International Organizational Structures for Competitive Advantage
Organizational Structures for Competitive Advantage
An organizational structure defines how activities such as task allocation, coordination, and supervision are directed toward achieving organizational aims. Organizations must be efficient, flexible, innovative, and caring to achieve a sustainable competitive advantage.
Simple Structures (U-Form/Functional with Export Department)
Common in small and medium-sized enterprises (SMEs) and firms in early life stages, this structure houses exports within the sales department, differentiating international sales from national sales.
- Advantages: General manager in contact with all functions, simple control mechanisms, clear definition of responsibilities.
- Disadvantages: Difficulty dealing with diversity, occasional lack of coordination between functions, high executives may not consider the firm holistically.
Simple Structures (U-Form/Matrix-Affiliate)
Used in the initial stages of internationalization, this structure features affiliates with high autonomy, dependent on the mother company. Affiliates share high rates of tactical information but not strategic information. Useful in stable environments.
- Disadvantage: Structural problems arise with increasing operational variety, leading to heavy administrative tasks and communication problems.
International Division (M-Form)
This structure comprises semi-autonomous operating divisions (by product or geographical area) and a head office responsible for strategic planning, resource allocation, and control.
- Advantages: Divisions act as profit centers, offering flexibility and proximity to local conditions, along with fiscal advantages.
- Disadvantages: International division’s dependence on other divisions can cause inter-divisional conflicts.
Product Global Division
Each product line manages its international operations with centralized decision-making and profit centers. Authority shifts from affiliate managers to global division managers.
- Advantages: Adapts to specific customer needs for each product line, improves communication and resource transfer between domestic and international divisions.
- Disadvantages: Limited sensitivity to local conditions, potential shortage of globally focused managers.
Geographical Global Division
Suitable for expansion across numerous culturally diverse and geographically dispersed foreign markets. Regional managers are responsible for all products and businesses within their division.
- Advantages: Flexibility in adding or removing divisions, simplified performance control.
- Disadvantages: Task duplication across functions, risk of head office losing control.
Matrix Structure
Resulting from increased complexity in international operations, this structure enhances resource organization flexibility and facilitates conflict resolution between functions, markets, or products.
- Advantages: Flexibility, knowledge integration.
- Disadvantages: Slower decision-making, coordination difficulties.
Mixed Structure
Adapts specific firm components (products or areas) to the market while maintaining other components for the entire organization. Combines functional units with product- or market-focused units.
- Problem: Potential disconnect between head office and divisional functional operations, impacting shared vision.