Structural considerations in multinationals

When bringing out a business innovation in any country, trudging through corporate bureaucracy can cause delays that result in a competitive disadvantage. This is especially true in China which is one of the world’s fastest growing economies. Successful multinational corporations operating in China are realizing that the optimal structure is decentralized with a relatively high degree of managerial autonomy. Given that over 1.3 billion people live in China, the opportunity for businesses is tremendous and as a result, competition is increasing. To take advantage of this opportunity, companies must be able to respond to changes before their competitors.

For example Tyson Foods gives its vice president and head of the company’s China operation, James Rice, the freedom to build the company’s business overseas. While walking past a food vendor in Shanghai, Rice got the idea of cumin flavored chicken strips. Without the need to obtain approval from upper management, Rice and his team immediately developed the recipe, tested it, and after receiving a 90 percent customer approval rating, began selling the product within 2 months of coming up with the idea.

Other companies that have implemented more formalized, bureaucratic structures have fared less well. One manager of a consumer electronics company who wanted to reduce the package size of a product to lower its cost and attract lower-income Chinese customers had to send the idea to his boss. His boss, the vice president of Asian operations, then sent the idea to the vice president of international operations, who in turn sent the idea to upper management in the United States. Although the idea was approved, the process took 5 months, during which a competitor introduced a similarly packaged product.

So, when it comes to innovating in a dynamic, fast paced economy such as China decentralization and autonomy can be major competitive advantages for multinational companies. To gain this competitive advantage, companies like Tyson are empowering their overseas mangers to make their own decisions.

The matrix Structure:

Another popular organizational design option is the matrix structure. You’ll find is being used in advertising agencies, aerospace firms, research and development laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies. Essentially the matrix combines two forms of departmentalization: functional and product.

The strength of functional departmentalization lies in putting like specialists together, which minimizes the number necessary while allowing the pooling and sharing of specialized resources across products. Its major disadvantage is the difficulty of coordinating the tasks of diverse functional specialists so that their activities are completed on time and within budget. Product departmentalization on the other hand, has exactly the opposite benefits and disadvantages. It facilitates coordination among specialties to achieve on time completion and to meet budget targets. Furthermore it provides clear responsibility for all activities related to a product, but with duplication of activities and costs. The matrix attempts to gain the strengths of each, while avoiding their weaknesses.

The most obvious structural characteristics of the matrix is that it breaks the unity of command concept. Employees in the matrix have two bosses their functional department managers and their product managers. Therefore, the matrix has a dual chain of command.

The matrix form as used in a college of business administration are the academic departments of accounting, decisions and information systems, marketing and so forth are functional units. In addition specific programs (that is, products) are overlaid on the functions. In this way, members in a matrix structure have a dual assignment to their functional department and to their product groups. For instance, a professor of accounting who is teaching an undergraduate course may report to the director of undergraduate programs as well as to the chairperson of the accounting department.