Questions

1. You work for a company with three major products, and your CEO has decided to sell
these products in the international marketplace. She asks your advice in setting up an
organizational structure. What issues would you discuss with her regarding the
company’s international strategy before making any recommendations?

When a company wants to diversify its operations internationally, it rarely changes its
basic organization structure. Therefore, the company is required to design its organization
structure according to the company’s international strategy.
The issues that should be discussed regarding the company’s international strategy before
making any recommendations is that there might be lack of effective communication
between the different product based organizational structure. This will make it very
difficult for the employees to transmit the information to the different departments in the
international marketplace. It is very difficult in a product based organizational structure is
that it leads to operational inefficiencies as each department functions independently.
Also that international division has lot of responsibility besides maintaining its exports
management and international sales force. So, the international organization structure
should be designed which is able to handle all the products and foreign subsidiaries. The
international division structure is losing its popularity among the large multinationals.
When the company decides to three products in the international marketplace the
organization structure should be according to the product or market location. However, in
order to deal with such shortcomings international division structure can adopt potentially
effective worldwide organization structure.

2. What are the advantages of a worldwide product structure over a worldwide area
structure? What type of company would most likely choose each type?

In the worldwide geographic structure, regions or large-market countries become the

geographic divisions of the multinational company. The primary reason to choose a
worldwide geographic structure is to implement a multidomestic or regional strategy,
which requires a company to differentiate its products or services by country or region
and therefore to have an organizational design with maximum geographic flexibility.
Product divisions form the basic units of worldwide product structures. Each product
division assumes responsibility for producing and selling its products or services
throughout the world.It is usually considered the ideal structure to implement an
international strategy, in which the company attempts to gain economies of scale by
selling worldwide products with most of the upstream activities based at home.

3. What are the costs and benefits of having a matrix structure?

Advantages of the matrix organizational structure

There are several advantages to using the matrix organizational structure. One benefit of the
matrix structure is that it allows cross-collaboration between staff and departments that may not
always have opportunities to work together. There are several other key advantages as well:

1. Collaboration between different departments

 2. Combines project and functional management structures
3. Allows interdepartmental communication
4. Employees can develop new skills
5. Team members and managers keep their functional roles

1. Collaboration between different departments

Perhaps the biggest advantage of a matrix structure is that is brings together highly skilled team
members from different departments, allowing the organization to capitalize on the resources it
already has rather than seeking expertise and recruiting project team members from outside of
the organization.

2. Combines project and functional management structures

The matrix structure combines the project management structure with the functional
management structure to increase efficiency, adapt to changing markets and respond more
quickly to market demand.

3. Allows interdepartmental communication

The matrix structure also allows for better interdepartmental communication and collaboration.
By allowing different departments to work together, the matrix structure fosters a more open
work environment, ultimately making the organization more dynamic. 

4. Employees can develop new skill sets

The matrix structure can offer employees the opportunity to strengthen their interpersonal skills,
communication skills and new skill sets due to the nature of utilizing more than one manager.
Working outside of a traditional or hierarchal structure can benefit employees by helping them
develop new skill sets and gain valuable experience from working with different departments.

5. Team members and managers keep their functional roles

Projects will always continue to come to an end, but project team members and managers may
keep their functional roles throughout the project. When a project ends, both managers and team
members can avoid misconceptions about their job security or searching for new projects as a
contractor, as they may simply assume their functional roles. Additionally, team members may
also participate in future projects.

Matrix organization is expensive mainly because of dual management.

It may also lead to unhealthy competition between the managers when it comes to choosing
of employees. There could also be scarcity of resources that may lead people competing to get it.
It is how people work together that determines the success or failure of the organization.

4. What transnational activities might be possible for a small company with only an export
department or an international division?
 When a company first goes international, it does not change its basic organizational
structure. Most companies first act as passive exporters. They simply fill the international
orders using similar procedures, structures, and people that were used in domestic sales.
Even with increased involvement in exporting, companies usually avoid any fundamental
organizational changes. They hire other companies to provide them with international
expertise and handle their export operations.

Seminar task
1. Go to any major multinational’s website (e.g., Siemens, Shell, McDonalds).

2. Find the company’s organizational structure. What type of organizational structure

exists at the company?

Apple organizational structure can be described as hierarchical and functional. Such a

structure has been developed by its founder and former CEO late Steve Jobs in order to
ensure focused realization of his innovative ideas and clear vision for the business. Apple
organizational structure has been subjected to certain modifications since the leadership
role was assumed by Tim Cook on August 2011. Specifically, Mr. Cook embraced the
decentralization of decision making to a certain extent in order to encourage innovation
and creativity at various levels. Nevertheless the structure remains to be largely
hierarchical.
Currently, Apple organizational structure has the format illustrated in figure below:
Apple Organizational Structure
Generally, Apple corporate structure has the following characteristics:

1. Hierarchical organizational structure. Although Tim Cook introduced considerable

changes to Apple corporate structure since assuming the top job in 2011, the
structure still remains to be highly hierarchical with many layers of management.
Massive size of the company that comprises 132,000 full-time equivalent employees
globally necessitates the adherence to the hierarchical organisational structure.
Advantages of Apple hierarchical organizational structure include tight control
possessed by senior management over all aspects of the business. Moreover,
promotion opportunities motivate employees to perform well and there are clear
levels of authority and responsibility. On the negative side, Apple’s hierarchical
organisational structure may compromise flexibly of the business to reflect changes in
the global marketplace. Furthermore, in hierarchical organizations communication
across different departments tends to be less effective than in flat organizations.
2. Product-based grouping. Product-based grouping is an important feature of Apple
organizational structure. The multinational technology company divides its operations
into the following product-based groups:

1. Services. This group includes App Store, ApplePay, iCloud, and Apple Music.
2. Mac
3. iPhone
4. iPad
5. Other products. These include Apple TV, iWatch, headphones, cases, displays, storage
devices and various other connectivity and computing products and supplies

3. Collaboration between different groups and divisions. Apple Inc. maintains an

intensive and effective collaboration between various groups and divisions of the
company. Each product within Apple portfolio such as iPad, iPhone, iPad, Apple TV
and iWatch is a result of collaboration of product-based groups.
Apple Inc. Board of Directors consists of eight members with a solid leadership
background in a range of industries. Three members are acting CEOs and two members
are former Chairman and CEOs of global companies.  Moreover, proven leaders such as
former US Vice President Albert Gore Jr., former CFO and Corporate President The
Boeing Company James A. Bell and co-founder and Director of BlackRock Susan
Wagner also serve in Apple Board of Directors.
Considering a number of challenges faced by the company such as rapidly decreasing life
cycle of technology products and declining sales of iPhones, iPads and Mac
products, [1] it can be argued that Apple organizational structure may be subjected to
certain changes in the medium-term perspective. To be more specific, elements of matrix
organizational structure and divisional organizational structure may be integrated into
Apple Inc. organizational structure to a greater extent to increase the efficiency of new
product development practices.
4. Functionality. Functionality is another important aspect of Apple’s structure.
Although, product-based grouping is an important element of organizational structure
as discussed above, senior vice presidents reporting to CEO are in charge of
functions, not products. Functional organizational structure is not common for
behemoths like Apple, however, the tech giant benefits from the current patterns of its
 corporate structure. Specifically, unlike many other large companies there is no fight
between heads of product divisions at Apple for resources.
Moreover, functional organizational structure allows the tech giant to neglect short-term
financial targets when developing new products that require considerable investments.
Importantly, the bonuses of senior R&D executives are based on the financial
performance of the whole company rather than revenue from particular products.
Therefore, executives at Apple are made to take a holistic approach to the business,
similar to small entrepreneurial firms.

3. Do you think that the structure is appropriate for the multinational? Why or why not?
Yes, I do, because functional organizational structures are similar to line structures;
however, each tier may share information and offer direction horizontally (to one
another). This structure is ideal for large companies with many departments and for those
companies that need to meet strict deadlines.

4. What sort of challenges do you see from the particular form of organizational structure
used?

Functional organizational structure involves structuring an organization around basic

business functions such as production and operations, marketing and finance. An
advantage of functional organizational structure is a high level of specialization: each
unit operates as a mini-company. An expert in his functional area can perform tasks with
a high level of speed and efficiency, is more productive. Such experts may have
difficulties to work together with workers from other units. They may not be that used to
the teamwork. Also, when organizations get larger the top management needs to delegate
more decision-making responsibilities to functional areas. It increases autonomy, but it
requires more formalization, makes communication, management and control
maintenance more challenging.