YAVER PART

CHAPTER 3 THE ORGANIZATIONAL CONTEXT

THE PATH TO GLOBAL STATUS
Multinationals do not emerge from nowhere; the transition from a domestic to a truly global organisation
can be a long and winding road with many and varied milestones. Although research on
internationalisation has identified a common process, it is important to note that this process is not same
for all businesses. Instead of or in addition to developing their own international production or service
facilities, some companies may employ different business models such as licensing and subcontracting.

 Export:
This is usually the first step for manufacturing companies looking to expand internationally. As a result,
until the amount of export sales reaches a critical degree, it rarely involves significant organisational
response. Of course, for service organisations (such as law firms), simple exporting may be problematic,
therefore they may be obliged to enter foreign direct investment operations early (via a branch office, or
joint venture). Because local market expertise is thought vital, exporting is frequently handled by an
intermediary (for example, a foreign agent or distributor). However, when export sales grow, an export
manager may be hired to oversee overseas sales and actively search out new markets. Typically, this
person comes from the domestic operations.

 Sales subsidiary
Agents and distributors are frequently replaced by direct sales with the development of sales subsidiaries
or branch offices in international market countries as the firm gain’s competence in overseas markets.
This stage may be triggered by issues with foreign agents, more trust in overseas sales, a desire for greater
control, and/or a choice to provide more assistance to the exporting activity, which is becoming
increasingly important to the organization's overall success. The decision to employ PCNs leads to
concerns and activities related to expatriation management.

 International division
When a company expands its international operations, it often creates what are known as ‘miniature
replicas,' where foreign subsidiaries are formed to resemble the parent company. If the company is
already assembling the goods in another country to save money on labour or shipping expenses or taxes,
this step may be considered minor. The head of the foreign division reports to the subsidiary managers,
and there may be some informal reporting to the various functional heads. Concerning personnel
difficulties, the HR managers in the two country subsidiaries may communicate with the HR manager at
corporate headquarters.

 Global product/area division

Typically, tensions arise between the parent firm (headquarters) and its subsidiaries, owing to the
subsidiary unit's requirement for national responsiveness and the parent headquarters' global integration
imperatives. Differences in market structures, distribution channels, customer wants, local culture, and
pressure from the host government all contribute to the necessity for national responsiveness at the
subsidiary unit. The need for more centralised worldwide integration by headquarters stems from
multinational customers, global competitors, the increasingly quick flow of information and technology,
as well as the pursuit of enormous volumes for economies of scale.
  The matrix
The MNE is seeking to unify its operations across multiple dimensions using the matrix framework. The
product division and the international or geographical division have combined jurisdiction. The
advantages of this structural design, according to proponents, are that conflicts of interest are exposed and
that each topic of high priority in decision-making has an executive champion to ensure it is not
overlooked. In other words, the matrix is thought to bring a concept of matching structure to decision-
making process into the management system.

 Mixed structure
Although all structural forms resulting from the evolution of international business are complex and
difficult to manage effectively, mixed structures appear to be even more complex and difficult to explain,
implement, and control, given an MNE's developing capabilities and experience at each new stage. As we
discussed in our discussion of the matrix structure, it is critical that all employees grasp the mixed
framework and that supporting procedures are given due consideration.

 Beyond the matrix

These movements are multidirectional in large, mature multinationals: from headquarters to subsidiaries,
subsidiaries to subsidiaries, and subsidiaries to subsidiaries. The consequence can be a complicated web
of interconnected activities and interactions, with three types of organisational structures identified in the
multinational management literature: heterarchy, transnational, and network firms. Despite their various
names, each form understands that, at this point of globalisation, the concept of a superior structure that
neatly fits the business plan is no longer appropriate.

 The heterarchy
In terms of human resource management, the heterarchy is intriguing because its success appears to be
contingent exclusively on the multinational's ability to conceive, implement, and reinforce the essential
human resource elements. In order to build the normative control mechanisms required for good
performance, Hedlund understood that the heterarchy requires skilled and experienced employees as well
as sophisticated incentive and punishment systems. Hedlund suggested that knowledge management
necessitates a new structural form. His N-form eliminates divides, permits temporary constellations and
project teams, and emphasises lateral contact and discussion between units and individuals. The top
management role was presented as that of a catalyst, architect and protector of knowledge rather than a
monitor and resource allocator.

 The transnational
The word "transnational" was coined to describe an organisational form defined by a cross-national
interdependence of resources and responsibilities across all business divisions. The phrase has also come
to be used to describe a specific type of multinational, one that attempts to manage huge flows of
components, goods, resources, people, and information among its subsidiaries while also recognizing
distributed specialized resources and capabilities.

 The multinational as a network

A multi-centered networked organisation is difficult to manage. Each subsidiary has a variety of external
relationships in addition to the intra-organizational network (which includes the headquarters and
multiple subsidiaries) (involving local suppliers, customers, competitors, host governments and alliance
partners). Global corporate performance depends on the management of both intra-organizational and
inter-organizational domains, as well as the overall integrated network. It features a five-dimensional
structure that has been dubbed "less hierarchical."
• Decision-making authority is delegated to appropriate divisions and levels.
• Key functions are geographically dispersed across units in different nations.
• Organizational levels are being delayered.
• Formal procedures are de-bureaucratized.
• Work, responsibility, and authority are all differentiated among the networked subsidiaries.
 Different countries take different paths
It's crucial to recognise that there's a cultural component here. If, as Stopford and Wells state, MNEs can
develop global capabilities by focusing on product diversity, which leads to global product division
structures, or by focusing on cultural responsiveness, which leads to regional or area division structures,
the question becomes what role does the multinational's cultural origin play in the globalisation process.
Those companies in the United States who have experimented with the matrix form appear to have had
mixed results. Multinational corporations in Japan are evolving in the same way that multinational
corporations in the United States are. Export divisions have evolved into worldwide divisions, but at a
slower pace, according to Ronen94. The structural structure and growth trends of internationalising
enterprises from different Asian countries may also differ. Korean conglomerates (chaebols) have a
higher proclivity for acquisitions than Japanese multinationals, which has altered their structural
responses in terms of control and coordination.
Some experts have even questioned the existence of a truly global corporation. Institutional
infrastructures (cultural heritage codified in legislation and values related to banking and financial
markets, research and development capabilities and patterns of technological change, as well as
governmental and managerial preferences and strategic propensities) combine to limit the ability of firms
to move too far beyond their regional homes, according to Doremus et al.