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International Business Book

International Business Book

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Published by Waqas Abrar

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Published by: Waqas Abrar on Jan 11, 2012
Copyright:Attribution Non-commercial


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Both the worldwide area structure and the worldwide
product division structure have strengths and
weaknesses. The worldwide area structure facilitates
local responsiveness, but it can inhibit the realization of
location and experience curve economies and the transfer
of core competencies between areas. The worldwide
product division structure provides a better framework
for pursuing location and experience curve economies
and for transferring core competencies, but it is weak in
local responsiveness. Many firms have attempted to cope
with the conflicting demands of a transnational strategy
by using a matrix structure. In the classic global matrix
structure, horizontal differentiation proceeds along two
dimensions: product division and geographical area. The
basic philosophy is that responsibility for operating


decisions pertaining to a particular product should be
shared by the product division and the various areas of
the firm.

Unfortunately, the global matrix structure often does not
work as well as the theory predicts. In practice, the
matrix often is clumsy and bureaucratic. It can require so
many meetings that it is difficult to get any work done.
Often, the need to get an area and a product division to
reach a decision slows decision making and produces an
inflexible organization unable to respond quickly to
market shifts or to innovate. The dual-hierarchy structure
can also lead to conflict and perpetual power struggles
between the areas and the product divisions, catching
many managers in the middle. To make matters worse, it
can prove difficult to ascertain accountability in this
structure. In light of these problems, many transnational
firms are now trying to build "flexible" matrix structures
based on firmwide networks and a shared culture and
vision rather than on a rigid hierarchical arrangement.
Dow Chemical, which is profiled in the accompanying
Management Focus, is one such firm.

Integrating Mechanisms

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