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Organizational Structure in Global Corporations


Organizational Structure
 Organizational Structure is defined by the formal

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

Vertical Differentiation: Centralization V/S Decentralization.  Centralization is the degree to which high level managers. and those made at HQ are considered to be centralized. the authority to make decisions stand. usually above the country level.  Decisions made at foreign subsidiary level are considered decentralized. .  Vertical Integration: The issue of determining where in the hierarchy. make strategic decisions and pass them over to lower levels for implementation.

Centralization Advantages • Engender common culture and values • Reduces the risk of making wrong decisions at low level • Realize cost savings from economies of scale Disadvantages • People fail to coordinate with other departments • Discourages initiative among lower – level employees .

Centralized Organization Structure Managing Director HR Manager Marketing Manager Finance Manager Staff Staff Staff .

Decentralization Advantages • Stable environments do not require frequent intervention by the CEO to reap coordination benefits • Offer close proximity between business lines and markets • Motivates employees to exercise initiative Disadvantages • Looser controls yield riskier decision-making • Duplication of functions .

Decentralized Organizational Structure CEO BU 1 BU 2 Marketing HR Marketing HR .

Divide these tasks into jobs. 1.Horizontal Differentiation: The Design of the Formal Structure  Horizontal Differentiation: The way a co. . departments. Assign authority relationships to get the work done in a way that supports co. subsidiaries and divisions to get the work done. 2. 3. Specify the set of organizational tasks. designs its formal structure to perform the following functions. strategy.

Types of Organizational Structures 1. 2. 5. Functional Structure International Division Structure Product Division Structure Geographic (Area) Division Structure Matrix Division Structure . 4. 3.

 Helps maximize economies of scale  Highly efficient. Functional Structure  Specialized jobs are grouped according to traditional business functions. CEO Production Marketing India USA India USA . sharing similar technology.1. having a narrow product line.  Ideal for Co.

or to allocate resources on a global basis .International Division Structure  International division structures  A structural arrangement that handles all international operations out of a division created for this purpose  Assures that international focus receives top management attention  Unified approach to international operations  Often adopted by firms still in the developmental states of international business operations  Separates domestic from international managers (not good)  May find it difficult to think and act strategically.

International Division Structure (Partial Organization Chart) Chief Executive Officer Home-office departments Production Operating divisions Marketing Finance Human Resources Domestic Division: Plant Domestic Division: Tools Domestic Division: Hardware Domestic Division: Furniture Australia Internationa l Division: Japan Italy Office Operations Marketing Government Relations .

technology. production and finance can be coordinated on a product-by-product global basis  Division manager may pursue currently attractive geographic prospects and neglect others with long-term potential  Division managers my spend too much time tapping local rather than international markets  See example next slide . customer diversity  Ability to cater to local needs  Marketing.Global Product Division Structure  Global product division  A structural arrangement in which domestic divisions are given worldwide responsibility for product groups Global product divisions operate as profit centers  Helps manage product.

Global Product Division Home-office departments Chief Executive Officer Production Marketing Product Division B Africa Finance (Partial Organization Chart) Operating divisions Human Resources Product Division A Product Division C Europe Product Division D Australia Product Division E Far East S. America Great Britain France Germany Italy Netherlands Production Marketing Finance Human Resources .

the firm is able to reduce cost per unit and price competitively  Difficult to reconcile a product emphasis with a geographic orientation  New R&D efforts often ignored because divisions are selling in mature market  See example next slide .Global Area Division  Global area division  A structure under which global operations are organized on a geographic rather than a product basis International operations are put on the same level as domestic operations  Global division managers are responsible for all business operations in their designated geographic area  Often used by firms in mature businesses with narrow product lines  By manufacturing in a region.

Global Area Division (Partial Organization Chart) Chief Executive Officer Home-office departments Production Operating divisions Marketing Finance Human Resources North America South America Europe Asia Great Britain France Germany Italy Netherlands Africa .

centralized coordination and control of integrated production processes and firms involved in transporting products and raw materials between geographic areas  Emphasizes functional expertise. and relatively lean managerial staff  Coordination of manufacturing and marketing often is difficult  Managing multiple product lines can be very challenging because of the separation of production and marketing into different departments  See example next slide .Global Functional Division  Global functional division  A structure that organizes worldwide operations primarily based on function and secondarily on product Approach not used except by extractive companies such as oil and mining firms  Favored only by firms that need tight. centralized control.

Global Functional Division (Partial Organization Chart) Chief Executive Officer Production Marketing Finance Domestic Production Product A Product B Product C Product D Foreign Production Product A Product B Product C Product D Domestic Production Product A Product B Product C Product D Foreign Production Product A Product B Product C Product D .

area.Matrix Organizational Structures  Matrix organizational structures  A structure that is a combination of a global product. coordinating the personnel and getting everyone to work toward common goals often become difficult  Too many groups go their own way  See example next slide . or functional arrangement Allows the organization to create the specific type of design that best meets its needs  As the matrix design’s complexity increases.

Matrix Organizational Structures (Partial Organization Chart) Chief Executive Officer Home-office departments Production Operating divisions Marketing Finance Human Resources North America Industrial Goods Europe Manager. Industrial Goods North America Manager. Industrial Goods Europe .

Transnational Network Structures  Transnational network structures  A multinational structural arrangement that combines elements of function. functional. which are units charged with coordinating product. and geographic information  Different product line units and geographical area units have different structures depending on what is best for their particular operations  See example next slide . while relying on a network arrangement to link worldwide subsidiaries At the center of the transnational network structure are nodes. and geographic designs. product.

Transnational Network Structures .

Organizational Structure of HTC .

the process will go on. the growth will go on.” -Mukesh Ambani . the organization will go on.“The organizational structure is really that a centipede walks on hundred legs and one or two don't count. So if I lose one or two legs.