Designing Organizations

for the International

Environment
Chapter Six
Stages of International Evolution
1. DOMESTIC
 Initial entry into foreign markets through exporting
2. INTERNATIONAL
 Company has a department or division for international sales
 It is doing business in more than one country.
3. MULTINATIONAL
 Well established overseas with subsidiaries & facilities
 Structure is probably a hybrid
4. GLOBAL
 Corporate culture not oriented to any one country
 Operations are geographically dispersed worldwide.
 Extremely large and complex structures
 Stages of International Evolution

I. II. III. IV.

Domestic International Multinational Global

Strategic Domestically Export-oriented, Multinational Global

Orientation oriented multi-domestic

Stage of Initial foreign Competitive Explosion Global

Development involvement positioning

Domestic Domestic Worldwide Matrix,

Structure structure plus structure plus geographic, transnational
export international product
department division
Market Moderate, Large, Very large, Whole world
Potential mostly multidomestic multinational
domestic
Common Ways to Go International

 Licensing
 Joint Ventures
 Partnerships
 Outsourcing
 Acquisitions
 Mergers
 Join the Army
 Organizational Designs
for Global Advantage
Three major factors determine structure . . .
1. SCOPE (Extent of foreign operations)
 How many countries
 What % of market share in each
 What % of sales is foreign sales

2. SIZE of the organization.

 In terms of sales
 Relative to the competition
3. NATURE OF PRODUCTS and or services
 Are they global (Coke)
 Are they culturally tailored
Two Types of Global Structures
1. Globalization Strategy
 Used when the product or service can be standardized
world wide.
 Division heads are product managers for global distribution
and sales of a specific product or product group

2. Multi-Domestic Strategy
 Structure is geographically oriented by country or culture
 Division heads oversee multiple products for a country or
cultural area.
 Global Product Structure Used by
Eaton Corporation
Chairman
Chairman

Law
Law && Engineering
Engineering President
President Finance
Finance &
& International
International
Corporate
Corporate Administration
Administration
Relations
Relations
Regional
Regional
Coordinators
Coordinators

Global
Global Global
Global Global
Global Global
Global
Global
Global
Automotive
Automotive Instruments
Instruments Materials
Materials Truck
Truck
Industrial
Industrial
Components
Components Product
Product Handling
Handling Components
Components
Group
Group
Group
Group Group
Group Group
Group Group
Group
 Global Geographic Division Structure

CEO
CEO

Latin
Latin
Pacific
Pacific European
European Canadian
Canadian Corporate
Corporate
American
American
Division
Division Division
Division Division
Division Staff
Staff
Division
Division

Long-term
Long-term
Planning
Planning

Geographic divisions enable Product

Product
Coordinators
Coordinators
Multi-domestic strategies
 Domestic Hybrid Structure with
International Division
CEO
CEO

Human
Human Corporate
Corporate Research
Research &
&
Resources
Resources Finance
Finance Development
Development

Electrical
Electrical Scientific
Scientific Medical
Medical International
International
Products
Products Products
Products Products
Products Division
Division
Division
Division Division
Division Division
Division

Europe
Europe
(Sales)
(Sales)

Brazil
Brazil
(Subsidiary)
(Subsidiary)
Some global product divisions
and some multi-domestic Mid
Mid East
East
products that require cultural (Sales)
(Sales)

tailoring.
Staff
Staff (Legal,
(Legal,
Licensing)
Licensing)
 Global Matrix Structure
Balances product interests of both product standardization and
geographical localization.
International
International
Executive
Executive
Committee
Committee
Country Managers

Business Argentina/
Argentina/ Spain/
Spain/
Germany
Germany Norway
Norway Brazil
Brazil Portugal
Portugal
Areas

Power
Power
Transformers
Transformers

Transportation
Transportation

Industry
Industry

Local
Companies
 Trans-
National
Structure
(Philips NV)
 Transnational Model
No hierarchy to speak of except within
subsidiaries
 No one subsidiary can have an impact
without coordination and integration among
other subsidiary managers.
 Alliances are established to facilitate change.
 Gives autonomy to the subsidiaries
 Makes subsidiaries more flexible and
responsive to local/regional needs.
 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
 Matching Organizational Structure to
International Advantage

When Forces And Forces for

for Global National
Integration Responsiveness Strategy Structure
are . . are . . .
International
Low Low Export
Division
Global Product
High Low Globalization
Structure

Global Geographic
Low High Multi-domestic
Structure

Globalization and Global Matrix

High High
Multi-domestic Structure
Doing Business Internationally
 First Net Card was established with a goal of
providing credit for online transactions to
anyone in the world.
 Managers found the complications of dealing
with international credit and banking laws
mind-boggling.
 After two years and mountains of legal
research, First Net was licensed to provide
credit only in the U.S., Canada, and England.
Doing Business Internationally
 Saks planned to open a store in China in time
for the Beijing Olympics but, due to the
bureaucratic red tape, permits, and other
legal issues, the games were over before
construction could even begin.
 Bertlesmann, Europe’s largest magazine
publisher, tried for decades to extend their
success into the U.S., but eventually sold off
their U.S. assets as “a billion dollar
experiment gone horribly wrong.”