CHP 9

Slide 9.
Chapter 9
Organizing strategy
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 9.2
Organizing strategy
• Objectives
• Introduction
• Organizational structures
• Strategic management and organizing strategy.
Slide 9.3
Introduction
• The FSA and CSA framework is related to the
issues of organizational structure.
– A centralized and hierarchical structure is usually
followed by firms in cell 1 pursuing economic
integration.
– In cell 4, the strategy of national responsiveness
may require a decentralized organizational
structure.
– In cell 3, it may be necessary to combine the
advantages of both a centralized and de-
centralized organizational structure.
Slide 9.4
Slide 9.5
Organizational structures
Slide 9.6
Early organization structures

• When a company first begins international
operations, it is typical for these activities to be
extensions of domestic operations.
– Primary focus continues to be the local market .
• As international operations increase, however,
the MNE will take steps to address this growth
structurally.
– For instance, by having a marketing or export
department handle international sales or by using
an overseas subsidiary.
Slide 9.7
Figure 9.1 An export department structure
Slide 9.8
Figure 9.2 Use of subsidiaries during the early stages of internationalization
Slide 9.9
The international division

• The international division structure centralizes
all the international operations.
Advantages:
• It reduces the CEO’s burden of direct operation
of overseas subsidiaries and domestic
operations.
• It raises the status of overseas operations to that
of the domestic divisions.
Slide 9.10
Figure 9.3 An international division structure
Slide 9.11
Global organization structures

• As MNEs generate more and more revenues
from their overseas operations, their strategies
and the structures used to implement these
strategies become more global in focus.
• There are six basic types of global structures.
Slide 9.12
1. Global product structure

• An arrangement in which domestic divisions are
given worldwide responsibility for product groups.
Slide 9.13
Figure 9.4 A global product structure
Slide 9.14
2. Global area structure

• Primary operational responsibility is delegated to
area managers, each of whom is responsible for
a specific geographic region.
Slide 9.15
Figure 9.5 A global area structure
Slide 9.16
3. Global functional structure

• Builds around the basic tasks of the
organization. For example, in manufacturing
firms, production, marketing and finance are the
three primary functions that must be carried out
for the enterprise to survive.
Slide 9.17
Figure 9.6 A global functional structure
Slide 9.18
4. Matrix structure
• An organizational arrangement that blends two
organizational responsibilities such as functional
and product structures or regional and product
structures.
Slide 9.19
Figure 9.7 Geographic matrix structure
Slide 9.20
Figure 9.8 A multinational matrix structure

Source: Allan R. Janger, Matrix Organizations of Complex Business (New York: The Conference Board, 1979), p. 31
Slide 9.21
5. Mixed structure
• A hybrid organization design that combines
structural arrangements in a way that best meets
the needs of the enterprise.
Slide 9.22
Figure 9.9 A mixed structure
Slide 9.23
6. Transnational network structure

• Designed to help MNEs take advantage of global
economies of scales while also being responsive
to local customer demands.
– Relies on a network arrangement to link the various
worldwide subsidiaries.
• Three components:
(1) Dispersed subunits
(2) Specialized operation
(3) Interdependent relationships
• At the center of the transnational network
structure are nodes, which are units charged with
coordinating product, functional, and geographic
information.
Slide 9.24
Figure 9.10 Transnational network structure
Slide 9.25
Strategic management and

organizing strategy
Slide 9.26
Factors that encourage centralization or decentralization of decision making

Table 9.1
in multinational operations

CHP 9

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Slide 9.

Early organization structures

Figure 9.1 An export department structure

Figure 9.2 Use of subsidiaries during the early stages of internationalization

The international division

Figure 9.3 An international division structure

Global organization structures

• There are six basic types of global structures.

1. Global product structure

Figure 9.4 A global product structure

2. Global area structure

Figure 9.5 A global area structure

3. Global functional structure

Figure 9.6 A global functional structure

Figure 9.7 Geographic matrix structure

Figure 9.8 A multinational matrix structure

Figure 9.9 A mixed structure

6. Transnational network structure

Figure 9.10 Transnational network structure

Strategic management and

Factors that encourage centralization or decentralization of decision making

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