IV

ULE
OD
M

International Business
Management
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Module IV
Organizational structure and control system for international business:
Centralized Vs decentralized
structure-functional, divisional, product based and matrix structure.

Global business planning system global

business organizing system—information system-global business control system
Integration of international business..
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Some Key Terms

Flat or tall structure

Span of control
Chain of command
Hierarchy
Delegation
Empowerment
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Kinds of structures…

International division –
All international units report to one place at headquarters
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Functional structure –
Units performing particular functions all over world
report to central groups
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Advantages Disadvantages
Specialisation – each department focuses • Closed communication could lead to
lack of focus
on its own work
• Departments can become resistant
Accountability – someone is responsible to change
for the section • Coordination may take too long
Clarity – know your and others’ roles • Gap between top and bottom
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Product division structure –

People working on same products all
over world report to central groups
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Geographic division structure –

Units for different countries, regions
report to same top executive
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Advantages Disadvantages

Serve local needs better • Conflict between local and

Positive competition central management
More effective communication • Duplication of resources and
between firm and local customers functions
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Matrix structure
International units have more than one boss

Matrix overlay
An organization in which top-level divisions are required to heed input
from a staff composed of experts of another organizational dimension
in an attempt to avoid the double reporting difficulty of a matrix
organization but still mesh two or more dimensions
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Matrix Organizations………………………..
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Hybrid Forms
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Organization design for international

how an international business is organized in order to ensure
worldwide business activities are able to be integrated efficiently and
effectively
Structures and systems must be consistent with each other and
with the environmental context
Size and complexity of the organization must be considered
Structure must be able to evolve over time in order to respond to
change
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Degree of multidomestic, global, and transnational policies employed

Location and type of foreign facilities
Impact of international operations on total corporate performance
Structures are dynamic
Structure affects:
Taxes
Expenses
Level of control
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The relationship among International Environment,
Competitive Strategy, and Organizational Structure
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Business entity with a clearly defined

market, specific competitors, the
Strategic Business Unit ability to carry out business mission,
and a size appropriate for control by
single manager
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Result from pressure to act more quickly, reduce costs and improve quality

Reengineering to
reduce levels of middle management
restructure work processes
reduce fragmenting across departments
Improve speed and quality of strategy execution
Empower employees
Communicate instantly
Transmit information swiftly
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New trendz…………………
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Virtual Corporation • Advantages

An organization that – Permits greater flexibility
coordinates economic activity – Forms a network of dynamic
to deliver value to customers relationships taking advantage
using resources outside the of the competencies of other
traditional boundaries of the organizations
organization • Disadvantage
– Potential to reduce
management’s control over the
corporation’s activities
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De-Jobbing

Replacing fixed jobs with

tasks performed by
evolving teams
Hierarchy not maintained
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Control………..
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Control is management’s
planning, implementation, evaluation, and
correction of performance
to ensure the organization meets its objectives
Management must balance global needs while adapting to
country-level differences
Control keeps a company’s direction or strategy on track
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Control principles often seem simple

But real control systems have to be very complex

Keep control systems as simple as possible –
but avoid false simplicity
Rewards based on who produced
high profits obscure key complexities
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Decentralization is key
The “Credo” is key
But J&J needs complex rules
and reporting relationships to
pursue its many goals
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Control Difficulties in International Business
Distance
Diversity
Market size
Type of local competition
Nature of product
Labor cost
Currency
Uncontrollables
Degree of uncertainty
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Elements of International Control

Planning
Organizational structure
Specific control mechanisms
Choices about location of
decision making
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Control

Where Are Decisions Made?

All at headquarters
All at subsidiary level
Combination
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Variables determining the location of decision making

Product and Equipment

Competence of subsidiary management
Size of international company and duration
Detriment of a subsidiary for the benefit of the enterprise
Level of subsidiary frustration
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Subsidiaries
Companies controlled by other companies through
ownership of enough voting stock to elect board-of-
directors majorities

Affiliates
A term sometimes used interchangeably with subsidiaries,
but more forms exist than just stock ownership
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Product and Equipment

Existence of global product policy

Degree standardized or localized

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Competence of Subsidiary Management depends on

How well executives know one another

How well executives know company policies

Whether headquarters management feels it understands

Host country conditions
Distances between home and host countries
Size and age of parent company
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Planning……………..
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