Chapter Six

Designing Organizations for the

International Environment

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Entering The Global Arena

More companies are doing business
globally
Companies need top leaders who have a
global outlook
Advancements in technology and world
communications has changed the
competitive landscape

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Motivations for Global Expansion

Economic, technological, and
competitive forces have combined to
push companies from a domestic to a
global focus.

Motivation to Expand:
Economies of Scale
Economies of Scope
Low-Cost Production Factors

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The Global Economy as Reflected in

the Fortune Global 500

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Stages of International Evolution

Domestic
Domestic
International
International
Multinational
Multinational
Global
Global

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Global Expansion Through

International Strategic Alliance
Licensing allowing another firm to
market your brands
Joint Ventures - separate entity of two or
more firms
Consortia groups of independent
companies

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Model for Global vs. Local

Opportunities
Global standardization versus national
responsiveness
Globalization or multidomestic strategy

Globalization strategy - products are

standardized throughout the world
Multidomestic - competition is handled in
each country independently

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Fitting Organization Structure to

International Advantages

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Global Organization Structure

International Division
Global Product Division
Global Geographic Division
Global Matrix Structure

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The Global Organizational Challenge

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Global Coordination Mechanisms

Global Teams
Headquarters
Planning
Expanded
Coordination Roles

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Benefits of Collaboration
Cost Savings
Better Decision Making
Greater Revenue
Increased Innovation

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Cultural Differences In
Coordination and Control
National Value System
Power Distance: people accept inequality
Uncertainty Avoidance: members feel
uncomfortable with uncertainty and
ambiguity

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National Approaches to
Coordination an Control
1) Centralized Coordination: Japanese
Companies
2) Decentralized Approach: European
Firms
3) Coordination and Control Through
Formalization: The United States

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The Transnational Model of

Organization
Mix in organizational complexity with diverse units and
coordination
Combines global learning, knowledge sharing and
technological innovation
Structure required in highly complex organizations
An integrated network linked together to achieve
multidimensional goals
Based on interdependence
A managerial state of mind, a set of values and
shared values toward a worldwide learning system
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Transnational Organizations
Assets and resources are dispersed
worldwide
Structures are flexible and ever-changing
Subsidiary managers initiate strategy and
innovations that become strategy for the
whole organization
Corporate culture, shared vision and
management style guide the organization
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Design Elements
Managers must design organizations for complex
international coordination
Organizations international strategy and structure evolve
There a diverse options for specific international
strategies
There are a variety of challenges for global organizations
Diverse national and cultural values influence an
organizations approach
Companies operating globally require broad coordination

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