Prof.
Adelaide N
Digital Signer:Prof. Adelaide N.A. Kastner,
PhD
DN:E=k_adelaide@[Link], O="Centr
.A. Kastner, Ph al University, Ghana", OU=Central Business
School, CN="Prof. Adelaide N.A. Kastner,
D
PhD"
Reason:I am the owner of this file.
Date:2022.01.12 00:12:25 +00:00
GBGM 603 : INTERNATIONAL
BUSINESS MANAGEMENT
LECTURE VI: ORGANISATIONAL
STRUCTURE AND CONTROL IN
INTERNATIONAL BUSINESSES
Lecturer: Prof. Adelaide Kastner
1/11/2022 Lecture Notes of Prof. Adelaide 1
Kastner
MAIN ISSUES
1. INTRODUCTION
2. FACTORS THAT INFLUENCE THE
STRUCTURE OF INTERNATIONAL
BUSINESSES
3. BASIC ORGANISATIONAL
STRUCTURES IN INTERNATIONAL
BUSINESS
4. CONCLUSION
1/11/2022 Lecture Notes of Prof. Adelaide 2
Kastner
INTRODUCTION
Mintzberg defined an organisation’s
structure as, “the sum total of the
ways in which its labour is divided
into distinct tasks and then co-
ordination is achieved among these
tasks”.
1/11/2022 Lecture Notes of Prof. Adelaide 3
Kastner
FACTORS THAT INFLUENCE
THE STRUCTURE OF
INTERNATIONAL BUSINESSES
• External Factors: With specific reference
to international business, major external
environmental factors worth considering
are economic conditions, technological
developments (including information
technology), product-market
characteristics, and host governments’
policies .
1/11/2022 Lecture Notes of Prof. Adelaide 4
Kastner
Internal (Company) Factors
• These include company history,
top management philosophy,
nationality, corporate strategy,
and degree of
internationalisation. Following
will be discussions on some of
these factors.
1/11/2022 Lecture Notes of Prof. Adelaide 5
Kastner
BASIC ORGANISATIONAL
STRUCTURES IN
INTERNATIONAL BUSINESS
• The Extended Domestic Structure
• Foreign Subsidiaries
• International Division Structure
• Global Structural Arrangements: Global
Product Division; Global Area Division;
Global Functionally-Based Structure
• Mixed Organization Structures including
matrix structures
1/11/2022 Lecture Notes of Prof. Adelaide 6
Kastner
Figure 1: Initial Division Structure
(Extended Domestic)
Chief Executive Officer
(CEO)
VP VP VP VP
Production Marketing Finance Human
Resource
Export
Manager
1/11/2022 Lecture Notes of Prof. Adelaide 7
Kastner
Extended Domestic
• Many firms enter international markets by
exporting locally-produced goods or services.
• If the company has a narrow product line,
the export manager reports directly to the
head of marketing (Fig. 1).
• If the firm has a broad product line for
export, the export manager heads a separate
department and reports directly to the CEO
(Fig. 2).
1/11/2022 Lecture Notes of Prof. Adelaide 8
Kastner
Figure 2: Initial Division
Structure (Extended Domestic)
Chief Executive
Officer
VP VP VP VP VP
Production Marketing Export Finance HR
1/11/2022 Lecture Notes of Prof. Adelaide 9
Kastner
Figure 3: Organisational Structure of a
Ghanaian Horticultural Export Company
Managing Director
Managing Director’s
Personal Secretary
Export Computer Transport Financial Quality Farm
Managers Expert Manager Controller Controller Expert
(2)
Drivers (10) Sorting Officers (6)
Export Officers
(4) Mechanic 1/11/2022 Lecture Notes of Prof. 10
Adelaide Kastner
Figure 4: Foreign Subsidiaries
President
(or Chief Executive Officer)
Home Office
Departments
VP VP VP VP
Production Marketing Finance HR
VP International
Operations
Overseas
Subsidiaries
Country E
Country A Country B Country C Country D
(E.g. Côte
(E.g. France) (E.g. Japan) (E.g. Nigeria) (E.g.
d’Ivoire)
Canada)
1/11/2022 11
Lecture Notes of Prof. Adelaide Kastner
Foreign Subsidiaries
• With increase in overseas sales, some local
governments exert pressure for the
establishment of on-site manufacturing
operations, resulting in sales subsidiaries.
• Each foreign subsidiary is responsible for
operations within its own geographic area.
• The head reports either to a senior executive
who co-ordinates international operations (e.g.
V-P International Operations) or directly to the
home-office CEO. Benefit: Reduces
transportation
1/11/2022
costs for price competitiveness.
Lecture Notes of Prof. Adelaide 12
Kastner
Figure 5: International Division Structure
Chief Executive
Officer
Home Office
Departments
Production Marketing Finance HR
Operating
Divisions
Domestic Domestic Domestic Domestic International
Division Division Division Division Division
(Oils) (Detergents) (Soaps) (Toothpastes)
Country 1
Country 2
Country 3
Country...n
1/11/2022 Lecture Notes of Prof. Adelaide Office Marketing Govt13
Kastner Operations Relations
International Division
• An international division structure is adopted to
address growth in international business.
• Subsidiaries are grouped into an international
division, based at the head office, which
handles all international operations.
• The division is responsible for all products
and target countries. The head reports
directly to the CEO.
• Advantage: International focus receives top
management attention
1/11/2022 Lecture Notes of Prof. Adelaide 14
Kastner
Figure 6: A Global Product Division Structure
Chief Executive Officer
Home Office
Departments
Production Marketing Finance HR
Operating
Divisions
Global Product Global Product Global Product Global Product Global Product
Division A Division B Division C Division D Division E
(Oils) (Detergents) (Soaps) (Toothpastes) (Fruit Juices)
Product Region A Product Region B Product Product Region D Product Region E
(E.g. North (E.g. West Africa) Region C (E.g. South Africa) (E.g. Far East)
America) (E.g. Europe)
United Kingdom
France
Germany
Denmark
1/11/2022 Lecture Notes of Prof. Production Marketing Finance 15
Adelaide Kastner Etc.
Global Product Division
• As shown in Figure 6, the manager who is in
charge of product division C has authority for
this product line on a global basis.
• Thus, in all target regions of that product
division.
• Manager also has internal functional support
related to the product line. For example, all
marketing, production, and finance activities
associated with product division C are under
the control of this manager
1/11/2022 Lecture Notes of Prof. Adelaide 16
Kastner
Figure 7: A Global Area Division Structure
Chief Executive
Officer
Home Office
Departments
Production Marketing Finance HR
Operating
Divisions
Region A Region B Region C Region D Region E
(E.g. North (E.g. West (E.g. Europe) (E.g. South (E.g. Far
America) Africa) Africa) East)
United Kingdom
France
Germany
1/11/2022 Lecture Notes of Prof. Adelaide 17
Kastner Denmark
Global Area Division
• Global operations are organized based on
geographic rather than product divisions.
• Subsidiary companies (regardless of
product line) report directly to corporate
executives responsible for a particular
geographical area.
• Each area division has both product line and
functional responsibilities for all operations
within its area, usually with separate
regional headquarters.
1/11/2022 Lecture Notes of Prof. Adelaide 18
Kastner
Figure 8: A Global Functionally-Based
Structure (Hodgetts and Luthans)
Chief Executive
Officer
Production Marketing Finance HR
Domestic Foreign Domestic Foreign
Production Production Marketing Marketing
Product A
Product A Product A Product A
Product B
Product B Product B Product B
Product C
Product C Product C Product C
Product D
Product D Product D Product D
1/11/2022 19
Lecture Notes of Prof. Adelaide Kastner
Global Functionally-Based
• It organizes worldwide operations based
primarily on function and secondarily on
product.
• Useful for narrow product lines; e.g.
extractive firms, such as oil and mining firms.
• It allows tight control over specific functions
worldwide; E.g. technology, marketing or
human resource management practices.
• Disadvantage: Co-ordination of functions is
difficult.
1/11/2022 Lecture Notes of Prof. Adelaide 20
Kastner
Figure 9: International Matrix Structure
President
(CEO)
Home Office
Departments
Production Marketing Finance HR
Operating
Divisions
Region A Product Group X Region B
(E.g. West Africa) (Horticultural Products) (E.g. South Africa)
Manager Manager
Product Group X in Region A Product Group X in Region B
(Horticultural Products in West Africa) (Horticultural Products in South Africa)
1/11/2022 Lecture Notes of Prof. Adelaide 21
Kastner
Mixed (Matrix)
• Mixed organization structure combines the
above variations into a structure that
supplements its primary structure with a
secondary one and, perhaps, a tertiary (third)
one.
• E.g. a company may primarily adopt a global
area approach (i.e. regional blocks), and then
secondarily supplement with committees of
functional managers who provide assistance
and support to the various geographic
divisions. Lecture Notes of Prof. Adelaide 22
1/11/2022
Kastner
CONCLUSION
Organisational structures are means by
which firms can implement their plans and
accomplish their goals. To design a
strategically-effective organisational
structure, the international business must
take cognizance of both external
environmental factors and the firm’s internal
characteristics. A structure may, therefore be
reviewed periodically to ensure strategic
effectiveness.
1/11/2022 Lecture Notes of Prof. Adelaide 23
Kastner