Organization of Multinational Operations

1. Organization of Multinational Operations

2. Organizational structure in the early stage of international expansion Advantages • No commissions for specialized foreign trade agencies • Better coordination and control to the whole activity Disadvantages • subordinationto the marketing departament • No direct connections with production, financial or research and development departments • subordinationto the domestic sector. Recommendation • Companies with a narrow line of products, and for which revenues from the international activity are smaller than the revenues from domestic production

3. International Division Structure Advantages • Top management attention to foreign business • Concentration of international management expertise at headquarters Disadvantages • An inherent conflict between the goals of the domestic and international division • Domestic functional specialists are reluctant to give priority to foreign customers • A high degree of internationalization make very difficult a global coordination of resources Recommendation : to be used by the companies with few specialists in international business and internationalized in a limited geographical area

4. Global Product Division Structure Advantages • Allows the companies to add new products without disturbing the rest of organization • Fast response to the global competitive pressures against specific product lines Disadvantages • Wasteful duplication of management, sales representations and plant capacity utilization within regions. • The production managers tend to consider more the internal market Recommendations : • To be used by the companies with a diversified product line and growth opportunities and have different clients. • It is the most suitable for the companies which use advanced technologies

5. Global Area Division Structure Advantages • High decision power of local managers • Create the opportunity for economies of scale • Local managers could find faster better solutions to solve local problems Disadvantages • duplication of functional and product specialists among the regions • Lack of interest of area divisions to promote new products realized at headquarter or in another regional department Recommendations : to be used by companies with mature business and narrow product lines • Suitable for beverages, food, cosmetics or pharmaceutical companies

6. Global Functional Division Structure Advantages • Global activities could be controlled by a small number of managers • Functional design permits functional line managers to control directly all activities. Disadvantages • Difficult global coordination of functional departments • Inherent divergence of objectives among production and marketing managers which need to be solved at headquarters Recommendations • To be used by companies with narrow, standardized product line • Most suitable for companies involved in raw materials extractive industry.

7. Global Matrix Division Structure Advantages • It allows the efficient use of organizational resources, sharing them across multiple projects or countries • Improved interaction both vertically and laterally. • Frequent contacts between members from different areas expedite decision making and enhance management flexibility Disadvantages • A built-in tension between country managers and product managers who are in competition for control over the same set of resources • The time-consuming nature of shared decision making system

8. Global Network Division Structure