The previous chapter described how the management of a company chooses a foreign market entry mode-a participation strategy for entering the world market. The management team charged with executing this strategy must then begin to develop an organization structure that will enable the organization to achieve its goal of entering the foreign market. The view espoused in this book and accepted by most management scholars is that "structure follows strategy." In other words, management must first devise a framework (strategy ), which it then uses to organize the company's resources into an efficient system (structure).
In the sciences the term "organization" refers to a system that is able to perform coordinated, useful work. In management literature the term "organization" is used very loosely to connote both an institution, such as an MNC, and the process of coordinating the organization's resources. This chapter describes the process that an MNC follows in creating a coordinating structure and summarizes attempts to develop an organization theory for international management.
LEARNING OBJECTIVES
After studying the material in this chapter, the student should be familiar with the following concepts:
- The meaning of the term "organization"
- The "relay race" and "rugby" approaches to product development
- The evolution of MNC organization structures
- The two phases of the organization process
- The main alternative forms of organization structure
- Centralization vs. decentralization of decision making in an MNC
- The experience curve
- The meaning of the term "rationalization"
- Some guidelines for designing an organization structure
- "Product organization" as a future alternative
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