Designing Effective International Organizations

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“People will have to think Globally and predicate Leadership behavior not on power and authority but on Relationships and cooperation” “The Global Organization must have Virtual System of Boundary-Spanning Relationships, thus creating “Soft-Side” Culture of interdependence and Innovation” STRUCTURE FOR INTERNATIONAL ORGANIZATIONS

There is a fact that rarely can a firm extend its domestic structure into a global environment. Also there is no ideal model that defines the optimal multinational organization. Nevertheless, companies try to establish stable systems for management. Our focus here will be on:

Patterns of decision-making authority
Processes of managing global resources

Structural elements evolve as the nature of a firm’s international operations changes. During the evolution, the authority structures and management systems change to fit new competitive strategies. Structure follows strategy a company must forge an organizational structure consistent with its strategy to successfully implement plans through effective management systems. However, managers can often develop an effective strategy more easily than they can alter an organizational structure. “The inertia of prevailing management systems impedes change”

The Organization as a Global Network
Stanley Works, the world’s leading manufacturer of hand tools, operated primarily as an American exporter for more than a half-century. It served worldwide markets through a home-based export office, but intensifying competition from companies such as Black & Decker forced Stanley to establish overseas offices and eventually to group them under national and regional distribution centers. With greater expansion, Stanley found itself in so-called matrix structure that allowed for cross-management of products and markets. The Organization as a Global Network cont.

As a result, Stanley, like many large, diversified multinationals, has evolved toward a global network of overlapping systems in which foreign and domestic operations interact and depend on one another in varying ways. “A company periodically must reposition or “stage” itself. These stages represent patterns of organizational systems, each congruent with a company’s development” Contrasting Concepts of Organizational Structures

For nearly a century, organization theory has focused on specialization and vertical coordination. Specialization and hierarchical coordination are important stages in development, but at some point structure relationships must accommodate the complexity of dozens of international operations providing goods and services to one another and selling to outside customers in many different markets. Contrasting Concepts of Organizational Structures cont.

More specifically, specialization and vertical coordination imply dis-integration, while global coordination implies a move toward greater “integration”. The design of an organization, therefore, is contingent on a number of factors: All organizations must divide tasks and activities into well-defined operations and delineate authority to coordinate those activities. Strategy determines the interrelationships among these activities within the constraints of industry competition, technology, and the company’s markets.

Contrasting Concepts of Organizational Structures cont.
3. The complexity of international operations redefines information needs throughout a company, and pattern of information show the influence of cross-cultural issues such as diverse languages, work values, and leadership styles. These factors both facilitate the firm’s strategy and ensure responsibility throughout the company. FIGURE 7.1 Disintegration and Integration: Contrasting Organizational Relationship STRUCTURAL PATTERNS IN DEVELOPMENT STAGES

Incremental changes in organizational structure imply a progression of adjustments within the boundaries of a particular hierarchical system; the...
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