Organisational Structures

Question 1

Pressures for economic integration

Answer 1

often mean a centralised & hierarchical structure (Locate where strong CSAs reduce costs)

Question 2

National responsiveness may mean

Answer 2

a decentralised structure with autonomous local subsidiaries (strong FSAs in marketing & customisation)

Question 3

Other firms may try both

Answer 3

leading to sophisticated structures (mixing FSAs & CSAs)

Question 4

Early organisation Structure

Answer 4

• First internationalisation often just extends domestic operations
• Main focus still local market

Question 5

More internationalisation may mean:

Answer 5

Marketing or export department handle international sales (e.g. Command Alkon)
Or use of overseas subsidiary (e.g. Sanofi-Aventis)

Question 6

INTERNATIONAL DIVISION

Answer 6

Centralises all international activities in one division/SBU (Home Replication)

Question 7

Pros for International division:

Answer 7

Easier for CEO since international & domestic divisions now separate; raises status of overseas operations, with dedicated managers & supporting systems

Question 8

Cons for International division

Answer 8

Rival divisions; HQ (Home Office) might not have global outlook or allocate resources fairly to International Division

Question 9

What are the 6 sophisticated global structures

Answer 9

• Global Product Structure
• Global Area Structure
• Global Functional Structure
• Matrix Structure
• Mixed Structure
• Transnational Network Structure

Question 10

Global Product structure

Answer 10

Each domestic division has worldwide responsibility for product groups with countries subservient (Global Standardisation)
Each division an autonomous profit centre

Question 11

Pro’s and Con’s of Global Product structure

Answer 11

Pros: Each division focuses on customer needs; develops experienced managers; manages life cycles; gives feedback to HQ
Cons: Duplicating functions/ staff; focus on best-sellers; domestic managers developing international knowledge; coordinating activities; cooperation/communication

Question 12

Global Area Structure

Answer 12

Decentralised: Each area manager autonomous & responsible for all region’s products (Localisation, Multidomestic)

Question 13

Pros and Cons of Global Area Structure

Answer 13

Pros: Nationally responsive to local tastes & regulations; allows regional economies of scale; avoids imports, so reduces transport costs
Cons: Lack of product knowledge; smaller factories duplicate costs; lack of international cooperation & synergies; ‘anti-new product drift’

Question 14

Global Functional Structure

Answer 14

Builds around the firm’s basic tasks (e.g. Manufacturing firms need production, marketing and finance)
Highly centralised – Each function head responsible for domestic & foreign business (Global Standardisation – narrow product line)

Question 15

Pros and Cons of Global Functional Structure

Answer 15

Pros: Controlled by fewer managers; little duplication
Cons: Coordinating independent functions; CEO responsible for profit

Question 16

Matrix Structure

Answer 16

Blends 2+ organisational responsibilities in dual command e.g. functions (inputs) & products (outputs), or regions & products

Question 17

Pros and Cons of Matrix Structure

Answer 17

Pros: More global managers
Cons: Complex, confusing - Two bosses; multiple meetings; steep learning curve; political agendas

Question 18

Mixed Structure

Answer 18

Hybrid - combining structures to meet organisation’s needs

‘Pure’ structures hard to find

Question 19

Pros and Cons of Mixed Structure

Answer 19

Pros: Specific to organisation
Cons: Messy solution
(e.g. Most firms, including Baker Tilly)

Question 20

Transnational Network Structure

Answer 20

Network links diverse subsidiaries (nodes), which can be :

(1) Dispersed (located anywhere to take advantage of low labour costs, customer data, etc.)
(2) Specialised (specifically located expertise or resources: particular products, R&D, marketing)
(3) Interdependent (share information & resources)

Question 21

Pros and Cons of Transnational Network Structure

Answer 21

Pros: Aims for both integration (economies of scale) & national responsiveness
Cons: Greatest need for coordination
(e.g. Ideal, or Philips NV now?)

Question 22

When choosing a structure a firm must consider;

Answer 22

• Relative importance of international activities now & likely situation in 3-5 years
• Firm’s past international history & experience
• Business and product strategy
• Management’s philosophy
• Firm’s ability to adapt to change

Question 23

Decision making: US V Japan

Answer 23

British top managers delegate budgeting to middle managers; Japanese ringi by consensus; US MNEs centralise international decisions

Question 24

Communication: US V Japan

Answer 24

US encourage open, direct & specific directives; Japanese indirect & implied

Question 25

Controlling: US V Japan

Answer 25

US control overseas operations by reports & performance data; Europeans by goal-directed behaviour, rotation & direct reporting to top; Japanese team evaluation & ten-yearly individual reviews

Question 26

What is the heart of structure?

Answer 26

Integration v Responsiveness