Organizational Structure

1) What variables have to be considered in designing the organizational structure for international operations? How do these variables interact, and which do you think are the most important?

The major variables which have to be considered are the firm’s strategy, size, and appropriate technology as well as the environment in those parts of the world in which the firm operates. Additional variables include geographic dispersion, differences in time, language, cultural attitudes and business practices. I believe the environment to be the most important variable.

2) Explain the need for an MNC to “be global and act local.” How can a firm design it organization to enable this?

A company must have the structure in place to respond to local market structures and consumer preferences while at the same time have enough centralized structure in place to coordinate its varied interests throughout the world. It is a balancing act that assures foreign managers have the flexibility to handle operations on a contingency basis. Companies employ regional presidents who oversee subsidiaries and serve as tethers to the home corporation and are part of the firm’s overall management rather than independent. This structure assures that there is not much centralization which can become a bureaucracy, slow to react and change in an ever-evolving global economy.

3) What is a transnational organization? Since many MNCs are moving toward this format, it is likely that you could at some point be working within this structure-how do you feel about that?

A transnational organization is a horizontal one which retains local flexibility while managing across national boundaries and achieving global integration. This helps link foreign operations to each other and headquarters. This decentralized operation requires the dispersal of responsibility and decision making to local subsidiaries and alliances. This a lateral rather hierarchical system of communication. It is crucial that there is a willingness and ability to share technology across a network of units. The firm’s headquarters is unimportant. There is instead a web of alliances to tie in units and sub-units of the company. I would like this form of organization in that it gives more responsibility to the employees. Employees of which much is expected and who have more of a proprietary feeling about their company would tend to be happier and more productive. There is a sense of being integral to one’s company rather than being under some oppressive power.

4) Discuss the implications of the relative centralization of authority and decision making at headquarters versus the local units or subsidiaries. How would you feel about this variable if you were a subsidiary manager?

A company may be centralized or decentralized dependent on a particular situation. Most companies are neither completely one or the other. Centralization is required for certain functions such as research and development and finance. Marketing, sales and production would be more decentralized concerns. Cultural concerns also influence the locus of control in a company’s structure. Because needs change, structure should remain flexible and be managed on a contingency basis. The traditional ways have to be overridden in a dynamic global economy.

6) What is the role of information systems in the reporting process? Discuss the statement, “Inadequate MIS systems in some foreign affiliates are a control problem for MNCs.”

Information systems provide management with timely information concerning sales, production, and financial results to be able to compare with goals and take corrective action. International reporting systems require information feedback for financial, personnel, production, and marketing variables. Problems in less developed countries with management information systems (MIS) include operating in extreme uncertainty where government information is filtered or fabricated, data is limited, employees who aren’t accustomed to sophisticated information generation, analysis, and reporting systems common to more developed nations. They may not have the sense of
urgency or work-related sensibilities which dictate the timely reporting of information. Also, hardware may not be available to facilitate such communication.