The purpose of organization is to enable an MNC to perform useful work, by linking individuals, groups of individuals, firms, and groups of firms into a coherent and cohesive system that will facilitate decision making and decision implementation. Vernon describes the management task of organization as follows: "Organizations, it is evident, are created to link the behavior of individuals: to collect and pool information, skills, or capital; to engage in related actions towards the achievement of a set of goals; to monitor performance, initiate corrections, and define new goals." 1
Brooke, on the other side of the Atlantic, has identified four main purposes of organization:
- To enable decisions to be taken efficiently and at the right time
- To provide a channel for the exercise of authority
- To provide a system for reporting and communication
- To provide a career structure 2
The organization structure must facilitate decision making both vertically and horizontally. The number of ways of organizing even a small MNC, with five thousand employees, five products, and five subsidiaries, is astronomical.
The task of designing the appropriate organization structure is a very difficult one, and the choice of the wrong organization structure can be detrimental to an MNC's success. In a study performed at the University of Warwick in England, researchers attributed the superior performance of Japanese managers over both British and American managers to, among other factors, different organization structures. The Japanese subsidiaries examined by the researchers were organized by products, whereas both the U.S. and British companies were organized by functions.
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