International Business: Organization Architecture

Organizational Architecture

• Organizational architecture refers to the totality of a firm's organization, including organizational structure, control systems and incentives, processes, organizational culture, and people.
• The elements of organizational architecture must be internally consistent, fit the strategy, and be consistent with each other and competitive conditions to achieve profitability.

Organizational Structure

• Organizational structure has three dimensions: vertical differentiation, horizontal differentiation, and integrating mechanisms.
• Vertical differentiation refers to the location of decision-making responsibilities within a structure, which can be centralized or decentralized.
• Horizontal differentiation involves the formal division of the organization into sub-units.
• Integrating mechanisms are used to coordinate sub-units.

Types of Organizational Structures

• Functional structure: a typical structure where sub-units are organized by function (e.g., marketing, finance, HR).
• Product divisional structure: a structure where each division is responsible for a distinct product line.
• International divisional structure: a structure where all international activities are grouped into an international division.
• Worldwide product divisional structure: a structure adopted by firms with a reasonable degree of diversification.
• Worldwide area structure: a structure favored by firms with low diversification and a domestic structure based on function.
• Global matrix structure: a structure that tries to minimize the limitations of the worldwide area structure and the worldwide product divisional structure.

Integrating Subunits

• Firms need a mechanism to integrate subunits, regardless of the type of structure.
• Informal integrating mechanisms include knowledge networks.
• Formal integrating mechanisms include:
• Personal controls
• Bureaucratic controls
• Output controls
• Cultural controls

Organizational Culture

• Organizational culture refers to the shared values, beliefs, and norms that shape the behavior of an organization.

This quiz covers the organization of international business, including organization architecture, organizational choices, and matching organization with strategy.