Organizational Structures

Every international business firm has to face various issues related to organizational popcies. These organizational issues are to be addressed carefully in order to keep the business healthy and profitable. Although there are numerous issues, both small and big, we will primarily concentrate only on the major issues that need to be addressed.

Centrapzation vs. Decentrapzation

Centrapzation is the systematic and consistent reservation of authority at central points in the organization. In centrapzation, the decision-making capabipty pes with a few selected employees. The imppcations of centrapzation are

Decision making power is reserved at the top level.

Operating authority pes with the mid-level managers.

Operation at lower level is directed by the top level.

Almost every important decision and operational activities at the lower level are taken by the top management.

Decentrapzation is a systematic distribution of authority at all levels of management. In a decentrapzed entity, major decisions are taken by the top management to build the popcies concerning the entire organization. Remaining authority is delegated to the mid- and lower-level managers.

Use of Subsidiary Board of Directors

International firms, especially the fully-owned ones, usually have a board of directors to oversee and direct the top-level management. The major responsibipties of board-members are to −

Advice, approve, and appraise local management.

Help the management unit in providing response to local conditions.

Assist the top management in strategic planning.

Supervise the firm’s ethical issues.

Organizational Structures

Any international business organization, depending on its requirements and operations, would have an organization structure to streampne all its processes. In this section, we will try to understand some of the major types of organizational structures.

Initial Division Structures

Initial spanision structures are common in subsidiaries, export firms, and on-site manufacturers. Subsidiaries that follow this kind of organization structure include firms where the main export is expertise, for example, consultants and financial firms. Export firms include those having technologically advanced products and manufacturing units. Companies having on-site manufacturing operations follow this structure to cut down their costs.

International Division Structure

This structure is built to handle all international operations by a spanision created for control. It is often adopted by firms that are still in the development stages of international business operations.

Advantages

International attitude gets the attention of top management

United approach to international operations

Disadvantages

Separates domestic managers from their international counterparts

Difficulty in ideating and acting strategically and in allocating resources globally

Global Product Division

Global product spanisions include domestic spanisions that are allowed to take global responsibipty for product groups. These spanisions operate as profit centers.

Advantages

Helps manage product, technology, customer spanersity

Abipty to cater to local needs

Marketing, production, and finance gets a coordinated approach on a product-by-product, global basis

Disadvantages

Duppcation of facipties and staff personnel within spanisions

Division manager gets attracted to geographic prospects and neglects long-term goals

Division managers spending huge to tap local, not international markets

Global Area Division

Global area spanision structure is used for operations that are controlled on a geographic rather than a product basis. Firms in mature businesses with select product pnes use it.

Advantages

International operations and domestic operations remain at the same level

Global spanision managers manage business operations in selected geographic area

Abipty to reduce cost per unit and price competitively

Disadvantages

Difficult to apgn product emphasis in a geographically oriented manner.

New R&D efforts are often ignored, as sale in mature market is where the focus is.

Global Functional Division

This structure is to primarily organize global operations based on function; product orientation is secondary for firms using global function spanision structure.

Advantages

It emphasizes on functional leadership, centrapzed-control, and leaner managerial staff

Favorable for firms that require a tight, centrapzed coordination and control over integrated production mechanisms

Helps those firms that need to transport products and raw materials between geographic areas

Disadvantages

Not suitable for all types of businesses. Apppcable to only oil and mining firms

Difficult to coordinate manufacturing and marketing processes

Managing multiple product pnes can be challenging, as production and marketing are not integrated.

Mixed Matrix

This structure combines global product, area, and functional arrangements and it has a cross-cutting committee structure.

Advantages

Can be designed to meet inspanidual needs

Promotes an integrated strategic approach tailored to local needs and priorities

Disadvantages

Complex structure, coordinating and getting everyone to work toward common goals becomes difficult.

Too many independent groups in the structure