organisational structure

WHy? so all the right jobs are given to the right people and the right decisions are made by the right people.

Early organisation structures: often just extensions of domestic operations, but a marketing or export department may handle international sales, or the firm may use an independent overseas subsidiary.

International division structure: centralises all international activities in one division.

Pros: Easier for CEO since international & domestic divisions now separate; raises status of overseas operations, with dedicated managers & supporting systems.

Cons: Rival divisions; HQ (Home Office) might not have global outlook or allocate resources fairly to International Division.

Global product structure: each domestic division is an autonomous profit centre with worldwide responsibility for product groups & subservient country subsidiaries.

Pros: Each division focuses on customer needs; develops experienced managers; manages life cycles; gives feedback to HQ.

Cons: Duplicating functions & staff; focus on best-sellers only; hard for domestic managers to develop international knowledge; coordinating activities across divisions; lack cooperation/communication (e.g. LVMH).

Global area structure: decentralized, with each area manager autonomous & responsible for all products in a specific geographic region.

Pros: Nationally responsive to local tastes & regulations; allows regional economies of scale; avoid imports, so reduce transport costs.

Cons: Lack of product knowledge; duplication costs of smaller factories; lack of international cooperation & synergies; ‘anti-new product drift’(e.g. Avon Products Inc.).

Global functional structure: builds around the firm’s basic tasks (e.g. Manufacturing firms need production, marketing and finance) & is highly centralized, with each function head responsible for domestic & foreign business. Pros: Controlled by fewer managers; little duplication of facilities. Cons: Coordinating independent functions; CEO responsible for profit (e.g. Mines, energy companies: Exxon Mobil). 

Matrix structure blends two organisational responsibilities in dual command e.g. functions (inputs) & products (outputs), or regions & products. Pros: More global managers. Cons: Complex, confusing - two bosses; multiple meetings; steep learning curve; political agendas (e.g. Procter & Gamble now, NEC – but GE Brazil & Philips failures).

Mixed Structures are hybrid - combining structures to meet a particular organisation’s needs since ‘pure’ structures are hard to find. Pros: Specific to organisation.

Cons: Messy solution (e.g. Most firms, including Baker Tilly).

Transnational network structure is where a network links diverse subsidiaries (nodes), which can be dispersed or specialized, with interdependent relationships (sharing information & resources). Pros: Aims for both integration (economies of scale) & national responsiveness. Cons: Greatest need for coordination (e.g. Ideal, or Philips NV now?)

Choosing a structure: need to consider firms history, ability to change, business strategy and management philosophy