   A company’s organizational structure helps to determine where formal
    power and authority will be located within the organization.
   Organizational Structure refers to the way that an organization formally
    arranges its various domestic and international units and activities, and the
    relationships among these various organizational components.
   The structure of an international organization is constantly “evolving” over
    time, especially as the international business increases and foreign markets
    are added. Moreover, this structural evolution is managed by senior
   Organizational structure deals with how an international business should be
    organized in order to ensure that its worldwide business activities are
   Organizational Design is a process that deals with how an international
    business should be organized in order to ensure that its worldwide business
    activities are able to be integrated in an efficient and effective manner.
   Organizational design 1. must consider the size of an organization and the
    complexity of its business operations, and 2. must be able to evolve over time
    in order to enable the organization to respond to change.
   There are four primary dimensions that need to be considered when
    designing the structure of an international company, including 1. product
    and technical expertise, 2. geographic expertise, 3. customer expertise, and 4.
    functional expertise. Indeed, most companies establish worldwide
    organizations based on product, region, function, or customer classes.
   Two major concerns that management faces in designing the organizational
    structure for an international company are 1. finding the most effective way
    to departmentalize to take advantage of the efficiencies gained from the
    specialization of labor and 2. coordinating the activities of those departments
    to enable the firm to meet its overall objectives.
   Note: Changes in an international company’s strategy may require changes in
    the organization, but the reverse is also true. For example, a new CEO joining
    a firm, or a new company may be acquired, and this will require change of the
   As firms grow they will do importing and exporting, then they might invest
    some in another country so they set up an International Division. This group
    reports to the CEO (not the domestic organization) and is responsible for all
    non-home country business.
   As companies grow even more they will go from the International Division
    (eliminate it) to a worldwide organization based on product, function,
    customer class or regional (geographic area). Eventually they will evolve to a
    Global Matrix.
   Indeed, to simplify this, a typical evolutionary path for an international
    company’s structure is: from international division to worldwide product
    division to global matrix….or….from international division to worldwide
    geographic regions to global matrix.
   Global “Product” form/organization: The product global corporate form
    tends to duplicate product and area specialists, so headcount sometimes
    grows too much.
   The use of a global “product” organizational structure frequently represents
    a return to pre-export department times, and this structure has product
    divisions responsible for the worldwide operations such as marketing and
    production of products under their control. Again, this can lead to an
    increased headcount situation.
   The “regionalized” organizational structure is normally more popular with
    companies that manufacture products with a rather low technological
   Note: Both multinational and GLOBAL companies use regionalized
    organizational structures often.
   The main disadvantage of a large international company being organized
    along “regional” lines is that each region must have its own product and
    functional specialists. This adds headcount.
   Global firms that organize along “functional” lines at the top level have
    functional managers that report directly to the CEO.
   Hybrid Organizational Structure: An organizational structure organized by
    more than one dimension at the top level. Note: Such organizations are
    often the result of a regionally organized company having introduced a new
    and different product from what the regionally organized form is
    accustomed to handling, and senior management feels it can best be handled
    by a worldwide product division.
   A “hybrid” organization may result also from the company acquiring a
    company with distinct products and distribution channels.
   Matrix organization: This style of organization has evolved from
    management’s attempt to mesh product and regional and functional
    expertise while maintaining clear lines of authority.
   In a typical matrix organization based on area and product dimensions, the
    country managers will be responsible to BOTH the area managers and the
    product line managers.
   The main problem with a matrix organization is that often two or three
    managers must agree on a decision. This can often be difficult.
   Hence, a “Matrix Overlay” organizational form has evolved so that some of
    the decision making process can be simplified. However, decision making
    can still be slowed by the complicated structure.
   Strategic Business Units (SBUs): A business entity with a clearly defined
    market, the ability to carry out business mission, and a size appropriate for
    control by a single manager, e.g., A SBU is an organizational form in which
    “product divisions” are defined as though they were independent businesses.
   Virtual Corporation: An organization that coordinates economic activity to
    deliver value to customers using resources outside the traditional boundaries
    of the organization. Outsourcing is an example of utilizing expertise that the
    company just does not have. A “Virtual” Corporation is also called a
    “Network” organization.
   Subsidiaries: Companies controlled by other companies through ownership
    of enough voting stock to elect Boards-of-Directors.
   Affiliates: A term sometimes used interchangeably with subsidiaries, but
    more forms exist than just stock ownership.
   In large international companies that have affiliates/subsidiaries decisions
    are made at either the IC headquarters or at the affiliate/subsidiary level.
    Also, some decisions are made jointly.
   The larger and older the international company, the more decisions that are
    often made at headquarters. Yet, this depends on the corporation and the
    corporate management culture.
   In larger ICs senior executives are often moved around to different
    affiliates/subsidiaries to gain experience and increase confidence and mutual
   Reengineering: Many large ICs see a need for frequent reorganization in
    order to cut costs and to be more efficient. Reengineering is normally a task
    to significantly reduce middle management personnel and to empower
    employees to make more decisions.
   Control is very important in large ICs and their affiliates/subsidiaries. The
    types of information that an IC needs to have reported by subsidiaries
    include 1. financial and technological, 2. market opportunities and 3. political
    and economic events.
   Every successful company uses CONTROLS to put its plans into effect,
    evaluate, correct, and reward individuals.

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