Page 269 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes 14.4.2 Organisation Structure

In order to achieve the plan, an appropriate setting-up of organisation structure (the formal
patterns of their lines of communication and responsibilities), that groups/individuals and
operation units in strategic ways require. The structure depends on many factors including:
1. The degree of multidomestic, global and transitional policies that are employed.
2. The location of the types of facilities.
3. The impact of international operations on total corporate performance. The form, method
and location of operational units at home and abroad will affect taxes, expenses and
control consequently, organisational structure has an important effect on the fulfillment
of corporate objectives. The major structures of companies’ international operations are
given below:

International Division Structure
Grouping each international business activity into its own division puts internationally
specialised personnel to handle various matters such as export documentation, foreign exchange
transactions and relations with foreign governments. This strategy prevents duplication of
these activities in more than one place in the organisation. It also enables the respective people
to push for international expansion. However, an international division has to depend on the
domestic divisions for products to sell, personnel, technology and other resources. But since
domestic business managers are usually evaluated on the performance within the domestic
divisions for which they are responsible, they may withhold their best resources from the
international division to improve their own performance. Given the separation between domestic
and foreign operation, this structure is probably best suited for multi-domestic strategy for
which there is little integration and standardisation between domestic and foreign operations.
Functional Division Structure

This structure is popular among companies offering a limited range of products, particularly if
the production and marketing methods are undifferentiated among them. Here, marketing
people report to other marketing people, finance to other finance people and so on.

Product Division Structure
This structure is the most popular among international companies, because most companies’
business involves a variety of diverse products. Because these divisions may have little in
common, they may be highly independent of each other. As is true for the functional structure,
the product division structure is well-suited for a global strategy because both the foreign and
domestic operations for a given product reports to the same manager who can find synergies
between the two. Most likely, there will be duplicated functions and international activities
among the product divisions. Moreover, there is no formal means by which one product division
can learn from another international experience. Finally, different subsidiaries from different
product divisions within the same foreign country will report to different groups at headquarters,
so synergy could be lost within countries if different subsidiaries don’t communicate with each
other or with a common manager.
Geographic (Area) Division Structure

Companies use geographic divisions, if they have large foreign operations that are not dominated
by a single country or region (including the home country). This structure is more common to

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