Chapter Six

Designing Organizations for the

International Environment

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 Entering The Global Arena
• More companies are doing business
globally
• Companies need top leaders who have a
global outlook
• Advancements in technology and world
communications has changed the
competitive landscape

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 Motivations for Global Expansion

Economic, technological, and

competitive forces have combined to
push companies from a domestic to a
global focus.

Motivation to Expand:
• Economies of Scale
• Economies of Scope
• Low-Cost Production Factors

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 The Global Economy as Reflected in
the Fortune Global 500

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 Stages of International Evolution

•• Domestic
Domestic
•• International
International
•• Multinational
Multinational
•• Global
Global

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 Global Expansion Through
International Strategic Alliance
• Licensing – allowing another firm to
market your brands
• Joint Ventures - separate entity of two or
more firms
• Consortia – groups of independent
companies

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 Model for Global vs. Local
Opportunities
• Global standardization versus national
responsiveness
– Globalization or multidomestic strategy
• Globalization strategy - products are
standardized throughout the world
• Multidomestic - competition is handled in
each country independently

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 Fitting Organization Structure to
International Advantages

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 Global Organization Structure

 International Division
 Global Product Division
 Global Geographic Division
 Global Matrix Structure

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 The Global Organizational Challenge

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 Global Coordination Mechanisms

 Global Teams

 Headquarters
Planning

 Expanded
Coordination Roles

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 Benefits of Collaboration

→ Cost Savings
→ Better Decision Making
→ Greater Revenue
→ Increased Innovation

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 Cultural Differences In
Coordination and Control
National Value System
• Power Distance: people accept inequality

• Uncertainty Avoidance: members feel

uncomfortable with uncertainty and
ambiguity

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 National Approaches to
Coordination an Control

1) Centralized Coordination: Japanese

Companies
2) Decentralized Approach: European
Firms
3) Coordination and Control Through
Formalization: The United States

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 The Transnational Model of
Organization
• Mix in organizational complexity with diverse units and
coordination
• Combines global learning, knowledge sharing and
technological innovation
• Structure required in highly complex organizations
• An integrated network linked together to achieve
multidimensional goals
• Based on interdependence
• A managerial state of mind, a set of values and
shared values toward a worldwide learning system

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 Transnational Organizations
• Assets and resources are dispersed
worldwide
• Structures are flexible and ever-changing
• Subsidiary managers initiate strategy and
innovations that become strategy for the
whole organization
• Corporate culture, shared vision and
management style guide the organization
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 Design Elements
 Managers must design organizations for complex
international coordination
 Organizations international strategy and structure evolve
 There a diverse options for specific international
strategies
 There are a variety of challenges for global organizations
 Diverse national and cultural values influence an
organization’s approach
 Companies operating globally require broad coordination

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