International Business Ch. 10

International Product Structure (The same as Global Product Structure)

Domestic product division is given responsibility for global line and staff operations. Product divisions are responsible for worldwide operations of their products. Duplication of area experts. To avoid this, company may have a group of managerial specialists in an international division who advise the product divisions, but have no authority over them.

Elements that need to be considered when designing the structure of an International Company:

1. Product and technical expertise for the company's different businesses. 2. Geographic expertise on the countries and regions in which the company operates. 3. Customer expertise to gauge the similarity of client groups, industries, market segments, or population groups that transcend the boundaries of individual countries or regions. 4. Functional expertise in the company's value chain activities.

International Divison Structure

A division in the organization that is at the same level as the domestic division and is responsible for all non-home-country activities. Downsides: Can result in conflicts within the firm. Difficulty in managing the int. division due to size can lead to inefficiency.

Matrix Organizations

Organizational structure composed of one or more super-imposed organizational structures in an attempt to mesh product, regional, functional, and other expertise. Organizational structure based on one or two dimensions is superimposed on an organization based on another dimension. Downfalls: -Two managers have to agree on a decision.

Organizational design

Def: Process that determines how a company should be organized to ensure its worldwide business activities are integrated in an efficient and effective manner. Objective: To find a balance between departmentalizing to most effectively take advantage of efficiencies gained from specialization of labor and coordinating the departments' activities to meet the firms objectives. Who is responsible for this? Management

Global Product structure

Has worldwide product divisions and a corporate staff that also includes international division area experts.

Kraft Foods

Kraft, hoping to improve its global presence, purchases Cadbury and begins to make new iconic snacks that appeal all over the world. After they found conflict between their NA grocery business and Global snacks business, they decided to restructure and split into to separate operations. This allowed greater effectiveness, flexibility, and each company to focus on its own distinctive products.

Global Functional Structure

Organized by function at the top level. (Marketing group, finance group, etc.) -Worldwide functional expertise is more significant than product or area knowledge. -Senior executives responsible for each functional area report to the CEO -Users have a narrow, highly integrated product mix. Ex: Aircraft manufacturers or oil refining companies.

Geographic Region Structure

Responsibility for all activities is under geographic area managers who report directly to the CEO. Simplifies the task of directing worldwide operations. Used by both multidomestic and global companies. Popular w/ companies that have products with a rather low or stable technological content that requires strong marketing, or those who have diverse products. Downfalls: Each region must have its own product and functional specialists.

What influences organizational structure?

The size of the organization and the complexity of its business operations. Systems and structure need to be consistent with each other, the strategy that's being used, and the environmental context.

How is organizational structure linked to international strategy?

The strategic planning process reveals the strengths, weaknesses and external environments of the company, sometimes disclosing a need to change the organization.

Organizational structure

The way an organization formally arranges its domestic and international units and activities and the relationships among these components. Why do they need this? Helps determine where formal power and authority will be located within the organization Enables a group of people to effectively coordinate and accomplish objectives