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Unit 14: Management Control of MNC’s
14.5 Matrix Organization Structure and the Multinational Firm Notes
The problem of achieving coordination and efficiency in multinational enterprises differ from
domestic product organization in two ways:
1. There is a greater geographical dispersion of various units of the enterprise. As a result,
multinational firms often subdivide their organization by areas of the world; each division
is responsible for all products in each geographical area. The divisions are often careful
enough to employ fully each of the functions within the division and achieve significant
economies of scale, with some loose coordination of each function among various divisions
taking place at headquarters.
2. Such each division of a multinational firm is responsible for sale and sometimes, production
of all the company’s products in a given area of the world, little attention can be given to
the development, in production and coordination of a given product for the company as a
whole. This intensifies the need for the matrix structure.
Figure 14.3: Organizational Structure
Worldwide
Organisation by
Organisation
Area of World
by Product
President President
Staff Staff
Division Managers of Areas Division Managers of Products
Area Managers Product Managers
Multinational Matrix Structure
President
Div. Managers Div. Managers
of Areas of Products
Matrix Manager Product/in Area A
Functional Managers
In a multinational enterprise, the two dimensions of management that must be considered in
the design of the organization structure are market area and product rather than product and
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