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One of the essential challenges facing most companies of almost all sizes is determining how to organize their operations. This issue becomes even more difficult when a company settles on to do business beyond national borders. In many cases, the company’s initial moves overseas are a response to unexpected or random overseas business opportunities. At first, this business can be carried out anywhere in the plan on an ad hoc system. As companies extend their operations overseas, it picks on additional difficulty, as decisions have to be taken which address global or local product designing, local response to individual markets or cross-border financing, among others. As the international edge of the business develops, many companies draw conclusions that reorganization can better handle the present international business requirements and better position the company to undertake full benefits of international opportunities as they come up. In the following paragraphs, four common international organizational models are briefly discussed (CTU, 2005).
A global functional structure is adopted by companies with an extremely limited product capacity. This structure is most frequently used by most companies. It is a top-down flowchart featuring a high ranking decision-maker at the top, with several middle managers – human resources, accounting, marketing, and engineering unit heads – all reporting to their top executive. The departments are managed independently of each other by their specific department heads, only answering to the top-level managers (CTU, 2005). The gain of this arrangement is that it is easy to comprehend and keep companies neatly compartmentalized. Conversely, the weakness is quite obvious. In the case of a weak or poorly organized executive, the instances where the right hand forgets to talk to the other will always occur, causing frustrating situations. A CEO will supervise a number of the company’s functions that have been deemed as critical to business procedures. Given that the product blend is singular or limited, the chief executive officer may coordinate the task of the functions and gather the resources of each one to bear on the product(s) line. In such a case, the CEO plays as the common denominator amongst the different functions.
A good example is the automotive company General Motors. The company has most intriguing benefits, e.g., the primary sources of knowledge are functionally based. Thus, economies of scale may be achieved by categorizing these resources by their function. In situations of human resources, a central human resources figure can serve as a counselor to all sections of the organization on matters such as salaries and performance assessment. This eliminates the collisions occurring when various parts of the organization get to developing such programs unsupervised. A functional organization enables the organization to normalize policies, procedures, and practices that might be carried out all through the organization. Speaking of the demerits, the primary focal point on business functional activities often tends to distract organizations from defined product requirements, geographic idiosyncrasies, and customer needs. With the executive of the organization serving as mutual arbiter and denominator between the functions, ways out may not reflect realities on the ground, as conclusions are made disregarding the benefit of an intimate interaction with customers and deeper understanding of the local circumstances (Anderson, 2007).
A global product structure is often chosen in companies with diverse product lines. Each line is assigned to its individual organization unit so that a conclusion is focused on the product’s characteristic and customers. In such a flowchart, a group of the top executives sit at the summit while various products are separated into mini-companies (Thareja, 2008). For instance, a food products company might be broken down into beverages, dairy products, snacks, condiments, and frozen dinners with the managers of every segment reporting to the executive. In this case, it does not matter if the right hand fails to communicate to the left since products do not depend straight on each other. Mostly, the product units will have their own functional organizations—in essence, working as a standalone business in the context of the larger framework. In many cases, a unit is to be managed with profit and loss responsibilities. Smirnoff is one of the companies with product structures that focus their attention and resources on a single product and the customer toward whom the product is targeted (Anderson, 2007). Conclusions are optimized for the benefit of the product and collisions are minimized. Speaking of disadvantages, redundancies frequently exist across the product organizations as functional responsibilities are multiplied under every product framework. The scope and economies of scale are quite difficult to deliver, as this structure encourages lower coordination and cooperation across the product units.
Global Area structure is regularly chosen by companies whose desire is to emphasize geographically set strategies and focus on local requirements. Organizations may be restructured up into regional or country segments, where a country manager operates rather independent businesses aided by local people. In such a case, the country organization method often operates as a self-contained business with substantial local authority and the profit and loss responsibilities (Griffin, 2005). An example of such a structure is Vodafone Company. As for the driving points, any country organization is in a position of detecting and understanding home conditions and is capable of formulating strategies that effectively convene the needs of all local stakeholders. Policies in divisions, such as human resources management, might be tailored to convene the expectations and needs of local employees; product blend and design may be optimized for specified local conditions; and the organization will respond more hastily to changing conditions on the ground. Speaking of demerits, economies of scale are harder to meet as different localities generate and implement extremely different product strategies and invest resources in upgrading local functional efforts and expertise that may well be repeated unnecessarily across other geographical units (Thareja, 2008).
This is an international organizational structure basing its development of departments on production process. It is designed to avoid confusion, overlaps, and redundancies. Forming part of an enterprise-wide attempt to centralize most of its business operations, a company that decided to create such a structure would provide an individual face and added consistent levels of order processing and service to customers. For help in maintaining this customer service transformation, Fonterra, a sample case, sought out a corporation that not only had excellent skills in customer rapport management and the related technology, but also the capacity to create a high quality customer service structure from scratch based a turnkey arrangement. Customer service has been for a long time been recognized as a subject that can have an essential impact on the company’s up and low lines.
In fact, one of the traits of high-performance businesses is the ability to develop and take benefits of a set of distinctive abilities that include those relating to customer services that are difficult to replicate and that may differentiate a company amongst the competitors. Fonterra clearly understands this mandate for greater customer services (Griffin, 2005). The firm is equally aware of the bottlenecks related with building a global customer structure of service capabilities to support its growing business. Presently, Fonterra is able to deliver to its customers a friendly, 24 hour, 7 days a week, 365 days per year channels to address their needs. Customers contact the service center through a local toll-free public number. The centers’ IVR system detects the location of the dial, welcomes the customer in the specific native language, and reroutes this call to the right representative. For a greatly valuable customer, the call is directed to a dedicated care person.
Simultaneously, IVR technology interacts with SAP CRM, requesting that system to generate the right customer account data for the selected agent. Similar rerouting occurs for fax and e-mails inquiries. Offering global coverage with a local touch was an important requirement for any company anticipating to try out a similar international organizational structure. A survey of consumers in the U.S. and United Kingdom indicated that the capability of the customer service agents to cater a full range of requirements is, by far, the one most crucial aspect of a top quality service experience. Fonterra today excels in this regard (Griffin, 2005).
Before settling on any of the major organizational structures above, it would do a great deal of benefit to first take a better look on the products or services provided and other related considerations to a successful international business.