Chapter Six

Designing Organizations for the International Environment

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Four Stages of International Evolution

I. Domestic Strategic Orientation Stage of Development Structure Market Potential
Domestically oriented Initial foreign involvement Domestic structure plus export department Moderate, mostly domestic

II. International
Export-oriented, multidomestic Competitive positioning Domestic structure plus international division Large, multidomestic

III. Multinational
Multinational

IV. Global
Global

Explosion

Global

Worldwide geographic, product Very large, multinational

Matrix, transnational

Whole world

Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, Strategy and Multinational Organization Structure: An Interorganizational Relationships Perspective, Academy of Management Review 9 (1984): 259-71.

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Matching Organizational Structure to International Advantage

When Forces for Global Integration are . .. And Forces for National Responsiveness are . . . Strategy Structure

Low High Low

Low Low High

Export Globalization Multidomestic

International Division Global Product Structure Global Geographic Structure Global Matrix Structure

High

High

Globalization and Multidomestic

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Domestic Hybrid Structure with International Division

CEO Human Resources Scientific Products Division Corporate Finance Medical Products Division Research & Development International Division

Electrical Products Division

Europe (Sales) Brazil (Subsidiary) Mid East (Sales) Staff (Legal, Licensing)

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Partial Global Product Structure Used by Eaton Corporation

Chairman

Law & Corporate Relations

Engineering

President

Finance & Administration

International

Regional Coordinators

Global Automotive Components Group

Global Industrial Group

Global Instruments Product Group

Global Materials Handling Group

Global Truck Components Group

Source: Based on New Directions in Multinational Corporate Organization (New York: Business International Corp., 1981).

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Global Matrix Structure

International Executive Committee

Country Managers

Business Areas
Power Transformers

Germany

Norway

Argentina/ Brazil

Spain/ Portugal

Transportation

Industry

Local Companies Thomson Learning 2004

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Building Global Capabilities

The Global Organizational Challenge

Increased Complexity and Differentiation Need for Integration Knowledge Transfer

Global Coordination Mechanisms

Global Teams Headquarters Planning Expanded Coordination Roles

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Cultural Differences in Coordination and Control

National Value Systems

Power Distance Uncertainty Avoidance

Three National Approaches to Coordination and Control

Centralized Coordination in Japanese Companies European Firms Decentralized Approach The United States: Coordination and Control through Formalization

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Transnational Model of Organizations

Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships. Structures are flexible and ever-changing. Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole. Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems

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