Organization Structure in International Business

PRESENTED BY: JATIN VAID

Organization Structure
Organization is defined by the formal structure,

coordination and control systems, and the organization culture. Its the formal arrangement of roles, responsibilities and relationships within an organization. Its a powerful tool with which to implement strategy.

Vertical Differentiation: Centralization V/S Decentralization.

Vertical Integration: The issue of determining where

in the hierarchy, the authority to make decisions stand. Centralization is the degree to which high level managers, usually above the country level, make strategic decisions and pass them over to lower levels for implementation. Decisions made at foreign subsidiary level are considered decentralized, and those made at HQ are considered to be centralized.

Centralization V/S Decentralization

Centralization
Decisions made by senior level

Decentralization
Decisions made by employees,

managers at HQ. Facilitates coordination of value chain Ensures decisions are consistent with strategic objectives. Senior executives have authority to direct major change. Preempts duplication of activities Reduces the risk of making wrong decisions at low level Ensures consistent dealings with all stakeholders. Discourages initiative among lower level employees.

who are closest to the situation. Employees who directly deal with customers, markets, etc Motivates employees to exercise initiative. Enables more flexible response to rapid environmental changes. Permits to fix better accountability. Puts the org at risk for bad decision making. Cross unit coordination is at stake for favouritism.

Horizontal Differentiation: The Design of the Formal Structure

Horizontal Differentiation: The way a co. designs its

formal structure to perform the following functions; 1. Specify the set of organizational tasks. 2. Divide these tasks into jobs, departments, subsidiaries and divisions to get the work done. 3. Assign authority relationships to get the work done in a way that supports co. strategy.

Types of Organizational Structures

1.

2.
3. 4.

5.

Functional Structure International Division Structure Product Division Structure Geographic (Area) Division Structure Matrix Division Structure

1. Functional Structure
Specialized jobs are

grouped according to traditional business functions. Ideal for Co. having a narrow product line, sharing similar technology. Helps maximize economies of scale Highly efficient.

CEO

Production

Marketing

India

USA

India

USA

2. International division structure.

Grouping each international

business activity into its own division. Creates a critical mass of international expertise. Creates quick response to environmental changes enabling them to deal with different markets. Prevents duplication of activities. Often struggles to get resources from domestic divisions. This structure is suited for multidomestic strategies that demand little integration and standardization between domestic and foreign operations. Frustrates its ability to exploit economies of scale.

CEO

Industrial Division

Automotive Division

Aerospace Electronics Division

International Division

Diesel Company (France)

Electronics Company (France)

Brake Company (Mexico)

Product Division Structure

These are popular among

international companies with diverse products. Similar products are grouped under one product head e.g. Perfumes and Cosmetics, each focusing on a single product segment for its global market. Suited for a global strategy There may be duplicate functions and activities among divisions. No formal means by which one product divison can learn from another international expertise.

CEO

Power Systems Group

Industry And Defense Group

Electric Company (Belgium)

Meter Company (Argentina)

Elevatoe Company (Belgium)

Construction Products Company (Italy)

Geographic (Area) Division Structure

These are used when foreign

operations are large and not dominated by a single country or region. Useful when managers can gain economies of scale on a regional rather than on global basis. Drawback is the potential of duplication of work among areas as the company locates similar value activities in several places rather than consolidating them in the most efficient place.

CEO
Europe and Latin America Division North America and Pacific Division

U.K.

Venezuela

Italy

U.S.

Japan

Canada

Matrix Division Structure

This tries simultaneously to deal with competing pressures for global integration and local responsiveness. Institutes overlaps among functional and divisional forms. Gives functional, product, and geographic groups a common focus. It makes each group share responsibility for foreign operations and enables each group exchange information and resources more willingly. Drawbacks- Stop championing their groups unique needs, and thereby eliminate the multiple knowledgegenerating and decision making relationship that it is supposed to engage.

CEO

Textile Groups

Agricultural Products Group

EuropeAfrica Group

Latin America Group

U.K.

Mexico

Thank You! jatinvaid@gmail.com