Organizational Structure and Design in Multinational Enterprises
The objective of organizational design (OD) is to provide, maintain, and develop organizational structures that work toward the achievement of corporate goals. OD helps create a workable structure of tasks and positions that create the physical organization and jobs.
Organizational structure is ultimately driven by strategy; in the near term, however, strategy is shaped by organizational structure because structure provides a constraint to action. Structure is relatively immobile in the short run; in the longer term, it can (and does) change.
What is the Purpose of Structure?
- Global integration and local responsiveness.
- Every business seeks efficiency and effective structures to organize tasks.
- In the global environment, structures take on differing forms in order to effectively answer cultural demands and respond to global environments.
Purpose of Global Organizational Design
- Create structures that work well in diverse locations while aiding coordination and allowing for quick responsiveness to market demands.
Multidomestic Strategy
- Strategic and operational decisions are delegated to strategic business units in each country.
- This permits customization but interferes with economies of scale and intra-organizational learning and sharing.
Transnational (or Hybrid) Strategy
- Seeks to achieve both global efficiency and local responsiveness. It requires shared vision and commitment through an integrated network.
- With this strategy, the roles and responsibilities of subsidiaries are varied to reflect differences in their external environment, internal capabilities, and strategic role.
Subsidiary Roles
- Operate in host environments.
- Play a key part in balancing integration and local responsiveness through playing an autonomous role, a receptive role, or an active role.
Receptive Role
Subsidiary functions are highly integrated with headquarters or with other business units; for example, exporting most of the subsidiary production to the parent company or other subsidiaries while importing multiple products or components from them.
Active Role
Many activities are located locally but carried out in close coordination with other subsidiaries. The autonomous role is typical of multinational enterprise subsidiaries employing a multidomestic strategy.
Global Functional Structure
Where functions are performed in each location in order to be adaptive to local demands.
Global Geographic Structure
Where divisions can be based on political borders, cultural similarity, economic similarity, business prospects, regional integration, tax, or logistics considerations.