THE ORGANIZATIONAL CONTEXT

CHAPTER 2

MANAGEMENT DEMANDS ON INTERNATIONAL GROWTH

Management demands on

Internationalization

Size

Structure

Geographical dispersion

Control mechanism

Natural culture & languages

Host country

demands

Operation modes

Flow & volume of information

THE PATH TO GLOBAL STATUS

• Most firms pass through several stages of organizational development as the nature and size of their international activities grow. As they go through these evolutionary stages, their organizational structure change, typically due to :The strain imposed by growth and geographical

spread.The need for improved coordination and control

across business units.The constrain imposed by host-government

regulations on ownership and equity.

STAGES OF INTERNATIONALIZATION

Exporting

Sales Subsidiary

Foreign Production

Licensing Subcontracting

Network of Subsidiaries

HR Activities Export stage

• Export tends to be handled by intermediary (foreign agent or distributor).

• Export manager appointed to control foreign sales and activities seek new market (from domestic operation).

• Create an export department (hire export staff) and perhaps training foreign agents.

• The role of HR department is unclear.

EXPORT DEPARTMENT STRUCTURE

Corporate Executive

Finance Manager

Logistic Manager

Production

Manager

Marketing Manager

Domestic Sales Mgr

International

Sales Mgr

Human Resource Manager

Issues of roles

& respon sibility

HR Activities Sales Subsidiary

• Foreign agent or distributor replaced by direct sales with the establishment of sales subsidiaries or branch offices in the foreign market countries.

• More confidence in the international sales activities.• The desire to have greater control/decisions• Exporting is still controlled at corporate

headquarters, but make decision on sales coordination, including staffing.

• The decision to use PCNs leads into expatriation management issues and activities.

EXPORT DEPARTMENT STRUCTURE

Corporate Executive

Finance Logistic Producti on

Marketing Export

Direct Export

Sales

Subsidi ary

Human Resour

ce

Issues of roles

& respon sibility

GLOBAL PRODUCT DIVISION STRUCTURE

Headquarters

Worldwide production group/div. A

Worldwide production group/div. B

Area 1 Dome

sticFunctiona

l Unit

s

Area 2 InternationalFunctiona

l Unit

s

Worldwide production group/div. C

GLOBAL AREA DIVISION STRUCTURE

Headquarters

North American

Area

Latin American

Area

European Area

Middle East /Africa Area

Far East Area

GLOBAL MATRIX STRUCTURE

Headquarters

Area 1 Area 2 Area 3

Product Division A

Product Division B

Product Division C

Mana ger

THE MATRIX• In the matrix structure, the multinational is attempting to integrate

its operations across more than one dimension. • The matrix is considered to bring the management system a

philosophy of matching the structure to the decision making process.

• Area managers are responsible for the performance of all products within the various countries that comprise their regions, while the product managers are responsible for sales of the specific product ranges across the areas.

• Product A Manager reports to vice President of Global Products and VP of International (geographical matters).

• Country/Are HR Manager involves in staffing issues involving product division staffs report indirectly to VP Global Products and Corporate HR at headquarters.

Four contributing factors in matrix structure implementation

• Dual reporting, which lead to conflict and confusion.

• The proliferation of communication which creates information logjams

• Overlapping responsibilities• The barriers of distance, language, time, and

culture, which often make it very difficult for managers to resolve conflicts and clarify confusion.