The organizational structure of such firms must be able to accommodate the usual business operations such as finance, marketing, research and development, production e. t. c. as well as other functions necessary for operations in an overseas markets such conformity with the local nationals’ culture. Considering the complexities involved in such operations, a firm which operates internationally or as a multinational has to take into account various variables necessary for a successful implementation of an effective organizational structure.
One of the variables to consider is the scope of international operation as compared to the local operations. This will help the firm know such vital information as general characteristics of the overseas market, major competitors and their strategies, costs involved, etc. Global integration is the extent of which strategies, products, and marketing styles to be dealt with are similar to those of the parent company. This is another very important variable considered in order to help a Multinational Enterprise (MNE) design a viable organizational structure.
Global integration will help such a firm to gauge on the best ways available to gain economies of scale, and reduce high development costs which relates to individual market’s product design and unique strategy. MNEs also need to consider local responsiveness of their products before designing their organizational structure. This will affect greatly the marketing and staffing strategies of the firm, and possible product restructuring to suit the locals requirements.
Need for centrality in decision making process will also be considered before a design of the structure because different organizational structures call for different decision making methods and processes. Options available for an MNE in choice of organizational structure include: i. International Division Structure-this organization structure is whereby the fragmentation is made in terms of separate divisions, and such divisions are further subdivided into product(s) or region(s).
It is the most simplified structure, but some of its drawbacks include minimal realization of economies of scale, and limited inter-transferability of knowledge between the host markets and the parent company. ii. Global Area Structure-it breaks firms into divisions y regions. This regional focus enables the firm tailor unique strategies pertaining to each region. Knowledge and practices transferability from region to region is relatively limited, and doubling of production functions is possible which may be expensive.
This structure is highly recommended for MNEs. iii. Global Product Division-breaks the firm into divisions by products. It majors in product focusing which can easily help a firm adopting such a structure to gain economies of scale. Coordination is very minimal. Such a structure best fits a global firm. iv. Matrix Structure-the sub-divisions is based on divisions, who report to both regional and a product office. Such a structure can easily cause confusions in terms of accountability. The variables discussed above are very important, and are inter-related.
For instance, the study of scope of international market and possibility of global integration interact in that the latter is only possible if the scope in the overseas market shares similarities with that of the home market. The global integration strategy also interacts with the need to check the responsiveness of the locals on the products, and the strategy also highly dictates the decision making position of the firm. Global integration is deemed to be the best and most important variable to consider.
This is because it will affect the decision making structure, the staffing and marketing strategies, and the overall costs incurred to run the structure designed. Possibility of Global Integration to any MNE will as well mean that such an MNE is compatible with many markets overseas without having to restructure its operations much. (Endurance Trading Corp. , 2008) ‘Think Local, Act Global’ Concept ‘Local’ in this case mean the people, i. e. the society affected by the firm’s business. This touches on the peoples lives and work places, their opinions, what they value, and whatever moves them to some action.
‘Global’ on the other hand mean the scope, the size and the strength of the business. The concept of ‘think local act global’ is very essential tool for any MNE which wants to succeed. It helps the business to be held by the locals as that which respects their views, priorities and culture, and at the same time cut itself a niche in the wider scope of the entire market it covers. The concept calls for the MNE to look at the markets regionally and in the process forms such opinions as “our growth rate in USA is the fastest”, or “we need to remain the market leaders in the African region”.
These definitions and opinions are important guidelines to an MNE in their overall focus, yet actually the opinions are from local markets. Such opinions are then translated into a version in which they can be communicated globally by the firm as a whole, rather than through the regional segments of the firm. This concept helps the firm tackle the overall issues of the firm in overall, and the local ones locally, even though the regional ones will be featured in the global perspective too. The firm will develop messages with global perspectives with local focus, and it will maximize the local resources.
In order to fit this, the MNE needs to design its organizational structure such that communication both laterally and vertically is very efficient. The coordination of the entire regions of the MNE is also very vital in that the separate local focuses can be easily merged to come up with the overall message that will affect the entire MNE and address such local focuses as if they were individual. Global Area Structure organizational design is the best for this concepts’ achievement. This is because the design has a centralized decision making body but the market focus is segregated and individualistic.
The heads of the regional markets will be reporting to the central head quarters in the parent country who shall design a message to communicate globally, but relevant to all the regions. Staffing options for international operations a. Ethnocentric staffing approach-this is where the senior managerial positions of the overseas firm are filled by the parent country’s employees. This approach has several advantages which include: i. There is the ability to transfer the MNE’s culture to the new market. ii. There will be effective communication between the host country’s division and the parent country’s offices.
iii. The measure of control over the subsidiary is enhanced and well maintained. iv. The managers are familiar with policies and procedures of the firm, hence no need for training. This method of staffing is often adopted when there are no qualified personnel in the host country, the parent firm wants to maintain close control on the subsidiary, the products are going to be similar to those of the parent company, the culture of the firm must be maintained for some reasons, and when high level of expertise is required for the host country’s operations to be a success. b.
Polycentric staffing approach-this is the approach whereby the key managers are sourced from the host country’s personnel. The advantages of this move include: i. There are minimal dangers of cultural myopia between the countries concerned. ii. The local managers have the ability to translate foreign guided programs. iii. There’s high chances of successful implementation of multi domestic strategies iv. It is less expensive as compared to the ethnocentric approach This method is recommended where: continuity of subsidiaries will be achieved by the locals, there is need to cut costs of staffing, and the dangers of cultural myopia are eminent.
It is also applicable where the managers sourced from the host countries have the necessary expertise and qualifications. c. Geocentric- this is the approach whereby the major posts of the organization are filled by the people from anywhere in the world, irrespective of the nationalities. This approach has the following advantages: i. The staff will be sufficient and of high quality ii. There is high effective use of Human Resources This approach is best taken when the firm needs highly qualified, gifted and experienced officers to run their operations. It is the most competitive and democratic in that it is globally focused.
Major causes of expatriate failure Failures of expatriates include damage of reputation, lost business opportunities and lost market share among others. These failures are often caused by several factors. One of the factors includes lack of familiarity of the host country’s environment by the expatriate. This touches on cultural differences, and language barriers. Evaluation method of expatriates’ performance is another factor. The methods are normally diverse, and are subject to human biases, errors, and the assumptions that local and foreign operations should be evaluated equally.
Roles and abilities of employees of both the host country and those of the foreign country can also frustrate the actions of the expatriates. For cases where such employees have high expectations of the expatriates and hence sit back and wait for them to work instead of helping them, the expatriates may fail. Roles and abilities of the mentors too can affect the expatriates’ performances. Mentors are of different calibers, but it is known that those of peer mentors category influence the expatriate the most. Incase such mentors are over dependent on the expatriates, or worse still are absent, chance of expatriates failing are high.
The major success factors for such expatriates include: – Proper selection and training of the expatriates. – Organizational support for the expatriates both locally and within the parent company e. g. in cases of compensation packages, relocation support and organizing repatriation. – Proper communication between the parent firm and the overseas firm. The steps which can be taken by the IHRM department to maximize effectiveness of expatriates i. Proper training. This will make the initial introduction into the assignment more welcoming to the expatriate.
Training also helps such expatriates get introduced to some of the challenges they are likely to face on their assignment. Common training techniques which may be adopted include: a) Area studies b) Cultural assimilators c) Language training d) Sensitivity training e) Field experiences ii. Communication It has been revealed that some of the expatriates fail because of the unclear communication between the head in the host country’s firm and the head in the parent firm. For example, the head in the parent firm may require that the expatriate sent to a certain overseas firm operates in such a firm as assistant of the head therein.
If this information is not well disseminated, the personnel in the host countriy’s firm will see as if the expatriate is encroaching into their work. This may cause some bad blood between the expatriate and the other senior employees in the firm. So, the IHRM will be required to facilitate a good communication flow between the firm and its regional branches situated overseas. Other steps which might be taken by the IHRM department to ensure effective use of expatriates are; properly designed contracts, specific operations to be undertaken (i. e. clear job description), and respecting such expatriates’ views pertaining operations of the firm.
Strategically placed mentors in the organization, and full support of expatriates’ work are also important factors to be taken into account. Work centrality and its implications for motivation Work centrality refers to the culture of people considering working and its implications as a central aspect in their live as well as an important source of formation of identification and self image, and a necessity for fulfilling basic needs. People who have higher work centrality become more involved in their work, and get closer affinity to the organization they work for.
In Israel, there has been reported decline in work centrality over the last two decades. A move by citizens towards pluralism and decentralization has been greatly witnessed in the country. This is where individuals’ rights came to occupy a more central position as opposed to a collective one. Relative prosperity further strengthened materialistic values, intensifying individualistic trend. Mass immigration in 1980s and 1990s further contributed to pluralism and greater societal heterogeneity while distancing collectivist norms and values. This, together with economic depression caused unemployment rate to rise from 5. 1% in 1981 to 11.
2% in 1992. Such changes affected the way individuals perceived their in the labor market. Work centrality can be a strategy for worker motivation. This is achievable by carefully analyzing the jobs workers are best in, so hat they are put under the departments they produce the best in. Further, employees who show affinity to their work are awarded for meeting certain achievements. In the long run, all the employees will be motivated in their work. Reference: Endurance Trading Corp. (2008, September 11th). 6 Organizational Structure of a MNC. Retrieved April 30th, 2009, from Endurance Trading: http://www. endurancetrading. com/? p=209
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Organizational Structure Types. (2020, Jun 02). Retrieved from https://studymoose.com/organization-structure-2-new-essay