to the situation
Increases control by creating subunit accountability

13. Strategy and Centralization
The choice between centralization and decentralization is not absolute and depends on the:
type of decision being made
firm’s strategy

14. Horizontal Differentiation: The Design of Structure
Concerned with how the firm decides to divide itself into sub-units
The decision is usually based on:
organizational function
type of business
geographical area

15. Organizational challenges of international expansion
Configuration
Compatibility
Coordination
Modularity
Complexity
Structure of interfaces

16. An export department structure

17. Use of subsidiaries during the early stages of internationalization

18. International Divisional Structure
CEO
Domestic
Marketing
Operations
Support
services
International
Division
Some support
services
Area 1
Area 2
Area 3
Area 4
International Divisional Structure, with domestic business and all international operations shifted to a “specialist” international division

19. 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

20. International Division Structure
(Partial Organization Chart)
Chief Executive Officer
Home-office departments
Human Resources
Finance
Marketing
Production
Operating divisions
Domestic Division:
Plant
Tools
Hardware
Furniture
International Division:
Japan
Italy
Australia
Government Relations
Marketing
Office Operations

21. Global organizational 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.

22. Global organizational structures cont’
The Global Product Structure locates manufacturing and value creation activities in appropriate global locations to increase efficiency, quality, or innovation.
Global divisions are responsible for Global Product Design and operate in divisional, cluster, or holding company formats.

23. Global Product Structure For Product-diversified Firms
Global HO
Global functions
Product Group A
Product Group B
Product Group C
Product Group D
Group support functions
Columbia
Columbia
Argentina
Brazil
Venezuela
USA
Argentina
Marketing
Operations
Support services
Distribution
Sales
After sales
Production
Procurement
Personnel
Office services IT
Legal services

24. The Global Product Structure

25. The Global Product Structure
Supports a global strategy in treating each product division as a stand-alone entity with full worldwide— as opposed to domestic—responsibilities for its activities.
Facilitates attention to pressures for cost efficiencies in allowing for consolidation on a worldwide (or regional) basis and reduction of inefficient duplication in multiple countries.
Problems:
It is the opposite of the geographic area structure: Little local responsiveness.

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

27. Global area structure cont’s
Organizes the MNE according to different geographic areas (countries and regions).
Is the most appropriate for a multidomestic strategy.
Its ability to facilitate local responsiveness is both a strength and a weakness.
Problems:
While being locally responsive can be a virtue, it may also encourage the fragmentation of the MNE into highly autonomous, hard-to-control “fiefdoms.”

28. Global function 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

29. Mixed structure
A hybrid organization design that combines structural arrangements in a way that best meets the needs of the enterprise. The Mixed Structure is most common in the Multinational Enterprise. It uses localization in product development, marketing, sales, and service. At the same time functions that benefit from scale advantages, like purchasing, are centralized

30. Global Matrix Structure

31. The Global Matrix Structure
An organizational arrangement that blends two organizational responsibilities such as functional and product structures or regional and product structures.
The Global Matrix Structure contains simultaneous, intersecting differentiation bases, with employees reporting to a functional and a product manager simultaneously

32. The Global Matrix Structure
Organization chart of the Dow Chemical Company

33. The Global Matrix Structure
Is often used to alleviate the disadvantages associated with both geographic area and global product division structures.
Is intended to support the goals of the transnational strategy—in practice, it is often difficult to deliver.
Problems
May add layers of management, slow down decision speed, and increase costs while not showing significant performance improvement.

34. Knowledgecast Summary
• Demonstrate a sound appreciation of current strategic management concepts
• Communicate an in-depth understanding of the complexity of the environment and its applications on decision-making process
• Integrate and apply strategic approaches to practical situations in various types of organisations
• Assess current developments in the organisational environment and alternative responses related to strategy
MAXIMUM THREE LEARNING OUTCOMES TO REVIEW: ONE REVIEW SUB BULLET PER LEARNING OUTCOME

36. Seminar End of Module Assessment – Evaluating internationalization
Strategy (Management Brief) (Unit 10)
Preparation – Preparing the Final Draft
This session will provide you with the opportunity to discuss your final
draft with your module tutor and ensure all your questions are answered
as you finalize your submission.
Although this is an independent piece of work giving and receiving
feedback from your peers is an essential skill, which will be of great
value in the workplace.
Be prepared to provide constructive feedback on other’s work and
receive feedback which can inform your progress.

37. Group Activity Module Review
In this session you will be required to give feedback on the module
via the usual course evaluation mechanisms. This may include a
consideration of the following questions.
1. Which of the units of the module have been most interesting to you?
2. How will your study of international business strategy affect your future business practice?
3. What do you consider to be the challenges for those involved in international business strategy?