The Management of International Enterprises: A Socio-Political View

By Monir H. Tayeb | Go to book overview

7
Organisational Design

INTRODUCTION

Multinational companies share in common with their single-nation counterparts many internal organisational issues, problems and challenges, such as coordination, integration, differentiation and control, but they face these in their most intense and complex forms. The sheer size and diversity of location, products and services offered and needed, operational technology, clients, suppliers, customers, legal and other institutional contacts and trade partners, bring with them their own imperatives. These in turn cause conflicts, frictions, tensions and frustrations in their own right in addition to those which might have their roots in the national culture of the parent company and its foreign subsidiaries.

Conflict can occur at a number of levels, between head office and subsidiaries (or agents, affiliates and franchisees, as may be the case), between subsidiaries and their host country, or within head office. In addition there may also be communication difficulties between head office and subsidiaries.

As Wilson and Rosenfeld (1990) argue, conflict primarily occurs over priorities in decision-making within the multinational firm. Decisions concerning organisational structure present a considerable challenge to the manager of international companies. Do managers organise on product lines or should the firm be structured on the basis of its geographical markets? Should they create a separate ‘international division’ at head office to handle multinational problems centrally, or should most decision-making be decentralised to the operating subsidiaries? Companies which have adopted a product structure have generally done so due to the differing technologies associated with each product. In such a structure, management power is usually rooted in its knowledge of a technologically complex product. For this reason, a central international division may cause difficulties since various product divisions tend to reserve all policy decisions pertaining to international operations for themselves. This reduces the influence of the international division's managers on overall strategies and policy decisions, and international conflict becomes inevitable.

However, market-structured organisations are also prone to the problems resulting from cross-cultural differences, as it can prove difficult to transfer policies and strategies across territorial boundaries. This can

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