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Multinational corporations can use divisions, geographic locations, product lines, functional structures, or matrix structures for their international organizational structure. Each has its benefits and drawbacks, and companies may choose based on ease of expansion or cultural acumen. Automotive companies often use product line structuring, while functional structuring can lead to bureaucratic behaviors. Matrix structuring combines the strengths of product and functional structures and discourages silos.
The different types of international organizational structure generally fall into five categories. Multinational corporations can be organized into divisions or by geographic location of operations. Manufacturers operating globally often use an international organizational structure focused on product lines. Other global organizations choose to pursue a functional structure. An internal collaborative approach may also be used, which is often referred to as matrix structuring.
The international organizational structure is sometimes based on the structuring of the division. Businesses may choose this option because expansion is relatively easy. A new division is created and nested within the existing management structure. This is comparable to adding a room onto an existing building, as other aspects of the operation remain mostly unaffected.
Geographical structuring is another form of compartmentalized international organizational structure. In this case, management typically appoints regional directors, each with responsibility for operational decisions within a geographic area. This strategy is often used when a company takes the first step from domestic to international operations. Another oft-cited benefit is that Indigenous leadership can be located within a geographic area, thus tapping into the cultural acumen of the manager.
Organizing operations around product lines can be another choice for manufacturing companies that have facilities in multiple international locations. Just as in the case of a corporate management geographic structure, this module allows for easier expansion. Automotive companies are an example of an industry that frequently uses this form of international organizational structure. One automotive line that produces cars that appeal to North Americans may be located in the United States and geared toward that market, while another product line may consist of subcompacts targeted at a European market. While such operations are managed by a single company, managers of a product line can operate highly autonomously, allowing for rapid response to changing market conditions.
Sorting operations by functionality is another very common type of international organizational structure. It is also known as a departmental organization. In this case, an international company or organization may have a marketing department, an accounting department, and so on. Sometimes, if this is used on a large scale and spans multiple countries, bureaucratic behaviors can eventually impede productivity.
An international organization using a matrix structure usually aims to combine the strengths of both product and functional structures. This system supports cross-functionality more and offers large international organizations a more collaborative approach. In a matrix structure, management seeks to discourage silos while maintaining a departmental structure. This form of organizational structure is often used to stem the growth of internal bureaucracy while still allowing for departmentalization.
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