Title: Organization Structure and Control Systems

Introduction: This is a reading report on the chapter 8 of the Helen Deresky’s International

Management Managing across Borders and Cultures. This chapter is centered on Organization

Structure and Control Systems. The chapter main objectives are to enable the reader:

 To understand the importance of appropriate organizational structures to effective

strategy implementation.

 To become familiar with the types of organizational designs suitable for the level and

scope of internationalization of the firm.

 To understand the role of technology in the evolution of the networked structure and to

appreciate the role of teams in achieving business goals.

 To realize how organizational design affects the manager’s job, for example, on the level

and location of decision making.

 To emphasize the role of control and monitoring systems suitable for specific situations

and locations in the firm’s international operations.

Organizational structure is the framework of the relations on jobs, systems, operating process,

people and groups making efforts to achieve the goals. Organizational structure is a set of

methods dividing the task to determined duties and coordinates them. Organizational structures

must change to accommodate a firm’s evolving internationalization in response to worldwide

competition. Considerable research has shown that a firm’s structure must be conducive to the

implementation of its strategy. In other words, the structure must fit the strategy, or it will not

work. Managers are faced with how best to attain that fit in organizing the company’s systems

and tasks. The failure to adapt to changing market conditions both strategically and structurally
is demonstrated by the short life span of even large companies. The typical ways in which firms

organize their international activities are:

Domestic structure plus export department

 Domestic structure plus foreign subsidiary

 International division

 Global functional structure

 Global product structure

 Matrix structure

No matter what the stage of internationalization, a firm’s structural choices always involve two

opposing forces: the need for differentiation (focusing on and specializing in specific markets)

and the need for integration (coordinating those same markets). The way the firm is organized

along the differentiation–integration continuum determines how well strategies along a

localization–globalization continuum are implemented. This is why the structural imperatives of

various strategies such as globalization must be understood to organize appropriate worldwide

systems and connections. Strategy may be the primary means to a company’s competitive

advantage, the burden of realizing that advantage rests on the organizational structure and

design; that structure, in turn, establishes the responsibilities and guides the decisions, actions,

and communications of its employees. Because of the difficulties companies experience trying to

be global companies (global and local), researchers are suggesting new, more flexible

organizational designs involving interorganizational networks and transnational design.

Companies are increasingly abandoning rigid structures in an attempt to be more flexible and

responsive to the dynamic global environment Some of the ways they are adapting are by

transitioning to formats known as interorganizational networks, global e-corporation network

structures, and transnational corporation network structures.

When a company makes drastic changes in its goals, strategy, or scope of operations, it will

usually also need a change in organizational structure. However, other, less obvious indications

of organizational inefficiency also signal a need for structural changes; conflicts among divisions

and subsidiaries over territories or customers, conflicts between overseas units and headquarters

staff, complaints regarding overseas customer service, and overlapping responsibilities are some

of these warning signals. At persistent signs of ineffective work, a company should analyze its

organizational design, systems, and work flow for the possible causes of those problems. The

nature and extent of any design changes must reflect the magnitude of the problem. In choosing a

new organizational design or modifying an existing structure, managers must establish a system

of communication and control that will provide for effective decision making. At such times,

managers need to localize decision making and integrate widely dispersed and disparate global

operations.

To complement the organizational structure, the international manager must design efficient

coordinating and reporting systems to ensure that actual performance conforms to expected

organizational standards and goals. The challenge is to coordinate far-flung operations in vastly

different environments with various work processes; rules; and economic, political, legal, and

cultural norms. The feedback from the control process and the information systems should signal

any necessary change in strategy, structure, or operations in a timely manner. Often the strategy,

the coordinating processes, or both, need to be changed to reflect conditions in other countries.
Organizations may also restructure and set up reporting systems to avoid problems preemptively

that would negatively affect its processes and image. The design and application of coordinating

and reporting systems for foreign subsidiaries and activities can take any form that management

wishes. MNCs usually employ a variety of direct and indirect coordinating and control

mechanisms suitable for their organization structure.

Management practices, local constraints, and expectations regarding authority, time, and

communication are but a few of the variables likely to affect the appropriateness of monitoring

(or control) systems. The degree to which headquarters’ practices and goals are transferable

probably depends on whether top managers are from the head office, the host country, or a third

country. In addition, information systems and evaluation variables must all be considered when

deciding on appropriate systems.

The structure, control, and coordination processes are the same whether they take place in a

domestic company, a multinational company with a network of foreign affiliates, or a specific

international joint venture. It is the extent, the focus, and the mechanisms used to organize those

activities that differ.