Global Strategic management
Department of International Business
University of Economics, the University of Danang
Part 4
Global Strategy
Implementation
Department of International Business
University of Economics, the University of Danang
Chapter 9
Global structures and designs
Department of International Business
University of Economics, the University of Danang
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Learning outcomes
After reading this chapter, you should be able to:
➢ Explain the contingency factors that determine the structure
of multinational firms.
➢ List and explain the different ways in which a multinational
firm can be structured.
➢ Explain the strengths and weaknesses of each structure in the
light of the strategy being adopted.
➢ List and discuss the different forms multinational firms
adopt to balance the need for global integration with the
pressure for local responsiveness.
➢ Choose a structure that supports the different forms of
multinational firms.
Strategy implementation
o Bringing together all activities and choices necessary to implement the
strategy.
o The process by which strategic directions and actions are implemented
through programs, budgets, plans, and processes.
o Key questions in implementation:
• Who will implement the strategy?
• What needs to be done to adjust operations in the new direction?
• How will the work be coordinated?
Strategy implementation
+ Action plan
- Activities needed to complete the work/ group of work
+ Budget plan
- Action plan costs (final reality check on the feasibility of the
chosen strategy)
+ Procedure
- Sequence of steps to complete the work
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Components of the strategy implementation process
Building a
Capable
Organization
Leadership Resource
Execution allocation
Defining a
Business Establish
Action plans of
Culture suppoting
Aligned with implementers
policies
Strategy
Connecting
Rewards and Establishing a
Performance continuous
in Achieving improvement
Strategic mechanism
Goals Building a
Support
System
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Contents of building a capable organization
Designing an
organization
structure
suitable for the
strategy
Arranging Building
personnel for capabilities
the and
organization competencies
Organization
with the
capability to
implement
the strategy
The fit between organizational structure
and strategy
• Strategy changes according to structure
- Changes in organizational structure lead to changes
in the organization's strategy
• Structure changes according to strategy
- Changes in the organization's strategy lead to the
need to change the organizational structure
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Time to need a new organizational
structure
o A new strategy is being implemented
o New internal administrative problems appear
o New threats from the environment
o Discovering a more suitable structure
o Business results are not improved
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Organizational Structure
o An organizational structure can be seen as the
blueprint depicting the formal reporting rela-
tionships within the firm, explaining who does
what, where, and when.
o It explains the manner in which the firm organizes
its resources and capabilities into specific tasks
and achieves coordination among these tasks.
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Types of organizational structures of
MNCs: Two perspectives/viewpoints
o Contingency perspective (perspective of the fit
between strategy and structure): Different
structures are suitable for different types of
specific strategies.
o Integration-adaptation perspective: Different
structures meet the requirement of the best
combination between global integration pressure
and local adaptation.
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Types of organizational structures according
to the contingency perspective
o Simple structure
o Functional structure
o Divisional structure
o Matrix structure
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Simple structure
o Decision-making is tightly controlled, usually by
one entrepreneur.
o The formal structure is usually small.
o Short-term/reactive planning scope.
o Flexible and dynamic.
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Functional structure
o Formation of specific management functions
o Specialization by function
o Collective decision-making process
o Focus/specialization in the industry
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Functional structure
Advantages Disadvantages
• Grouping jobs by function • Functional orientation creates
creates conditions for difficulties in communication and
specialization and coordination of services.
increased productivity. • Difficulty in measuring the
• Better monitoring of the contribution of functions to the final
workflow, reducing costs. result and profit.
• Better control over • Difficulty in coordinating between
organizational activities. departments (industry, position) and
functions.
• Difficulty (strategic level) arises due
to non-standard design (vertically
and horizontally).
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Divisional structure
• Divisions are organized by product line, geographic
region, etc.
• Decentralized decision-making process
• Often structured according to SBUs (Strategic Business
Units)
• Virtually unlimited resources
• Types of divisional structures: International division
structure; product division structure; geographic division
structure.
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Divisional structure
Advantages Disadvantages
• Increased control by division • Difficulty in establishing a power
• Increased control over the relationship between divisions
strategy of each SBU in the and the enterprise
investment portfolio • Information distortion by
• Easier growth. New units don't divisions
need to be integrated into the • Competition for resources
entire organization between divisions
• Stronger pursuit of internal • Transfer pricing issues between
efficiency. The performance of divisions
each unit can be easily • Short-term focus on research and
measured development
• Administrative costs
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Matrix structure
• Increasingly unstable operating environment
• Many technological advances
• Expanding business scale and scope
• Multi-industry competitive strategy
• Workforce have higher education level
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Matrix structure
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Matrix structure
Advantages
• Flexibility of structure and components
• Minimal use of direct hierarchical control
• Maximum use of employee skills
• Motivates employees; frees up senior management
Disadvantages
• High administrative management costs
• High costs for building relationships within the structure
• Conflicts with the role of "employee of two bosses"
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Types of organizational structures
Integration and responsiveness perspective
• Export-oriented company - Export structure
• Multidomestic company - Holding company structure
• Global company - Various structures
• Transnational company - Network structure
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