CHAPTER 10:

THE ORGANIZATION OF
GLOBAL BUSINESS
GROUP 2:
Gapuz, Febbie
Guido, Wynnylyn
Manaig, Leica Laarni
Navarro, Bryan Rhen
Pale, Myra
Tumapang, Kesia
 LEARNING OBJECTIVES:
At the end of the module, the learners must be able to:

Discuss the concept of Stateless Corporations

Describe the importance of organizational structures of global businesses.

Discuss the role that exports departments and international divisions play in
the organization of global businesses.

Define functional, divisional, hybrid, and matrix structures, and illustrates

their advantages and disadvantages for global businesses.
 INTRODUCTION

To achieve sustainable competitive advantage on a

worldwide scale, global businesses have resorted to one of the
most basic weapons in their arsenals, namely, the ability to
organize people and resources. This ability is reflected in an
organizational structure.
 The Stateless Corporation

Stateless Corporation
a new phase in the evolution of the multinational
corporation.

Examples: Lenovo, Arcelor Mitta

 The Stateless Corporation
Businesses can become global starting with an
export department, followed by overseas sales offices, in
order to promote the export of goods that are domestically
made.
“Globally integrated enterprise” - a business organization
that sources the work from the most efficient location.
Stateless corporations are different because they
attempt to transcend nationality altogether.
 The Stateless Corporation

C.K Prahalad
an expert field and a professor at the University of Michigan
Business School, postulates that Stateless Corporation
represent the fourth stage of Globalization.
 The Stateless Corporation
Stateless corporations represent the fourth stage of
globalization;

1st Stage - global companies produce goods in one country

and export them to other countries.
2nd Stage – global businesses establish foreign subsidiaries to
handle the exports from their home countries.
3rd Stage - global firms set up operations in other countries.
 The Stateless Corporation

4th Stage – stateless corporations locate their core corporate

functions and top executives in different countries in
order to achieve competitive advantage via access to
talent, capital, low costs, or proximity to their most
important customers.

Note: When stateless corporations organize this way, they are no

longer limited to the strengths nor constrained by the weaknesses
of a single country
 ORGANIZING GLOBAL BUSINESS

Structure of an organization
refers to the pattern of organizational roles, relationships,
and procedures that enable such coordinated action by its
members
ORGANIZING GLOBAL BUSINESS
 ORGANIZING GLOBAL BUSINESS

Organization
a tool that people use to coordinate their actions to obtain something
they seek or value
 ORGANIZING GLOBAL BUSINESS

TOP 3 LARGEST COMPANIES IN 2023

1. Apple Inc. - $378.3 billion

2. Saudi Aramco- $346.5 billion
3. Microsoft Corp. - $184.9 billion
 ORGANIZING GLOBAL BUSINESS

Organizational Structure
 formal system of task and authority relationships
that control how people coordinate their actions and
use resources to achieve organizational goals
ORGANIZING GLOBAL BUSINESS
 ORGANIZING GLOBAL BUSINESS
Purposes of Organizational Structure:
1. Allows the members of the organization to perform a wide variety of
activities based upon a division of labor.
Leads to the departmentalization, standardization, and specialization of
functions and tasks.
2. Permits to the organization members the coordination of their activities by
integration mechanisms (hierarchical supervision, formal rules and
procedures, and training and socialization)
3. Determines the boundaries of the organization and regulates its
interfaces with the environment and its interactions with other
organizations
 ORGANIZING GLOBAL BUSINESS
Organizational structures can allow a company to fail or
succeed;
1. General Motors (GM)
2. Yahoo
 EXPORT DEPARTMENTS AND INTERNATIONAL
DIVISIONS
1. Creating an Export Department
First step a domestic firm takes when entering the global
arena is usually to export some of its products
typically done by one or two sales representatives
sometimes handled by Marketing or Operations
When the demand for the exported products grows, the number of
people needed to handle the job increases as well, which
leads to the formation of an export department
EXPORT DEPARTMENTS AND INTERNATIONAL
DIVISIONS
 EXPORT DEPARTMENTS AND INTERNATIONAL
DIVISIONS
2. International Division
Export department becomes the international division
As the volume of exports grows, it may become feasible for the firm
to manufacture and sell the products in the countries where the exports
are being shipped
may also be viable to adjust the product to local tastes
and culture
Expertise in foreign markets becomes important as well
Example: Walmart
EXPORT DEPARTMENTS AND INTERNATIONAL DIVISIONS
 EXPORT DEPARTMENTS AND INTERNATIONAL
DIVISIONS
Advantages:
It permits global businesses to concentrate all international efforts and
expertise in one location.
If the international division is at the same organizational level as
domestic operations, it signals to international customers their
importance to the company.
It fosters a global mindset in the people working within the division,
and facilitates the key process of designing products that cater
to local tastes and cultures
 EXPORT DEPARTMENTS AND INTERNATIONAL DIVISIONS

Disadvantages:
Potential conflict between domestic and international operations
Lack of communication and coordination
Drawbacks of separating domestic and international operations:
a. preventing the design of products with both domestic and international
appeal
b. precluding the sharing of core competencies and knowledge; and
c. complicating the capture of learning-curve savings resulting from
consolidating production in manufacturing plants around the world
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

1. Functional Structure
an organizational structure that groups people together
because they hold similar positions in a company,
perform a similar set of tasks, or use the same kinds of skills
activities are grouped by a common function, from the
bottom to the top of the organization.
Employees are committed to achieving the goals of their
respective functional areas
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Global businesses that use a functional structure typically

have a narrow product line or a highly integrated product
mix- aircraft manufacturers or oil and gas firms
(e.g., Boeing Commercial Airplanes)- mining and energy
industries
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Advantages :
promotes economies of scale
promotes in-depth skill development of employees
encourages collaboration, efficiency, and quality within the function
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Disadvantages :
inability to respond to environmental changes that require coordination
between the functional area
-coordinating mechanisms across functions can become overloaded
- Tasks become backlogged and top management cannot respond fast
enough
each employee has a restricted view of the organization’s primary goals
accountability is diffused because profit and loss accounts are
calculated for the entire firm rather than for each function
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

2. Divisional Structure
refers to one type of organizational structure in which
functions are grouped together to serve the
needs of products, markets, or geographical regions
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Functional structure is organized according to the various

inputs, while the Divisional structure is instead organized
according to the various outputs of the global business

One of the primary issues in a divisional structure is the

degree of autonomy granted to the divisions
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Advantages:
functions are able to focus their activities upon a specific
kind of product, market or geographical region
divisions develop a common identity and approach to
problem solving
it can respond to the requirements of individual
products, markets, or geographical regions and quickly adapt
as these needs change
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Each division can be held fully accountable

for its performance and this enables better control
employees’ identification with their division
increases their commitment, loyalty, and job
satisfaction
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Disadvantages:
it requires high operating and managing costs
communication problems may arise as various managers
in various divisions attempt to coordinate their activities
divisions may start to compete for organizational
resources and may start to pursue divisional goals at the
expense of the goals of the global business as a whole
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Kinds of Divisional Structure

A. Product Structure
particular kind of divisional structure that groups products
into separate divisions according to their similarities or
differences.
Examples: ExxonMobil, Honda, IBM
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Kinds of Divisional Structure

B. Market Structure
also called customer structure or customer class structure.
 particular kind of divisional structure that groups
products into separate divisions according to the
needs of different customers.
Example: Hilton Hotels Corporation
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Kinds of Divisional Structure

C. Geographical Region Structure
also called area structure
particular kind of divisional structure that groups products
into separate divisions according to the needs of
the different geographical regions the company serves
Example: Cementos Mexicanos S.A.B. de C.V. (CEMEX)
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

3. Hybrid Structure
Combination of organizational structure
Global businesses with hybrid structures are said to be
organized by more than one dimension at the top level
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Examples:
1. PepsiCo
combination of a product structure and a
geographical region structure
3 business units: PepsiCo Americas Foods, PepsiCo
Americas Beverages, PepsiCo International
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

2. Procter & Gamble (P&G)

offers a great variety of products, serves diverse
markets, and has a world-wide presence
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

4. Matrix Structure
an organizational structure in which people are
grouped simultaneously by function and by division
The functional managers and the division managers
have equal authority within the organization
Matrix structures are especially common in high-tech
and biotechnology companies
Example: Bayer AG
FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Advantages:
it allows the company to meet multiple demands from the
environment
Resources can be flexibly allocated and the firm can adapt to changing
external conditions.
It also provides employees the opportunity to acquire both
functional and division-related skills.
it facilitates innovation and creativity and provides a work setting
in which employees with different functional expertise can cooperate to
solve non-programmed decision-making problems
 FOUR ORGANIZATIONAL STRUCTURES FOR
GLOBAL BUSINESS

Disadvantages:
there is role ambiguity
Matrix structures also limit opportunities for promotion
 SUMMARY
Global businesses have been using organizational structures
as a basic source of sustainable competitive advantage
Organizational structures- a futuristic vison of how global
businesses will organize people and resources around the
world
The first step in path toward globalization is the creation of
an export department followed by the export department
becoming an international division
 SUMMARY
Once a company outgrows its international division and
become global enterprise, it may adopt one of the Four
common organizational structures;
a. Functional
b. Divisional
c. hybrid and
d. matrix structure.
 SUMMARY
Divisional structure has three specific versions:
a. Product structure
b. Market structure
c. Geographical structure