11

Chapter SixChapter Six

Designing Organizations for Designing Organizations for the International Environmentthe International Environment

22

Four Stages of International Four Stages of International EvolutionEvolution

I.I.

DomesticDomestic

II.II.

InternationalInternational

III.III.

MultinationalMultinational

IV.IV.

GlobalGlobal

StrategicStrategic

OrientationOrientation

Domestically Domestically orientedoriented

Export-oriented, Export-oriented, multidomesticmultidomestic

MultinationalMultinational GlobalGlobal

Stage of Stage of

DevelopmentDevelopment

Initial foreign Initial foreign involvementinvolvement

Competitive Competitive positioningpositioning

ExplosionExplosion GlobalGlobal

StructureStructure

Domestic Domestic structure plus structure plus export export departmentdepartment

Domestic structure Domestic structure plus international plus international divisiondivision

Worldwide Worldwide geographic, geographic, productproduct

Matrix, trans-Matrix, trans-nationalnational

MarketMarket

PotentialPotential

Moderate, Moderate, mostly domesticmostly domestic

Large, Large, multidomesticmultidomestic

Very large, Very large, multinationalmultinational

Whole worldWhole world

Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, “Strategy and Multinational OrganizationStructure: An Interorganizational Relationships Perspective,”Academy of Management Review 9 (1984): 259-71.

33

Matching Organizational Structure to Matching Organizational Structure to International AdvantageInternational Advantage

When Forces for When Forces for Global Global

Integration are . . Integration are . . ..

And Forces for And Forces for National National

Responsiveness Responsiveness

are . . .are . . .StrategyStrategy StructureStructure

LowLow LowLow ExportExport International International DivisionDivision

HighHigh LowLow GlobalizationGlobalization Global Product Global Product StructureStructure

LowLow HighHigh MultidomesticMultidomestic Global Global Geographic Geographic StructureStructure

HighHigh HighHigh Globalization and Globalization and MultidomesticMultidomestic

Global Matrix Global Matrix StructureStructure

44

Domestic Hybrid Structure with Domestic Hybrid Structure with International DivisionInternational Division

ScientificProductsDivision

Research &Development

HumanResources

MedicalProductsDivision

Europe(Sales)

ElectricalProductsDivision

CorporateFinance

CEO

InternationalDivision

Brazil(Subsidiary)

Mid East(Sales)

Staff (Legal,Licensing)

55

Partial Global Product Structure Used by Partial Global Product Structure Used by Eaton CorporationEaton Corporation

Engineering President InternationalLaw &CorporateRelations

Chairman

Finance & Administration

RegionalCoordinators

Global AutomotiveComponents

Group

GlobalIndustrial

Group

GlobalInstruments

ProductGroup

GlobalMaterialsHandling

Group

GlobalTruck

ComponentsGroup

Source: Based on New Directions in Multinational CorporateOrganization (New York: Business International Corp., 1981).

66

Global Matrix StructureGlobal Matrix Structure

InternationalExecutive

Committee

PowerTransformers

Germany NorwayArgentina/

BrazilSpain/

Portugal

Transportation

Industry

BusinessAreas

Country Managers

LocalCompanies

77

Building Global CapabilitiesBuilding Global Capabilities

The Global Organizational ChallengeThe Global Organizational Challenge

Increased Complexity and DifferentiationIncreased Complexity and Differentiation

Need for IntegrationNeed for Integration

Knowledge TransferKnowledge Transfer

Global Coordination MechanismsGlobal Coordination Mechanisms

Global TeamsGlobal Teams

Headquarters PlanningHeadquarters Planning

Expanded Coordination RolesExpanded Coordination Roles

88

Cultural Differences in Coordination Cultural Differences in Coordination and Controland Control

National Value SystemsNational Value Systems

Power DistancePower Distance

Uncertainty AvoidanceUncertainty Avoidance

Three National Approaches to Coordination and ControlThree National Approaches to Coordination and Control

Centralized Coordination in Japanese CompaniesCentralized Coordination in Japanese Companies

European Firms’ Decentralized ApproachEuropean Firms’ Decentralized Approach

The United States: Coordination and Control The United States: Coordination and Control through Formalizationthrough Formalization

99

Transnational Model of Transnational Model of OrganizationsOrganizations

Assets and resources are dispersed worldwide into highly Assets and resources are dispersed worldwide into highly specialized operations that are linked together through specialized operations that are linked together through interdependent relationships.interdependent relationships.

Structures are flexible and ever-changing.Structures are flexible and ever-changing.

Subsidiary managers initiate strategies and innovations that Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole.become strategy for the corporation as a whole.

Unification and coordination are achieved primarily through Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management corporate culture, shared visions and values, and management style rather than through formal structures and systemsstyle rather than through formal structures and systems