Chapter 9 Organizing Strategy

Slide 9.
Chapter 9
Organizing strategy
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013
Slide 9.2
Organizing strategy
Objectives
Introduction
Organizational structures
Strategic management and organizing strategy.
Slide 9.3
Objectives
Examine organization structures used by

enterprises that are just beginning their
international expansion.
Describe the international division and global
structures that are used as firms increase their
international presence.
Analyze the key structural variables that
influence international organization designs.
Review the role of the organizational processes
in ensuring that the structure is both effective and
efficient.
Slide 9.4
Introduction
The FSA and CSA framework is related to the

issues of organizational structure.
A centralized and hierarchical structure is usually

followed by firms in cell 1 pursuing economic
integration.
In cell 4, the strategy of national responsiveness
may require a decentralized organizational
structure.
In cell 3, it may be necessary to combine the
advantages of both a centralized and
decentralized organizational structure.
Slide 9.5
Introduction (Continued)
Organizations that have decided to expand internationally

do it in a number of ways.
Some companies ship their goods to a foreign market
and have a third party handle sales activities.
If the firms international market continues to grow, the
enterprise will need to review this strategy and decide
whether to play a more active role in the distribution and
sale of its products. As this happens, the companys
organizing strategy will change.
Major MNEs such as IBM, GM and Mitsubishi have
sophisticated global structures that form the basis of their
organizing strategies. Sometimes these firms will also
have subsidiaries or affiliates that are integrated into the
overall structure.
Slide 9.6
Organizational structures
Slide 9.7
Early organization structures
When a company first begins international

operations, it is typical for these activities to be
extensions of domestic operations.
Primary focus continues to be the local market.
As international operations increase, however, the
MNE will take steps to address this growth
structurally.
For instance, by having a marketing or export

department handle international sales or by using
an overseas subsidiary.
Slide 9.8
Figure 9.1
An export department structure

Slide 9.9
Figure 9.2
Use of subsidiaries during the early stages of internationalization

Slide 9.10
The international division

The international division structure centralizes
all the international operations.
Advantages:
It reduces the CEOs burden of direct operation

of overseas subsidiaries and domestic
operations.
It raises the status of overseas operations to that

of the domestic divisions.
Slide 9.11
Figure 9.3
An international division structure

Slide 9.12
Global organization structures
As MNEs generate more and more revenues

from their overseas operations, their strategies
and the structures used to implement these
strategies become more global in focus.
There are six basic types of global structures.
Slide 9.13
1. Global product structure
An arrangement in which domestic divisions are

given worldwide responsibility for product groups.
Slide 9.14
Figure 9.4
A global product structure

Slide 9.15
2. Global area structure
Primary operational responsibility is delegated to

area managers, each of whom is responsible for
a specific geographic region.
Slide 9.16
Figure 9.5
A global area structure

Slide 9.17
3. Global functional structure
Builds around the basic tasks of the

organization. For example, in manufacturing
firms, production, marketing and finance are the
three primary functions that must be carried out
for the enterprise to survive.
Slide 9.18
Figure 9.6
A global functional structure

Slide 9.19
4. Matrix structure
An organizational arrangement that blends two

organizational responsibilities such as functional
and product structures or regional and product
structures.
Slide 9.20
Figure 9.7
Geographic matrix structure

Slide 9.21
Figure 9.8
A multinational matrix structure
Source: Allan R. Janger, Matrix Organizations of Complex Business (New York: The Conference Board, 1979), p. 31
Slide 9.22
5. Mixed structure
A hybrid organization design that combines

structural arrangements in a way that best meets
the needs of the enterprise.
Slide 9.23
Figure 9.9
A mixed structure
Slide 9.24
6. Transnational network structure
Designed to help MNEs take advantage of global

economies of scales while also being responsive
to local customer demands.
Relies on a network arrangement to link the various

worldwide subsidiaries.
Three components:
Dispersed subunits
Specialized operation
Interdependent relationships.
At the center of the transnational network

structure are nodes, which are units charged with
coordinating product, functional and geographic
information.
Slide 9.25
Figure 9.10
Transnational network structure

Slide 9.26
Strategic management and

organizing strategy
Slide 9.27
From strategy to structure
Effective organizations begin by formulating a

strategy and only then design a structure that will
efficiently implement this plan.
In determining the best structure, three questions
must be answered:
Can the company operate efficiently with domestic

divisions or are international divisions also
necessary?
On what basis should the organization be
structured: product, area, function, mixed or
matrix?
How can the necessary coordination and
cooperation be most effectively achieved?
Slide 9.28
Analysis of key structural variables
These answers are usually determined through a

careful analysis of five key variables.
The relative importance of international operations

at the present time and what the projected
situation might be within three to five years.
The firms past history and experience in the
international arena.
The companys business and product strategy.
The managements philosophy of operating.
The firms ability to adjust to organizational
changes.
Slide 9.29
Coordination processes
The structure is designed to answer the question:

What is to be done? The organizational
processes decision making, communicating and
controlling help to make the structure work
efficiently.
Decision making: the process of choosing from
among alternatives.
Communication: the process of transferring
meanings from sender to receiver.
Controlling: the process of determining that
everything goes according to plan.
Slide 9.30
Factors that encourage centralization or decentralization of decision making

in multinational operations
Table 9.1

Chapter 9 Organizing Strategy

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Slide 9.

Examine organization structures used by

The FSA and CSA framework is related to the

A centralized and hierarchical structure is usually

Organizations that have decided to expand internationally

Early organization structures

When a company first begins international

For instance, by having a marketing or export

An export department structure

Use of subsidiaries during the early stages of internationalization

The international division

It reduces the CEOs burden of direct operation

It raises the status of overseas operations to that

An international division structure

Global organization structures

As MNEs generate more and more revenues

1. Global product structure

An arrangement in which domestic divisions are

A global product structure

2. Global area structure

Primary operational responsibility is delegated to

A global area structure

3. Global functional structure

Builds around the basic tasks of the

A global functional structure

An organizational arrangement that blends two

Geographic matrix structure

A multinational matrix structure

A hybrid organization design that combines

6. Transnational network structure

Designed to help MNEs take advantage of global

Relies on a network arrangement to link the various

At the center of the transnational network

Transnational network structure

Strategic management and

From strategy to structure

Effective organizations begin by formulating a

Can the company operate efficiently with domestic

Analysis of key structural variables

These answers are usually determined through a

The relative importance of international operations

The structure is designed to answer the question:

Factors that encourage centralization or decentralization of decision making

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