8.3 International structure options
Many companies go through four stages as they evolve towards full-fledged global operations.
In stage one, the domestic stage, the firm is domestically oriented but may want to consider some initial foreign involvement to expand production volume. The structure is domestic, typically functional or divisional and foreign sales are handled through an export department.
In stage two, the international stage, the firm becomes multi-domestic and foreign subsidiaries may be established. An international division has replaced the export department of stage one.
In stage three, the global stage, there are two alternatives:
1. If the firm has a domestic structure based on function and has a low degree of diversification (that is, relatively few products), it will probably adopt a worldwide area structure as illustrated in Figure 8.4 below.
Figure 8.4 A worldwide area structure
2 If the firm has a domestic structure based on product and is relatively highly diversified (that is, has many products), it will probably adopt a worldwide product division structure as illustrated in Figure 8.5.
Figure 8.5 A worldwide product division structure
In stage four, the transnational stage, the firm is trying to realise location and experience curve economies, as well as concentrating on local responsiveness and the diverse transfers of core competencies (global learning from page 430 of your textbook). These often conflicting demands suggest a global matrix structure as illustrated in Figure 8.6.
Figure 8.6 Global matrix structure
You should now read the relevant pages from your textbook and match this text with the Stopford and Wells model (Figure 13.6) on page 448 of the textbook. The Stopford-Wells international structural stages model begins in the bottom left-hand corner with 'international division' and ends in the top right-hand corner with 'global matrix'. The model actually starts after multi-domestic and stops before transnational. The latter is understandable because the model is dated 1972, but the transnational concept was not generally accepted until the late 1970s and early 1980s. The concept is still evolving but there is still no universal agreement on the meaning of 'transnational'.
As you read, remember that the Stopford-Wells model is about structure but the terms multi-domestic, international, global and transnational relate to strategy. The first of the additional readings discusses the communication problems that can occur between head and branch offices and suggests how they can be overcome, whilst the second discusses the cultural issues when the structures of two large MNEs combined to form BHP Billiton.
In your text
Hill 2005, Chapter 13, pp. 446-453.
Reading 8.1
Cooper, C. 2004, 'Making the outposts feel part of the team', Management Today , April, pp. 30-32.
Reading 8.2
Treadgold, T. 2001, 'Falling out of bed', Business Review Weekly ,
6 July, pp. 54-57.
Previous Page