| A multinational firm's organizational structure that | | | | Even customer service, which is the function most |
| reflects the "global" philosophy that the world is | | | | likely to be located closer to the customer, may have |
| basically one homogeneous market is called a "global | | | | its major policies and standards set at corporate level. |
| structure." For example, by this philosophy, many | | | | Structuring: A characteristic of the global structure is |
| large electronics and consulting firms, while allowing | | | | that it is relatively blind to geographic distance and |
| for minor local adjustments to packaging and | | | | instead focuses on one or more other strategic |
| language, basically project the same kinds of | | | | dimensions-like products or markets-that it considers |
| products and services around the world. However, | | | | more important (than geography) to its success at |
| there are several differences in terminology and | | | | implementing a global strategy. |
| philosophy in this field. | | | | Thus a global structure commonly has a major |
| First, a "global" philosophy is characterized by seeing | | | | top-level division into product categories (generally |
| the world as one more-or-less monolithic market with | | | | called a global product structure), markets (global |
| similar tastes and preferences. In contemporary | | | | market structure), or some matrix (global matrix |
| parlance this is opposite to a "multidomestic" (or | | | | structure). As an example of a global product |
| multinational or multilocal) philosophy by which one | | | | structure, Procter & Gamble (P&G) has |
| sees the world as made up of many more-orless | | | | three global product divisions, namely Global Beauty, |
| unique markets, each with its distinct tastes and | | | | Global Household Care, and Global Health & |
| preferences. A position between these two | | | | Well-being. However, the distinction between product |
| extremes is called regionalism, whereby one sees the | | | | and market structures is likely to be blurred-for |
| world as being made up of a small number of quite | | | | example, Boeing's business units seem like different |
| homogenous regions. These constructs can be | | | | product divisions (commercial airplanes, integrated |
| applied to industries, firms, and organizational | | | | defense systems, and Boeing capital corporation), but |
| structures, and it is informative to understand how | | | | in effect all three have the aim of marketing various |
| global thinking at industry and strategic levels apply. | | | | aircraft and aerospace products and services to |
| For example, George Yip sees globalization as a | | | | different market groups-in this case commercial |
| function of the degrees to which the global | | | | airlines, governments, and financial intermediaries. |
| marketplace is fragmented, local customer needs are | | | | The global matrix structure attempts to organize |
| distinct, local sourcing imperatives exist, costs are | | | | activities by two (or more) managerial dimensions-like |
| heterogeneous, and trade barriers are significant to | | | | product, geography, and/or market. For example H. J. |
| cross-border commerce. Thus Randall Schuler, Peter | | | | Heinz has simultaneously geographic divisions in North |
| Dowling, and Helen De Cieri and other scholars refer | | | | America, Europe, Australia/New Zealand, and |
| to some industries-like commercial aircraft, copiers, | | | | emerging markets (selected countries in Asia and |
| generic drugs, most electronics and computer | | | | eastern Europe); several product categories, namely |
| hardware-as global industries; while retail, the food | | | | ketchup/condiments/sauces, meals and snacks |
| industry, and most services are considered | | | | (including frozen foods), soups/beans and pasta, and |
| substantially multidomestic. | | | | infant feeding; and separate operations for retail and |
| Multinationals-and other large firms, for that | | | | food service channels. In a global structure these |
| matter-generally are divided into several parts, units, | | | | various departmental and business divisions may have |
| or divisions that reflect some aspect of their | | | | necessary aspects of local focus, but essentially they |
| strategy. This link between structure and strategy | | | | work together for implementing the firm's global |
| was made famous in the classic book Strategy and | | | | strategy. |
| Structure by Alfred DuPont Chandler. For example, a | | | | Processes: Finally, and very importantly, structure |
| firm with five product categories may have been | | | | implies processes such as coordination, integration, |
| structured into five divisions, each division mandated | | | | and information systems. These processes tend to |
| to manage one of the product categories. Chris | | | | be pronounced in the global structure, and generally |
| Bartlett and Sumantra Ghoshal build on this logic as | | | | very common in contemporary organizations. |
| they focus on organizational responses to global and | | | | Kwangsoo Kim and Jong-Hun Park identify four |
| local forces; and they describe four organizational | | | | generic integrating mechanisms: (1) people-based |
| types (or mentalities) for the global organization that | | | | integrating mechanisms that use people to coordinate |
| represent organizational and strategic responses to | | | | business operations across borders, involving the |
| various industry contingencies. For example, they | | | | transfer of managers, meetings, teams, committees, |
| describe the global firm that views the world as its | | | | and integrators; (2) information-based integrating |
| market, assumes that national tastes are more similar | | | | mechanisms use information systems such as |
| than different, and that believes in standardized | | | | databases, electronic mail, Internet, intranet, and |
| products; and these strategic approaches require | | | | electronic data interchanges to integrate business |
| structural integrative mechanisms that are to | | | | operations across borders; (3) formalization-based |
| coordinate worldwide activities, production, marketing, | | | | integrating mechanisms rely on the use of |
| research and development (R&D), and planning. | | | | standardized or common work procedures, rules, |
| Thus, it is these structural processes that are implied | | | | policies, and manuals across units; and (4) |
| by the term global structure. Mechanisms All large | | | | centralization-based integrating mechanisms retain |
| organizations need some structures that coordinate | | | | decision-making authority at the corporate |
| and integrate to some degree. However, the global | | | | headquarters-a similar concept to that in the "locus of |
| strategy relies on these structures for | | | | strategic responsibility" section above. |
| implementation There are three major aspects to this | | | | The more global the firm, the more it uses these |
| kind of structure. The first is the locus of strategic | | | | processes. Intel, for example, uses relatively few |
| responsibility. Second, the way the structure | | | | formal structural mechanisms, but several cross |
| separates reporting relationships and dictates how | | | | functional teams-including information technology (IT), |
| the firm is divided. This aspect of structure may be | | | | knowledge management, human resources, finance, |
| called structuring. The final aspect is the kinds of | | | | legal, change control, data warehousing, common |
| coordination and integration systems-these may be | | | | directory information management, and cost |
| called processes. | | | | reduction teams-as integrating processes that allow |
| Locus of strategic responsibility: A crucial aspect of | | | | them rapid adaptation to changing conditions. |
| organization structure is the extent to which decision- | | | | Integrating mechanisms can also have negative |
| making autonomy is delegated from corporate | | | | effects-perhaps tying the hands of local managers, |
| headquarters to parts of the business. In the global | | | | imposing compliance costs (both time and other |
| firm there is a strategic imperative to centralize | | | | resources), and creating unintended bureaucratic |
| important strategic decisions. For example, decisions | | | | barriers to efficient decision making. A study by |
| on product range, research and development, | | | | David Brock and Ilene Siscovick, for example, found |
| branding, and human resource management tend to | | | | effects of integrative factors at subsidiary level were |
| be made at corporate rather than subsidiary level. | | | | often negative. |