THE

ORGANIZATION
AL CONTEXT
CHAPTER OBJECTIVES
GLOBAL INTEGRATION
THE PATH TO GLOBAL
STATUS
 Most firms pass through several stages of organizational development according
to nature, size, and international activity growth.
 As organizations go through these stages, the structure of organization change
due to
 1.geographical spread
 2.control and coordination business unit.
 3.host government policy
 THE PATH TO GLOBAL
STATUS
 the journey to becoming a global MNC is a tortuous process.
 The process will not be same for all organizations.

STAGES OF INTERNATIONAL
BUSINESS
 Exporting department
 Sales Subsidiary
 International division
 Global product/area division
 PRODUCT DIVISION
/AREA
 Over DIVISION
time, the firm moves from the early foreign production
stage into a phase of growth through production, or service,
standardization and diversification. Consequently, the strain of
sheer size may create problems
 The international division becomes over-stretched making effective
communication and efficiency of operation difficult. In some
cases, corporate top managers may become concerned that the
international division has enjoyed too much autonomy, acting so
independently from the domestic operations to the extent that it
operates as a separate unit – a situation that cannot be tolerated as
the firm’s international activities become strategically more
important. 
 The demand for national responsiveness at the subsidiary unit develops
because of factors such as differences in market structures, distribution
channels, customer needs, local culture and pressure from the host
government.
 The need for more centralized global integration by the headquarters comes from
having multinational customers, global competitors and the increasingly rapid flow of
information and technology, and from the quest for large volume for economies of
scale. The multinational confronts two major issues of structure: 
 The extent to which key decisions are to be made at the parent-country headquarters or
at the subsidiary units
 The type or form of control exerted by the parent over the subsidiary unit. 
 The structural response, at this stage of internationalization, can either be a
product/service based global structure (if the growth strategy is through product or
service diversification) or an area-based structure (if the growth strategy is through
geographical expansion);
Matrix organization

In practice, firms that have adopted the matrix structure have
met with mixed success. One reason is that it is an expensive
structural form in that it requires careful implementation and
commitment (and often a great deal of time) on the part of
top management to be successful.