What is the most appropriate organizational architecture for a firm that is competing in an industry where global strategy is appropriate?

Answer 1

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The appropriateness of each strategy depends on the pressures for cost reduction and local responsiveness in the industry.

There are four basic strategies to compete in the international environment:

global standardization

localization

transnational

International

The global standardization strategy focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies.

The strategic goal is to pursue a low-cost strategy on a global scale.

The global standardization strategy makes sense when:

There are strong pressures for cost reductions

Demands for local responsiveness are minimal

The global matrix structure is an attempt to minimize the limitations of the worldwide area structure and the worldwide product divisional structure.

The global matrix structure:

Allows for differentiation along two dimensions - product division and geographic area

Has dual decision--making - product division and geographic area have equal responsibility for operating decisions

Can be bureaucratic and slow

Can result in conflict between areas and product divisions

Can result in finger-pointing between divisions when something goes wrong

Firms pursuing a global standardization strategy focus on the realization of location and experience curve economies.

Headquarters maintains control over most decisions

The need for integrating mechanisms is high

Strong organizational cultures are encouraged

The worldwide product division is common