International

and
Multinational
Structure and
Design
WEEK 15
 INTRODUCTION:

• Overview of International and Multinational

Structure Design
- International and multinational structure design
refers to the process of organizing and coordinating
operations across multiple countries and regions. It
involves creating a framework that allows for
effective communication, decision-making, and
resource allocation. In today's globalized business
environment, organizations must adapt their
structures to accommodate the complexities of
operating in different markets.

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 • Importance of International and Multinational
Structure Design
- Having a well-designed international and
multinational structure is crucial for organizations
seeking to expand globally. It ensures efficient
coordination, facilitates cross-border collaboration,
and enables effective management of diverse teams.
A carefully crafted structure helps organizations
capitalize on opportunities, navigate cultural
differences, and achieve their strategic objectives in
different markets.

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 • Objectives of the Presentation
- This presentation aims to provide an in-depth
understanding of international and multinational
structure design. It will explore the different types of
structures, their advantages and challenges, and the
factors influencing their design. Additionally, it will
highlight best practices and future trends in
international and multinational structure design.

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 • Outline of the Presentation
- The presentation will begin with an overview of
international structures, including their definition,
characteristics, and types. It will then delve into
multinational structures, discussing their features,
types, and benefits. Next, it will explore the factors
influencing the design of international and
multinational structures, such as cultural, legal,
economic, and geographic factors. The presentation
will conclude with a discussion of best practices in
structure design, emphasizing alignment with
organizational strategy, effective communication,
talent management, and continuous evaluation and
adaptation.

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 Definition and Characteristics of International Structures

International structures are organizational frameworks that enable

companies to operate in multiple countries or regions. They involve the
establishment of global or regional divisions, functional departments, or a
combination of both. International structures typically have centralized
decision-making, standardized processes, and clear reporting lines across
different locations. 6
Types of International Structures
There are various types of
international structures,
including global
structures, regional
structures, and functional
structures.
• Global structures
centralize decision-making
and control at the
headquarters, ensuring a
consistent approach across
all markets.
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 Global Structures
Production: The CEO needs to ensure
that the company is producing enough
products to meet demand in both the
domestic and foreign markets. This may
involve working with the production
team to develop new products, expand
existing production facilities, or
outsource production to foreign
suppliers.
Finance: The CEO is responsible for
ensuring that the company has the
financial resources to support its
domestic and foreign operations. This
may involve developing a
budget, raising capital from
investors, or managing the company's
debt.
Marketing: The CEO is responsible for
developing and implementing marketing
strategies to promote the company's
products in both the domestic and foreign
markets. This may involve developing
advertising campaigns, creating a brand
identity, and managing the company's
social media presence.
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Examples:

The CEO is considering launching a new product, Product E, in the foreign market. The
CEO would need to consider the following factors:

1. What is the demand for Product E in the foreign market?

2. What are the production costs for Product E in the foreign market?
3. What are the marketing costs for Product E in the foreign market?
4. What are the financial resources available to support the launch of Product E in the
foreign market?

The CEO would use the global structure of the table to assess these factors and make a
decision about whether or not to launch Product E in the foreign market.
The global structure of the table is important because it helps the CEO to visualize the
company's global operations and to identify the different obligations that they have to ensure
the success of the company.
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Advantages:
Efficiency: A global structure can be more efficient than a decentralized structure because it allows companies to
centralize decision-making and expertise. This can lead to reduced costs and improved productivity.

Consistency: A global structure can help companies to maintain a consistent brand identity and customer
experience across all of their markets. This is important for building and maintaining customer loyalty.

Flexibility: A global structure can give companies more flexibility to scale their operations and enter new
markets. This is because companies can easily move resources and personnel between different countries.

Access to new markets: A global structure can give companies access to new markets and customer
segments. This can help companies to grow their revenue and market share.

Reduced costs: A global structure can help companies to reduce costs by sourcing inputs from lower-cost
countries and by centralizing back-office functions.

Risk diversification: A global structure can help companies to diversify their risk by operating in different
countries. This can help to protect companies from economic downturns and other shocks in one particular
country.
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Disadvantages:
Responsiveness: A global structure can be less responsive to the needs of local markets. This is because decision-
making is centralized and it can take time for information to flow from the local level to the headquarters level
and vice versa.

Innovation: A global structure can be less innovative than a decentralized structure. This is because decision-
making is concentrated in a small group of people at the headquarters level. This can make it difficult for new
ideas to be heard and implemented.

Complexity: A global structure can be more complex to manage than a decentralized structure. This is because
companies need to coordinate the activities of their offices in different countries. This can be
challenging, especially for large and complex companies.

Cultural challenges: A global structure can create cultural challenges for companies. This is because companies
need to manage employees from different cultures with different values and work styles.

Political and regulatory risks: A global structure can expose companies to political and regulatory risks in
different countries. This can make it difficult for companies to operate effectively and efficiently.

Security risks: A global structure can make companies more vulnerable to security risks, such as data breaches
and cyberattacks. 11
Types of International Structures
• Regional structures are often
• Regional structures
decentralize decision-
making to regional offices,
allowing for better
adaptation to local markets.
used to organize operations
based on geographical regions.
This approach involves
grouping together functionally
like-activities along regional
lines, with a focus on
managing operations within
specific geographic areas.
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Regional Structures

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The table provided shows an example of a regional organizational structure for a company
with five regions: East, South, West, North, and Asia Pacific. Each region has its own CEO,
VP of Production, VP of Sales/Marketing, and VP of After Sales. The company also has a
President, VP of US Operations, VP of European Operations, and VP of Marketing.

In this structure, the regional CEOs are responsible for implementing the company's overall
strategy and objectives in their respective regions. They are also responsible for managing
the company's finances and resources in their regions. The VPs of Production,
Sales/Marketing, and After Sales are responsible for overseeing the day-to-day operations
of their departments in their respective regions.

The President, VP of US Operations, VP of European Operations, and VP of Marketing are

responsible for coordinating and supporting the activities of the regional teams. They also
play a role in developing and implementing the company's overall strategy.

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In this regional structure, the regional teams have a number of obligations to the company
as a whole. These obligations include:

• Implementing the company's overall strategy and objectives

• Working together to ensure that the company's products and services are consistent
across all regions

• Sharing information and resources with each other and with the company's headquarters

• Meeting the financial and operational targets set by the company's headquarters

• Contributing to the company's overall success

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Advantages:

Responsiveness: Regional structures can be more responsive to the needs of local markets. This is because
decision-making is decentralized and managers are closer to the customers.

Innovation: Regional structures can be more innovative than centralized structures. This is because regional
offices have the autonomy to experiment with new ideas and practices.

Flexibility: Regional structures can be more flexible than centralized structures. This is because they can adapt
more quickly to changes in local conditions.

Expertise: Regional structures can tap into the expertise of local employees. This can be helpful for companies
that operate in complex or specialized industries.

Empowerment: Regional structures can empower employees to make decisions and take ownership of their
work. This can lead to increased motivation and productivity.

Cost savings: Regional structures can help companies to save costs on transportation and logistics. This is
because products can be produced and distributed closer to the markets where they are consumed.

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Disadvantages:
Consistency: Regional structures can make it more difficult for companies to maintain a consistent brand
identity and customer experience across all of their markets. This is because regional offices have more
autonomy to make decisions about how to operate their businesses.

Control: Regional structures can give companies less control over their operations. This is because
regional offices have more autonomy to make decisions.

Coordination: It can be more difficult to coordinate the activities of regional offices than it is to
coordinate the activities of a centralized structure.

Bureaucracy: Regional structures can lead to bureaucracy and red tape. This is because regional offices
may have different procedures and policies.

Accountability: It can be more difficult to hold regional offices accountable for their performance. This
is because they have more autonomy and are less directly supervised by headquarters.

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Toyota is an example of a company that applies regional structures to decentralize decision-making to regional
offices, allowing for better adaptation to local markets. The company's organizational structure provides a greater
degree of flexibility compared to the old centralized hierarchical company structure. With its current
organizational design and business structure, the company is more capable of responding to regional market
conditions. This flexibility empowers Toyota to speedily respond to issues and provide higher-quality automotive
products. However, the increased decision-making power of regional heads has reduced headquarters control over
the global organization. Still, this organizational structure facilitates business resilience and growth in the
automotive industry.

Toyota's regional strategies have played a significant role in its global leadership. By creatively blending regional
strategies, Toyota surpassed Ford as the world's second-largest automaker in 2004. The company has implemented
strategies such as reducing the number of basic product platforms offered worldwide and allowing customization
atop common platforms engineered for adaptability. This approach has enabled Toyota to achieve greater
economies of scale in design, procurement, and other functions, thus delivering variety more cost-effectively.
However, taking platform standardization too far can backfire if regional customization creates excessive disparity
across regions.

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Types of International Structures
• A functional structure
• Functional structures
organize operations based
on specialized functions,
such as marketing, finance,
and operations, with a
global or regional focus.
groups employees into
different departments based
on work specialization,
such as marketing, finance,
human resources, and
operations. Each
department has a
designated leader highly
experienced in the job
functions of the employees
supervised by them.
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Functional Structures

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The Research and Development team develops a new product, such as a new type of smartphone.
They then work with the Marketing team to develop a marketing campaign for the product. The
Marketing team creates advertisements and promotional materials, and they work with the Sales
team to generate leads.

Once a lead is generated, the Sales team takes over and works to close the deal. Once the deal is
closed, the Operations team begins manufacturing and delivering the product to the customer.

Throughout the entire process, the Human Resources team is responsible for supporting all of the
other departments by recruiting, hiring, and managing employees.
This is just one example of how the different departments in a functional organizational structure
might work together. 21
Advantages:
Improved productivity: The functional organizational structure helps to enhance the productivity of
the organization as the individuals in the functional organizational structure having specialized skills
are grouped which helps them to work quickly and efficiently. Moreover, all the employees are
engaged in performing only the tasks in which they are proficient which also helps in ensuring higher
productivity.

Enhance employee skills: The employees in the functional organizational structure work under
experienced managers which helps to enhance the skills and abilities of the employees. Moreover, the
employees working in teams also get the opportunity to learn from the soft skills and abilities of other
employees.

Clarity: The functional organizational structure also helps to ensure greater clarity in the
organizational operations as each departmental head is held responsible for managing the performance
of the employees in the same department. Moreover, the collaboration of the employees with similar
skill sets also helps to improve the work effectiveness of the employees and clarity of operations.

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Disadvantages:
Hindered decision making- We all know that the organizations in the current times thrive to maintain flexibility in
the organizations. However, we need to consider that the employees working under the functional organizational
structure are required to seek approval for various decisions from the management which increases the chance of
delays in the decision making.

Communication barriers- In the functional organizational structure, there is limited communication in the cross-
functional departments which can also cause problems in innovation in the organization. For instance, the
marketing department may fail to communicate the product needs of the customers to the production department
due to a lack of interdepartmental communication in the functional organizational structure which can then lead to
the inability of the organization to effectively meet the customer needs.

Silos within an organization- The organizational silos can be defined as the business units or divisions operating
independently. The chance of silos in the organization operating under the functional organizational structure is
very high as each functional department may operate independently under the functional organizational structure.

Unhealthy competition- You may be surprised by the fact that the functional organizational structure can cause
unhealthy competition within the organization as each department may have its own goals and may work towards
achieving the department-specific goals. This can prompt competition between the departments and can deviate the
organizational operations from the organizational goals.
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Example of Functional Organizational Structure

The best example of the functional organizational structure is that of Apple as Apple
does not divide its operations based on the product line but instead focuses on
various functions like marketing, retail, engineering, and operations. The company
employs a unitary organizational form where the operations are organized around the
areas of expertise rather than the different types of products. This helps Apple to
maintain specialization in its product and ensure manufacturing of higher quality
products and services. The different areas of expertise of Apple include product
marketing, operations, hardware engineering, software engineering, hardware
Technologies, etc. The organizational structure of Apple is further represented as
follows-

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The organizational structure of Apple represents that the operations of Apple are organized in different
departments based on the functions and each department has its role and responsibility. For instance, the
marketing department of Apple is responsible to identify the customer needs and identify the products that can
best meet the market needs of the customers. The designing team at Apple is held responsible for crafting the
appearance of the Apple products like the Apple Macintosh computer line. The software engineering department is
held responsible for developing the operating system OS and other software products such as iWork.

Jeff Williams, Chief Operating Officer is responsible for managing the performance of departments. The different
departments of Apple include Marketing, engineering, finance and admin, and operations. Moreover, each
department is further headed by the upper management team and vice presidents who then supervise the
performance of employees. Thus, the functional organizational structure helps the organization to effectively
manage the organizational operations in different departments and areas of expertise along with effective task
allocation, coordination, and supervision. The individual divisions departments under the expertise-focused
hierarchy system of Apple also enjoy autonomy in various decisions and processes which further enable them to
perform effectively and help Apple to achieve a market-leading position for its products.

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 Advantages of International Structures

International structures offer several advantages:

• They promote efficient resource allocation, as companies can leverage economies of scale and share
resources across different markets.

• They enhance coordination and communication, enabling knowledge transfer and collaboration among
teams.

• International structures also facilitate the standardization of processes and practices, ensuring consistency
and quality across markets. 27
 Challenges and Considerations in International Structure Design

• Designing international structures comes with challenges. Companies must navigate cultural
differences, language barriers, and diverse regulatory environments. They must also consider
the balance between centralization and decentralization, ensuring the right level of control and
autonomy in different locations. Additionally, managing global teams and fostering
collaboration across borders require effective communication and cultural sensitivity.
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 Definition and Features of Multinational Structures

Multinational structures are organizational frameworks that allow

companies to operate as distinct entities in multiple countries. They
involve creating subsidiaries or divisions that have a high degree of
autonomy and adaptability to local markets. Multinational structures
enable companies to customize their products, services, and marketing
strategies to meet the specific needs and preferences of each market.

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Types of Multinational Structures

GLOBAL DIVISION MULTI- DOMESTIC TRANSNATIONAL

Different types of STRUCTURES STRUCTURES STRUCTURES
multinational have separate divisions for give subsidiaries combine global
structures exist. each country or region, significant autonomy coordination with local
allowing for localization to tailor their responsiveness, enabling
while maintaining global strategies to local knowledge sharing and
coordination. markets. collaboration across
borders. 30
 Benefits of Multinational Structures

Multinational structures offer several benefits. They enable

companies to respond quickly to local market trends, customer
preferences, and regulatory requirements. By decentralizing decision-
making, multinational structures promote innovation and adaptation to
local conditions. They also enhance customer satisfaction by providing
tailored products and services that meet specific market demands.

Key Factors to Consider in Multinational Structure Design

When designing multinational structures, companies must consider

factors such as the level of control and autonomy given to subsidiaries, the
extent of knowledge sharing and collaboration across borders, and the
degree of coordination and standardization required. They must also
evaluate the talent pool available in each market and ensure effective
communication and coordination among subsidiaries. 31
 Factors Influencing International and Multinational
Structure Design

Cultural Factors
Cultural factors play a significant role in international and multinational
structure design. Companies must consider cultural differences in
communication styles, decision-making processes, and work practices. They
should adapt their structures to foster cultural sensitivity, promote collaboration
among diverse teams, and leverage cultural knowledge to gain a competitive
advantage in different markets.

.
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 Legal and Regulatory Factors
Legal and regulatory factors vary across countries and impact
the design of international and multinational structures. Companies
must ensure compliance with local laws, tax regulations, and
employment practices. They should also consider intellectual property
rights, import/export regulations, and industry-specific regulations that
may affect their operations in different markets.

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 Economic Factors
Economic factors, such as market size, growth potential, and cost
considerations, influence structure design. Companies may opt for
centralized structures in large markets to achieve economies of scale,
while decentralized structures may be more suitable in smaller or
emerging markets. Economic conditions, currency fluctuations, and trade
barriers also impact the decision-making process.

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 Geographic Factors
Geographic factors, such as distance, time zones, and
infrastructure, affect international and multinational structure design.
Companies must consider the physical proximity of different markets
and the logistical challenges associated with managing operations
across borders. They should also assess the availability of
transportation, communication networks, and other infrastructure that
support their business activities.

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Best Practices in International and Multinational Structure
Design

Alignment with Organizational Strategy International and

multinational structures should align with the overall organizational
strategy. Companies should consider their market entry strategy, growth
objectives, and competitive positioning when designing their structures.
The structure should enable the efficient execution of the strategic plan
and support the organization's long-term goals.

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 Effective Communication and Collaboration

Effective communication and collaboration are essential in

international and multinational structures. Companies should establish
clear channels of communication, leveraging technology and platforms
that facilitate cross-border collaboration. Regular communication and
knowledge sharing among teams in different locations promote synergy,
innovation, and the exchange of best practices.

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 Talent Management and Development

International and multinational structures require effective talent

management and development strategies. Companies should identify
and develop global leaders who can navigate cultural differences,
manage diverse teams, and drive performance in different markets.
Talent mobility programs, cross-cultural training, and mentoring
initiatives can help build a strong talent pipeline and foster a global
mindset.

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International and multinational structures and design are becoming increasingly important in
today’s global economy. Businesses must be able to adapt quickly to changing markets,
technologies, regulations, customer needs and more. In order for organizations to stay competitive
they must be able to create a structure that is flexible enough so it can respond quickly but also
robust enough so it can handle the complexities of multi-national operations.

The first step in creating an international or multinational structure is understanding the various
cultural differences between countries as well as their legal systems. This will help organizations
determine which type of organizational model would best fit their business goals while allowing
them flexibility when dealing with different laws across multiple jurisdictions. Additionally,
businesses need take into consideration how language barriers may affect communication within
the organization or with customers from other countries when developing an international or
multinational strategy .

Organizations should also consider how technology has impacted globalization by making it
easier for companies operate on a larger scale than ever before; however this does come with its
own set of challenges such as data security concerns due increased cyber threats from around
world . To counter these risks businesses need ensure they have strong policies in place regarding
information management , access control , encryption etc., all tailored specifically meet demands
each country’s legal system . The right combination these elements can help any organization
build successful international/multinational structure that meets both current future needs while
staying compliant local regulations at same time.
Thank You!