Organizational Structure in Global Corporations

PRESENTED BY: AVANI JUVEKAR (14) BHUSHAN SADAPHULE (26)

Organizational Structure
Organizational Structure 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.

Centralization
Advantages
Engender common culture and values
Reduces the risk of making wrong decisions at low

level
Realize cost savings from economies of scale

Disadvantages
People fail to coordinate with other departments Discourages initiative among lower level employees

Centralized Organization Structure

Managing Director

HR Manager

Marketing Manager

Finance Manager

Staff

Staff

Staff

Decentralization
Advantages Stable environments do not require frequent intervention by the CEO to reap coordination benefits Offer close proximity between business lines and markets Motivates employees to exercise initiative Disadvantages Looser controls yield riskier decision-making Duplication of functions

Decentralized Organizational Structure

CEO

BU 1

BU 2

Marketing

HR

Marketing

HR

Horizontal Differentiation: The Design of the Formal Structure

Horizontal Differentiation: The way a co. designs its

formal structure to perform the following functions; 1. Specify the set of organizational tasks. 2. Divide these tasks into jobs, departments, subsidiaries and divisions to get the work done. 3. Assign authority relationships to get the work done in a way that supports co. strategy.

Types of Organizational Structures

1.

2.
3. 4.

5.

Functional Structure International Division Structure Product Division Structure Geographic (Area) Division Structure Matrix Division Structure

1. Functional Structure
Specialized jobs are

grouped according to traditional business functions. Ideal for Co. having a narrow product line, sharing similar technology. Helps maximize economies of scale Highly efficient.

CEO

Production

Marketing

India

USA

India

USA

International Division Structure

International division structures A structural arrangement that handles all international operations out of a division created for this purpose Assures that international focus receives top management attention Unified approach to international operations Often adopted by firms still in the developmental states of international business operations Separates domestic from international managers (not good) May find it difficult to think and act strategically, or to allocate resources on a global basis

International Division Structure

(Partial Organization Chart)

Chief Executive Officer

Home-office departments

Production
Operating divisions

Marketing

Finance

Human Resources

Domestic Division: Plant

Domestic Division: Tools

Domestic Division: Hardware

Domestic Division: Furniture Australia

Internationa l Division:

Japan

Italy

Office Operations

Marketing

Government Relations

Global Product Division Structure

Global product division

A structural arrangement in which domestic divisions are given worldwide responsibility for product groups
Global product divisions operate as profit centers Helps manage product, technology, customer diversity Ability to cater to local needs Marketing, production and finance can be coordinated on a product-by-product global basis Division manager may pursue currently attractive geographic prospects and neglect others with long-term potential Division managers my spend too much time tapping local rather than international markets

See example next slide

Global Product Division

Home-office departments

Chief Executive Officer Production Marketing Product Division B Africa Finance

(Partial Organization Chart)

Operating divisions

Human Resources

Product Division A

Product Division C Europe

Product Division D Australia

Product Division E
Far East

S. America

Great Britain France Germany Italy Netherlands

Production

Marketing

Finance

Human Resources

Global Area Division

Global area division

A structure under which global operations are organized on a geographic rather than a product basis
International operations are put on the same level as domestic operations Global division managers are responsible for all business operations in their designated geographic area Often used by firms in mature businesses with narrow product lines By manufacturing in a region, the firm is able to reduce cost per unit and price competitively Difficult to reconcile a product emphasis with a geographic orientation New R&D efforts often ignored because divisions are selling in mature market

See example next slide

Global Area Division

(Partial Organization Chart)

Chief Executive Officer

Home-office departments

Production
Operating divisions

Marketing

Finance

Human Resources

North America

South America

Europe

Asia
Great Britain France Germany Italy Netherlands

Africa

Global Functional Division

Global functional division

A structure that organizes worldwide operations primarily based on function and secondarily on product
Approach not used except by extractive companies such as oil and mining firms Favored only by firms that need tight, centralized coordination and control of integrated production processes and firms involved in transporting products and raw materials between geographic areas Emphasizes functional expertise, centralized control, and relatively lean managerial staff Coordination of manufacturing and marketing often is difficult Managing multiple product lines can be very challenging because of the separation of production and marketing into different departments

See example next slide

Global Functional Division

(Partial Organization Chart)

Chief Executive Officer

Production

Marketing

Finance

Domestic Production Product A Product B Product C Product D

Foreign Production Product A Product B Product C Product D

Domestic Production Product A Product B Product C Product D

Foreign Production Product A Product B Product C Product D

Matrix Organizational Structures

Matrix organizational structures A structure that is a combination of a global product, area, or functional arrangement
Allows the organization to create the specific type of design that best meets its needs As the matrix designs complexity increases, coordinating the personnel and getting everyone to work toward common goals often become difficult Too many groups go their own way

See example next slide

Matrix Organizational Structures

(Partial Organization Chart)

Chief Executive Officer

Home-office departments

Production
Operating divisions

Marketing

Finance

Human Resources

North America

Industrial Goods

Europe

Manager, Industrial Goods North America

Manager, Industrial Goods Europe

Transnational Network Structures

Transnational network structures A multinational structural arrangement that combines elements of function, product, and geographic designs, while relying on a network arrangement to link worldwide subsidiaries
At the center of the transnational network structure are nodes, which are units charged with coordinating product, functional, and geographic information Different product line units and geographical area units have different structures depending on what is best for their particular operations

See example next slide

Transnational Network Structures

Organizational Structure of HTC

The organizational structure is really that a centipede walks on hundred legs and one or two don't count. So if I lose one or two legs, the process will go on, the organization will go on, the growth will go on.

-Mukesh Ambani

THANK YOU !!