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Overall market structure

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The organizational structure of a multinational company that reflects the “global” philosophy that the world is basically one homogeneous market is called the “global structure.” For example, under this philosophy, many large electronics and consulting firms, while allowing minor local adjustments in packaging and language, basically project the same types of products and services around the world. However, there are several differences in terminology and philosophy in this field.

First, a “global” philosophy is characterized by seeing the world as a more or less monolithic market with similar tastes and preferences. In contemporary parlance, this is opposed to a “multinational” (or multinational or multilocal) philosophy whereby one sees the world as made up of many more or less unique markets, each with its distinct tastes and preferences. A position between these two extremes is called regionalism, according to which one sees the world as made up of a small number of fairly homogeneous regions. These constructs can be applied to industries, companies, and organizational structures, and it is informative to understand how global thinking is applied at the industrial and strategic level.

For example, George Yip sees globalization as a function of the degrees to which the global market is fragmented, local customer needs are different, local sourcing imperatives exist, costs are heterogeneous, and trade barriers are significant to the market. cross-border trade. Thus, Randall Schuler, Peter Dowling, Helen De Cieri, and other scholars refer to some industries—such as commercial aircraft, photocopiers, generic drugs, most computer and electronic equipment—as global industries; while retail trade, the food industry and most services are considered substantially multi-domestic.

Multinationals, and other large companies for that matter, are usually divided into various parts, units or divisions that reflect some aspect of their strategy. This link between structure and strategy was made famous in Alfred DuPont Chandler’s classic book Strategy and Structure. For example, a company with five product categories may have been structured into five divisions, each division mandated to manage one of the product categories. Chris Bartlett and Sumantra Ghoshal build on this logic by focusing on organizational responses to local and global forces; and describe four organizational types (or mindsets) for the global organization that represent organizational and strategic responses to various industry contingencies. For example, they describe the global company that sees the world as its market, assumes that national tastes are more similar than different, and believes in standardized products; and these strategic approaches require structural integrative mechanisms that coordinate activities, production, marketing, research and development (R&D), and planning around the world.

Therefore, it is these structural processes that are implicit in the term global structure. Mechanisms All large organizations need some structures that coordinate and integrate to some extent. However, the overall strategy depends on these structures for its implementation. There are three main aspects to this type of structure. The first is the locus of strategic responsibility. Second, the way the structure separates hierarchical relationships and determines how the company is divided. This aspect of structure can be called structuring. The final aspect is the types of coordination and integration systems, which can be called processes.

Locus of strategic responsibility: A crucial aspect of the organization’s structure is the extent to which decision-making autonomy is delegated from corporate headquarters to parts of the business. In the global enterprise there is a strategic imperative to centralize important strategic decisions. For example, decisions about product range, research and development, branding, and human resource management tend to be made at the corporate level rather than at the subsidiary level. Even customer service, which is the function that is likely to be located closest to the customer, may have its main policies and standards set at the corporate level. Structuring: One characteristic of the global structure is that it is relatively blind to geographic distance, and instead focuses on one or more strategic dimensions, such as products or markets, that it deems more important (than geography) to its success in the business. implementation of a global strategy. .

Thus, a global structure commonly has a major top-level division into product categories (usually called the global product structure), markets (global market structure), or some matrix (global matrix structure). As an example of a global product structure, Procter & Gamble (P&G) has three global product divisions, namely Global Beauty, Global Home Care, and Global Health & Wellness. However, the distinction between product and market structures is likely to be blurred; For example, Boeing’s business units appear to be different product divisions (Commercial Airplanes, Integrated Defense Systems, and Boeing Capital Corporation), but in reality all three have the goal of marketing various aviation and aerospace products and services to different groups of customers. market, in this case, commercial airlines, governments and financial intermediaries.

The global matrix structure attempts to organize activities along two (or more) managerial dimensions, such as product, geography, and/or market. For example, HJ Heinz simultaneously has geographic divisions in North America, Europe, Australia/New Zealand, and emerging markets (select countries in Asia and Eastern Europe); various product categories, namely ketchup/condiments/sauces, meals and snacks (including frozen foods), soups/beans and pasta, and baby food; and separate operations for retail and foodservice channels. In a global structure, these various departmental and business divisions may have necessary aspects of local focus, but they essentially work together to implement the company’s global strategy.

Processes: Finally, and very importantly, the structure implies processes such as coordination, integration and information systems. These processes tend to be pronounced in the global structure, and generally very common in contemporary organizations. Kwangsoo Kim and Jong-Hun Park identify four generic integration mechanisms: (1) people-based integration mechanisms that use people to coordinate business operations across borders, involving the transfer of managers, meetings, teams, committees and integrators; (2) information-based integration mechanisms use information systems such as databases, email, the Internet, intranet, and electronic data exchanges to integrate business operations across borders; (3) formalization-based integration mechanisms are based on the use of standardized or common work procedures, rules, policies and manuals in all units; and (4) centralization-based integration mechanisms retain decision-making authority at corporate headquarters, a similar concept to the previous section on “place of strategic responsibility.”

The more global the company, the more it uses these processes. Intel, for example, uses relatively few formal structural mechanisms, but several cross-functional teams, including information technology (IT), knowledge management, human resources, finance, legal, change control, data warehousing, information management teams. common directory and cost reduction. -as integrative processes that allow rapid adaptation to changing conditions. The integration of mechanisms can also have negative effects, perhaps by tying the hands of local administrators, imposing compliance costs (both in time and other resources), and creating unwanted bureaucratic barriers to efficient decision-making. A study by David Brock and Ilene Siscovick, for example, found that the effects of integration factors at the subsidiary level were often negative.

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