MNE Organizational Design: Structures & Advantages

MNE Organizational Design Decisions

The Multinational Enterprise (MNE) organizational design decision:

• Considers differentiation and integration, and the proper balance between them. This balance is rooted in the diverse requirements and circumstances of different locals and business units.
• The need for integration comes from the managerial perspective to maintain overall coordination and control, ensuring strategy implementation.

Global Product Structure

Advantages

• Global vision
• Resource leverage
• Strategic focus
• Simplicity
• Accountability
• Standard product introductions
• Enhanced speed and decision quality
• Self-contained product development and introduction
• Development of talent
• Low interference from other divisions

Disadvantages

• Limited cooperation, communication, and sharing of information between divisions.
• Costly to maintain.
• Duplicated functions.

International Division Structure

Focuses on domestic business by shifting all foreign operations into a semi-independent division. This structure evolved out of the growing scope of international activities and a realization that foreign markets often offered the most promising growth opportunity.

Characteristics of International Division Structure

• Organized by function, product, or geography – such as country units within a region.
• Reflects a shortage of capabilities: With few employees having knowledge and experience in international operations, it made sense to cluster them together rather than to spread them throughout the organization.
• Used mainly by firms with a low ratio of foreign to domestic revenues and low foreign product diversity.
• This is Functional Compartmentalization into areas such as research and development, marketing, production, and human resources. This structure can be found in all organizations, including those differentiated primarily along product lines, customers, or geography.