Organizational structure has some significant effects on the global strategies of multinational companies. These effects can be good for the company or they may cause tremendous harm to the operations of the company. This essay is going to look at the two issues.
One of the ways through which global strategy can be effectively developed and implemented, is by integrating or centralizing authority so that all units of the global business report to a common base. But some organizational structures do not allow for this. For instance raw-material processing industries find it hard to centrally coordinate their activities. To deal with this, global business directors can be appointed to operate in matrix fashion in the functional and geographical organizations. This was seen at work in the reorganization of Ford of Europe. This change saw Ford of Europe become one of the most global companies in automobiles. The presence of a split in organization between an international division and a domestic one is one of the barriers to global strategy. Companies can be managed in many ways but in all of them, organizational logic should match the strategic logic. Total global strategy can be realized by designating strategic leaders in specific countries. In this way responsibilities can be moved from other countries to one designated as the strategic leader. Organizational structures differ among companies depending on where they are found and this therefore makes them experience different globalization challenges.
Global reorganization can bring about major cost savings by reducing the extent of duplication of activities in multiple countries. But this should not just be aimed at cutting costs, but must also make strategic sense in relation to the globalization drivers in the industry and the type of the needed global strategy. We have seen that management behavior is directly affected by the structure of the organization, but the system is powered by the management processes, which sometimes can substitute the structure. There are four management processes that can be undertaken by companies. These are; the cross country coordination, the global strategy information system, global budgeting, global performance review and compensation and global strategic planning. All these methods aim at achieving global cooperation. Companies always look for what works best for them for a specific business at a specific time. Using multiple approaches assures one of the benefits he will get. Strategic planning processes bring in the company views from those who might not be heard. This is also realized in global strategic planning where the views of units that is distant in geographical location but strategically critical.
This article also shows that regional strategies can also work well, but this should be done in the context of a global strategy. A company needs to have a global strategy that is clear before embarking on doing a business in any region in the world. The company then can look at the regional strategy where it has to decide on the role of the region in the global strategy, and lastly it should look at the country strategy which involves the entry mode, selection of partners and the business strategy elements. Here regions can have varied definitions depending on the purpose of that definition. They are not continents as some people usually confuse. Geographic proximity is usually used to describe the regions for multinational companies. Regions can also be defined basing on the business strategy. Major regions of the world are; the European Union, North America, Asia-Pacific, Latin America and Central and Eastern Europe (Yip no date)
It has emerged that the organizational structure and management processes play a big role in determining how well a multinational company will run its business operations. These are coupled with both global and regional strategies which are used depending on the organizational needs of the business. Global strategies are used by large multinational companies to tap into the diverse potential of its subsidiaries that enable them be at pace with the rest of the world.