Organization of

Global Business
Stateless Corporation – a new phase in the evolution of the
multinational corporation, where work is sourced wherever it
is most efficient and the corporation transcends nationally
altogether.
Ex. Lenovo
Stages of Globalization
Stage 1. Global companies produced goods in one country and
export them to other countries.
Stage 2. Global businesses establish foreign subsidiaries to
handle the exports from home countries.
Stage 3. Global firms set up operations in other countries.
Stage 4. Stateless corporations locate their core corporate
functions and top executives in different countries to achieve
competitive advantage.
Organization – a tool that people use to coordinate their
actions to obtain something they seek or value.

Organizational structure – the formal system of task and

authority relationships that control how people
coordinate their actions and use resources to achieve
organizational goals.
The organizational structure serves the following purposes:
1. Allows the members of the organization to perform a
wide variety of activities based upon a division of labor
that leads to departmentalization, standardization, and
specialization of functions and tasks.

2. Permits the organization members the coordination of

their activities by integration mechanisms such as
hierarchical supervision, formal rules and procedures,
and training and socialization.

3. Determines the boundaries of the organization and

regulates its interfaces with the environment and its
interactions with other organizations.
 Four Organizational Structures of Global
Business
1. Functional Structure
 An organizational structure that groups people together because
they hold similar positions in a company, perform similar tasks, or use
the same kind of skills.
 Global businesses typically have a narrow product line or a highly
integrated product mix.
Ex. Organizational Structure of Boeing Commercial Airplanes

Chief Executive Officer

Business Supply Chain Commercial

Engineerin Airline
Strategy & Management Sales Finance Aviation
g Programs
Marketing & Operations Services
Advantages:
1. Promote economies of scale.
2. Promotes in-depth skill development of employees by providing
well-defined career ladder that allows employees to be exposed
to a range of activities within their own functional expertise.
3. Encourages collaboration, efficiency and quality within the
function.
Disadvantages:
4. Inability to respond to environmental changes that require
coordination between the functional areas.
5. Each employee has a restricted view of the organization’s
primary goals.
6. Accountability is diffused because profit and loss accounts are
calculated for the entire firm rather than each function.
2. Divisional Structure
 An organizational structure in which functions are grouped
together to serve the needs of products, markets,
geographical regions.

Advantages:
1. Functions are able to focus their activities upon a specific
kind of product, market or geographical region.

2. Divisions develop a common identity and approach to

problem solving, which increases cohesiveness and results
in improved decision making and performance.

3. It can respond to the requirements of individual products,

markets, or geographical regions.
Disadvantages
1. High operating and managing costs.

2. Communication problems may arise as various

managers in various divisions attempt to coordinate
their activities.

3. Divisions may compete with organizational resources

and pursue divisional goals at the expense of the goals
of global business as a whole.
Kinds of divisional structure:
Product structure
Products are grouped into separate divisions according
to their similarities or differences.
Ex. Honda, ExxonMobil

Market Structure
Products are grouped into specific divisions according to
the needs of different customers.
Ex. Hilton Hotels Corp.

Geographical Region Structure

Products are grouped into separate divisions according
to the needs of the different geographical regions the
company serves.
Ex. Product Structure for a Global Business with Four Product
Divisions.

Chief Executive Officer

Corporate
Headquarters

Product A Product B Product C Product D

Division Division Division Division
Ex. Market Structure for Global Business with Three Market
Divisions

Chief Executive Officer

Corporate
Headquarters

Consumer Commercial Government

Division Division Division
Ex. A Geographical Region Structure for a Global Business with
Three Divisions

Chief Executive Officer

Corporate
Headquarters

Americas Europe Asia

Division Division Division
3. Hybrid Structure
 a combination of different organizational structures
Ex. Pepsi Co – foods, beverages
Procter & Gamble – beauty, grooming, health care, snacks, coffee,
fabric care and home care, baby care and
family care.

4. Matrix Structure
 An organizational structure in which people are grouped
simultaneously by function and by division.
Ex. Bayer AG
Advantages:
1. It allows the company to meet multiple demands from the
environment.
2. It provides employees the opportunity to acquire both functional and
divisional related skills.
3. It facilitates innovation and creativity.
Disadvantages:
1. A basic problem is in determining the responsibility and
authority relationships between the functional and
divisional managers.

2. It limit the opportunities for promotion because most

employees move laterally from division to division, and not
vertically to upper management positions.
Ex. A Global Business with Hybrid Structure

Chief Executive Officer

Corporate
Headquarters

Product A Product B Global Global

Division Division R&D Marketing
Ex. A Global Business with a Matrix Structure

Chief Executive Officer

Manufacturing Sales Finance

A B C
Division I

D E F
Division II