Organizational Architecture in International Business

Learning Objectives

• Define organizational architecture.
• Discuss organizational architecture choices for international business.
• Align organizational architecture with global strategy for performance improvement.
• Outline requirements for changing organizational architecture to match global strategy.

Key Concepts in Organizational Architecture

• Represents the complete organization: structure, controls, culture, processes, and people.
• Must internally align, fit strategy, and reflect competitive market conditions.

Components of Organizational Architecture

• Structure: Formal division, decision-making locations, integration methods.
• Controls: Performance metrics for subunits.
• Incentives: Rewards to influence managerial behavior.
• Processes: Execution of decisions and work.
• Culture: Shared norms and values among employees.

Dimensions of Organizational Structure

• Vertical Differentiation:
• Centralization vs. decentralization of decision-making.
• Horizontal Differentiation:
• Division into subunits—functional vs. product divisional structure.
• Integrating Mechanisms:
• Coordination methods among subunits.

Control Systems

• Personal, bureaucratic, output, and cultural controls.
• Performance metrics linked to incentives tied to various strategies (localization, international, global, transnational).

Influence of Culture

• Leadership impact, hiring practices, socialization, and communication strategies.
• Strong vs. adaptive cultures impacting performance.

Strategies and Their Corresponding Architecture

• Localization: Decentralized, low coordination need.
• International: Core competencies centralized; moderate coordination.
• Global Standardization: High integration and cultural consistency required.
• Transnational: Focus on local responsiveness and global learning with high coordination needs.

Organizational Change

• Caused by power dynamics, culture, and institutional constraints.
• Phases: Unfreezing, moving to new state, and refreezing culture.