FUNCTIONAL STRUCTURE WITH AN EXPORT DEPARTMENT

FOREIGN SUBSIDIARIES
Subunit of the multinational company that is located in another country Types of foreign subsidiaries

Minireplica
Uses

subsidiary: smaller version of the parent company

the same technology and producing the same products as the parent company

Transnational
Each

subsidiary: has no companywide form or function

subsidiary contributes what it does best

AN INTERNATIONAL DIVISION

ORGANIZATIONAL STRUCTURES TO IMPLEMENT MULTINATIONAL STRATEGIES

Reasons to abandon the international division

Diverse

products overwhelm capacities of multinational Not close enough to local markets Cannot take advantage of global economies of scale or global sources of knowledge

Several options available to deal with these shortcomings

ROYAL VOPAK GEOGRAPHIC STRUCTURE

WORLDWIDE PRODUCT STRUCTURE

Both worldwide product structure and worldwide geographic structure have advantages and disadvantages
Product

structure: supports global products Geographic structure: emphasizes local adaptation

Multinationals often want both abilities Use hybrids or matrix

STOP FORD AND WELLS MODEL

WORLDWIDE MATRIX STRUCTURES

Symmetrical organization with equal emphasis on

Worldwide

product groups and Regional geographical divisions

WORLDWIDE MATRIX STRUCTURES

Balances the benefits produced by area and product structures Creates equal lines of authority for products and areas

Works

best with near equal demands from both

sides

Requires extensive resources for communication and coordination Requires middle and upper level managers with good human relations skills

EXHIBIT 7.9: WORLDWIDE MATRIX ORGANIZATION

MATRIX STRUCTURES

Problems emerging with worldwide matrix structures

Slow

decision making process Too bureaucratic Too many meetings and too much conflict

MATRIX STRUCTURES (CONT.)

Result
Companies

have redesigned their matrix structures to be more flexible with speedier decision making Other companies have abandoned their matrices and returned to product structures Key issue is equal line of authority

FRONT-BACK HYBRID STRUCTURE

The front side has units based on geography to provide a multidomestic or regional focus The backside has units based on product groups to capture global economies of scale in R&D and production Front end is decentralized with unit heads as key decision makers and holding P&L responsibility Back end is more centralized

EXHIBIT 7.8: TETRA PAKS FRONT-BACK HYBRID STRUCTURE

P&G 4 DIMENSIONAL STRUCTURE

THE TRANSNATIONAL-NETWORK STRUCTURE

Newest solution to the complex demand of being locally responsive and taking advantage of competitiveness of nation Combines functional, product, and geographic subunits

Dispersed

subunits Specialized operations Interdependent relationships

THE TRANSNATIONAL-NETWORK STRUCTURES

Has no symmetry or balance in its structural form Resources, people, and ideas flow in all directions Nodes or centers in the network coordinate product, functional, and geographic information

GEOGRAPHIC LINKS IN THE PHILIPS TRANSNATIONAL STRUCTURE

PRODUCT LINKS IN THE SAME ORGANIZATION

COMPONENTS OF THE TRANSNATIONALNETWORK STRUCTURE

Dispersed subunits: subsidiaries located anywhere where they can most benefit the company 2. Specialized operations: subunits specializing in particular product, research areas, or marketing areas 3. Interdependent relationships: continuous sharing of information and resources by dispersed and specialized subunits
1.

HOW TO DECIDE ON ORGANIZATIONAL STRUCTURE FOR MULTINATIONALS?

How geographically dispersed are capabilities How competent are people to work across different geographies These two questions decide what should be the organizational structure for a multinational organization

Sharp R&D and manufacturing in Japan, only international sales focus Consumer products companies: Locate manufacturing to low cost nations like India but keep R&D centered in US When GE develops new Jet engines, relies on China to design for manufacturing, uses India for analytics and material science and German Labs for wind tunnel testing

COMPETENCE ACROSS GEOGRAPHIES

Large cultural and technical differences exists across countries and within functions which a firm is unable to reconciliate Not very competent Common language and low cultural differences people easily mobile across geographies and countries Moderately competent People well adapt to work across products, functions and geographies

Competence in working across countires

Low

Medium

High

Front back hybrid Geogrophic dispersion Low

Global matrix Medium

Transnational/ TDesign High