Chapter Six

Designing Organizations for the

International Environment

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© 2004 6-1
 Four Stages of International
Evolution
I. II. III. IV.
Domestic International Multinational Global
Strategic Domestically Export-oriented, Multinational Global
oriented multidomestic
Orientation

Stage of Initial foreign Competitive Explosion Global

involvement positioning
Development

Domestic Domestic Worldwide Matrix, trans-

structure plus structure plus geographic, national
Structure
export international product
department division
Market Moderate, Large, Very large, Whole world
mostly multidomestic multinational
Potential
domestic

Sources: Based on Nancy J. Adler, International Dimensions of

Organizational Behavior (Boston: PWS-KENT, 1991), 7-8;
and Theodore T. Herbert, “Strategy and Multinational Organization
Structure: An Interorganizational Relationships Perspective,”
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Academy of Management Review 9 (1984): 259-71. © 2004 6-2
 Matching Organizational Structure to
International Advantage
When Forces for And Forces for
Global National
Integration Responsiveness
Strategy Structure
are . . . are . . .
Low Low Export International
Division
High Low Globalization Global Product
Structure
Low High Multidomestic Global Geographic
Structure

High High Globalization and Global Matrix

Multidomestic Structure

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© 2004 6-3
 Domestic Hybrid Structure with
International Division
CEO

Human Corporate Research &

Resources Finance Development

Electrical Scientific Medical International

Products Products Products Division
Division Division Division

Europe
(Sales)

Brazil
(Subsidiary)

Mid East
(Sales)

Staff (Legal,
Licensing)
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© 2004 6-4
 Partial Global Product Structure Used by
Eaton Corporation
Chairman

Law & Engineering President Finance & International

Corporate Administration
Relations
Regional
Coordinators

Global Global Global Global

Global
Automotive Instruments Materials Truck
Industrial
Components Product Handling Components
Group
Group Group Group Group

Source: Based on New Directions in Multinational Corporate

Organization (New York: Business International Corp., 1981).
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© 2004 6-5
 Global Matrix Structure
International
Executive
Committee
Country Managers

Business Argentina/ Spain/

Germany Norway
Brazil Portugal
Areas

Power
Transformers

Transportation

Industry

Local
Companies Thomson Learning
© 2004 6-6
 Building Global Capabilities
 The Global Organizational Challenge
Increased Complexity and Differentiation
Need for Integration
Knowledge Transfer

 Global Coordination Mechanisms

Global Teams
Headquarters Planning
Expanded Coordination Roles

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© 2004 6-7
 Cultural Differences in Coordination
and Control
 National Value Systems
Power Distance
Uncertainty Avoidance

 Three National Approaches to Coordination and Control

Centralized Coordination in Japanese Companies
European Firms’ Decentralized Approach
The United States: Coordination and Control
through Formalization

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© 2004 6-8
 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

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© 2004 6-9