A company's choice of participation strategy-one of the controllable variables (X) in the familiar XYZ framework-is a very important determinant of organization structure. Thus changes in the organization structures of U.S. MNCs over the years have to a large degree paralleled changes in participation strategy.
U.S. MNCs evolved through five main stages. During the first two decades after World War II, the main entry mode was exports. To facilitate the export of U.S. products all over the world, most MNCs created an export department, the activities of which were confined mostly to the logistics of getting the product to the nearest port.
During the sixties contractual agreements and investments followed trade. One by one, U.S. MNCs set up factories and sales offices in Europe. At home they created international divisions to coordinate the activities of the subsidiaries overseas. Since most of the decision making was done at the headquarters, the task of the international division was fairly simple: to relay messages from home to the foreign subsidiaries.
The seventies ushered in the age of consolidation of the numerous plants created under the expansive management philosophy of the previous two decades. Figure 11.1 outlines the evolution and growth of international business and corresponding changes in organization structure. The typical multinational company went from a rather simple organizational design (Stage I) based on an export department to a very complex-and, at times, confusing-organizational design (Stage V) based on a combination of product and geographical factors.
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