The structure of an organization is designed in such a way that it capitalizes on its inherent strengths while at the same time minimizing its weaknesses. This enables the organization to cut down on its operational costs and increase its market share. As globalization takes over the business environment, some organizations are opting to go global by operating in different countries while others prefer to operate solely in a single country. The paper discusses the best fit of the multinational firm to its global environment and the changing role of central headquarters as an organization expands into other countries.
An organizational structure comprise of the different individual officers and units which are differentiated by their levels of responsibility. The structure acts as the overall body of an organization which defines the internal environment of an organization. Ideally, the structure of multinational corporations should allow them to accommodate various functions like finance, R & D, marketing, as well as production (Newman, 2008). It should also ensure that its functionality goes beyond the domestic market. The global strategy of an organization therefore determines the success of an organization. In addition, the relative size associated with international operations should be compared to the home operations (Newman, 2008). Also, characteristics of the international market in which an organization operates are equally important. The major organizational structures are matrix, global product division, and international division. The latter works best for international organizations that adopts global strategy for their organizational goals. In addition, a specialized division is established with the mandate to operate in the international market. The divisions allow specialization with a special line of production that meets the demands of a particular group. Therefore, the operations of a MNC should ensure that organizations in different localities operate with different management strategies (Newman, 2008).
The organizational structure of an international organization allows a firm to operate independently compared to a firm which operates solely in one country. This is because different markets have different requirements, polices, and regulations. In other words, an international market has different environmental market factors compared to an organization that operates singularly with regulations and constraints from a single domestic market. This means that an organization should adopt an effective organizational structure which allows for of a permanent relationship with different units.
According to Tallman (2009) managers operating in a domestic market because of its very nature of familiarity may assume the characteristics of the home market, but managers operating in an international market have to do a PESTEL analysis to determine the market where they operates in. In others words, the international market prompt managers to carry independent market assessment to ensure that it gets familiarized with the changing market structures and forces. Compared to a domestic market, the multinational markets are neither identical nor constant as a domestic market. Individual markets undergo different business cycles which forces an organization to apply an international strategy while examining the different markets. The international strategy assists an organization minimize the negative effects associated with different economic cycles in each market. Therefore, to be at par with organizations operating in multiple countries, an organization should be able to apply a portfolio approach so as to reduce the negative effects (Tallman, 2009). Unlike in a domestic market, an international market prompts an organization to adopt an organizational structure which realizes competition resulting from other MNCs in the markets. As a result, MNCs should understand their market position with respect to global competition. They should also understand their potential market, national market, and regional market. As a result, an organization should understand the different international market models and the changing cultures at international levels (Tallman, 2009)
Also, as organizations go global, the functions of the headquarters are deemed to change. This necessitates the organization to gain a competitive advantage over its competitors. Specifically, organizations like Marks and Spencer have failed in the internationalization process as a result of replication of the strategic management which has led to their failure. Divisional managers play the role of overall managers in foreign markets and are given the mandate of controlling that particular market. The products produced by an organization at different market are each treated differently. This facilitates global planning as well as developing a strategy for that particular product. According to Newman (2008) global strategy is adopted at international market where means of production and the produced goods are independently made available to the international markets.
To sum it up, organizational structure is designed depending on the market in which an organization operates from. The structure of an international company is different from the structure of a domestic organization. Because of the different market in which an international market operates, an international organization adopts a global strategy to ensure that it meets it gains a competitive advantage. In addition, an effective organizational structure enables an organization to link the different units. The international strategy assists an organization minimize the negative effects associated with different economic cycles in each market. Because of the different tasks associated with international organizations divisional managers are expected to carry occasional market researches to remain relevant in the market.
Reference List
Newman, M. (2009). Organizational Structure of the Multinational Companies. Web.
Tallman, S. (2009). Global strategy. West Sussex, UK: John Wiley & Sons.