Organization of Multinational Operations

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Organization of Multinational Operations
C H A P T E R
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Table of Contents

• Chapter Vignette
• Organization of MNCs Operations
• Development of International Corporate Structure
• MNC Corporate Structure
• Organizational Structures

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Chapter Vignette

• Born Global
• MCS Energy

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Organizational of MNCs Operations

• Definition
• Designing The Skeleton and The Structure That
  Delineate The Nature and Extent of Formal
  Relationships Among
• Internal Components Tasks, Jobs and Units
• Physical and Nonphysical Forms in Response to
  Internal Requirements and External Environment
• A Tool for Goal Attainment

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Organizational of MNCs Operations

• Factors Influencing MNC Structure
• External Forces
• Economic Conditions
• Technological Development
• Product-Market Characteristics (Competition)
• Host Government Policies
• Company Factors
• History
• Top Management Philosophy
• Nationality
• Corporate Strategy
• Degree of Internationalization

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Development of International Corporate Structure

• From Simple to Complex
• From Domestic Orientation to Global Perspective
• Product Life Cycle
• Introduction
• Competition is Limited to Domestic Firms
• Export
• International Operation Is An Extension of
  Domestic

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Development of International Corporate Structure

• Product Life Cycle
• Growth
• Technology Diffusion and Price Competition-
  Manufacturing Facilities in Low-Cost Countries
• International Division
• Maturity
• Most of The Corporate Revenues Are From Abroad
• Organize Operations on a Global Basis

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MNC Corporate Structure

• The Extension of Domestic Structure
• Export Manager Reports to the Marketing Executive
  (Narrow Product Line)
• Export Manager Reports to C.E.O. (Broad Product
  Line)
• Increased Competition and Marketed Maturity--
  Local Manufacturing

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MNC Corporate Structure

• Autonomous Foreign Subsidiary
• Distant Operations Are Given Local
  Decision-Making
• Control Through Financial Reporting
• Foreign Sub. May Have Local Board of Directors
• Advantages and Disadvantages

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MNC Corporate Structure

• International Division Structure
• Four Factors Prompt The Establishment of
  International Division
• Increased International Involvement -- Require a
  Senior Executive
• Concentration Allows Exploiting The Worldwide
  opportunities
• Internal Specialist Are Needed
• A Desire to Be Proactive (Identify Opportunities)

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MNC Corporate Structure

• The Geographic Division
• The Product Division
• The Functional Structure
• Mixed and Matrix Forms

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Geographic Division StructureFigure (3.4)
CEO
Headquarters Staff
European Division
North American Division
South American Division
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Product Division Structure Figure 3.5
CEO
Headquarters Staff
Product Group A
Product Group B
Product Group C
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International Function StructureFigure 3.6
CEO
RD (Worldwide)
Marketing (Worldwide)
Manufacturing (Worldwide)
Finance (Worldwide)
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International Mixed Structure Figure 3.7
CEO
Product A (Worldwide, except US and Europe
USA Division
European Division
Product B (Worldwide, except US and Europe
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Management Views of IB

• Ethnocentric
• Superiority of everything from the home country.
• Polycentric
• Foreigners are different.
• Centocentric
• Classical global strategy, treat the world as one
  market, produce at home.
• Geocentric
• Locally responsive, globally integrated.