Designing Organizations for the

International Environment

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
 Entering the Global Arena

 The world is becoming a unified global field.

 More companies are doing business globally.
 No company is isolated from global influence.
 Advancements in technology and world communications has
changed the competitive landscape.
 Companies from developing countries are able to operate
from the beginning with global markets in mind.

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
 Motivations for Global Expansion
 Economic, technological, and competitive forces have
combined to push companies to a global focus.
 Economies of Scale
- e.g. through large-volume production, industrial giants were
able to achieve the lowest possible cost per unit of production.
 Economies of Scope
- Scope refers to the number and variety of products and
services a company offers, and the markets it operates.
- It increases a company's market power
 Low-Cost Production Factors
- e.g. in search of lower cost of capital, cheap energy,
reduced government restrictions

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
 Global Expansion Through International
Strategic Alliances
 Strategic alliances has developed rapidly as one of the most
common ways companies get involved in international
operations. It typically includes:
- Licensing – allowing another firm to market your brands
- Joint Ventures - separate entity of two or more firms. Joint
ventures may be with either customers or competitors.
- Consortia – groups of independent companies joint together
to share skills, resources, costs and assess to one
another’s markets.

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
Stages of internationalization

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
5
1408072378 © 2014 Cengage Learning
International division structure

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
6
1408072378 © 2014 Cengage Learning
Global product division structure

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
7
1408072378 © 2014 Cengage Learning
 Global Product division Structure
 Global product division structure means that the product
divisions take responsibility for global operations in their
specific product area.
 It is one of the most commonly used structures in order to
achieve global goals.
 It is widely used for standardizing production and sales
around the globe, it can encounter problems when the
product division do not work well together.
 The example of Eaton corporation

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
Global area division structure

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
9
1408072378 © 2014 Cengage Learning
 Global Geographic Structure
• The global geographic structure divides the world into
geographical regions, with each geographical division
reporting to the CEO.
• Each division has full control of functional activities within its
geographical area.
• Suitable for companies with mature product lines and stable
technologies.
• Senior managers may face difficulties resulting from the
autonomy of each regional division.
• Unilever

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
Global matrix structure

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
11
1408072378 © 2014 Cengage Learning
Fitting Organization Structure to
International Advantages

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
 Global Coordination Mechanisms
 Global team
- Also called transnational teams, are cross-border work
groups made up of multi-skilled, multinational members
whose activities span multiple countries.
- Intercultural teams and virtual global teams
 Headquarters planning
- Headquarters take an active role in planning, scheduling and
control to keep the global organization working together.
 Expanded coordination roles
- A possible way to integrate different aspects of the
organization to achieve a strong competitive position.

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
 Cultural Differences In
Coordination and Control
 National Value System
 Power Distance
- High power distance means that people accept inequality in
power.
- Low power distance means that people expect equality in
power.
 Uncertainty Avoidance
- High uncertainty avoidance means that members feel
uncomfortable with uncertainty and ambiguity.
- Low uncertainty avoidance means that people have
a comparatively high tolerance for uncertainty.

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning
 Three National Approaches to
Coordination and Control
 Centralized Coordination: Japanese Companies
- It has proven highly effective even in various environments
with deep national traditions
- It has encountered difficulties adapting quickly to
macroeconomic and market instability.
 Decentralized Approach: European Firms
- Companies rely on a strong mission, shared values, and
informal personal relationships for coordination.
 Coordination and Control Through Formalization: The
United States
- Responsible for international divisions
- Retain overall control of the organization

For use with Organization Theory and Design 2 e

by Richard Daft, Jonathan Murphy and Hugh Willmott
1408072378 © 2014 Cengage Learning