UNIT V STUDY GUIDE
Organizing Structure and Control Systems
Course Learning Outcomes for Unit V
Upon completion of this unit, students should be able to:
1. Explain how the political and economic environment affects decision making.
1.1 Examine the organizational structure of the United Nations Human Rights Council.
Reading Assignment
Chapter 8: Organization Structure and Control Systems
Unit Lesson
In recent years, corporations and small companies have entered the global market in larger numbers. If
Company B sees that Company A is doing well overseas, Company B will want to enter the global market
before Company A corners the market. Other reasons for wanting to engage in global trading might be to
avoid trade barriers and increasing costs at home.
Much planning goes into creating overseas corporations or subsidiaries. Managers for these corporations or
subsidiaries have to plan strategically, organizing structures for maximum impact, and putting control systems
in place that will secure their investments. All stakeholders in these ventures must pay attention to cultural
factors that can help them succeed or fail.
In 2011, Target acquired Zellers stores in Canada and entered the Canadian market. In January 2015, it was
reported that Target was closing all of its stores in Canada, leaving thousands of people jobless. According to
Kopun (2015), Target did not plan strategically. Kopun (2015) quoted Jamie Tate of Tate Economic Research
Inc. as saying that Target had underestimated the competition in Canada.
When companies enter markets globally, they must organize the structure and design control systems that
will stop them from making the same mistakes that were possibly made by Target. When companies create
structures, those structures change depending on new strategic directions and the competition. Perhaps
Target should have redesigned its organizational structure or rethought its control systems.
According to Deresky (2017), structures that are commonly the focus in the organizational stage include:
domestic structure plus export department,
domestic structure plus foreign subsidiary,
international division,
global functional structure,
global product structure, and
matrix structure (p. 257).
Understanding the social and business cultures will help managers determine which structure is best suited to
their organization. Small organizations tend to favor the export structure, using contractual services to help
them establish their products/services. Later, they can reorganize and move toward having the structure that
involves foreign subsidiaries. As their investments grow, those organizations might expand more, leading to
an international division organized by those categories that brought them success.
Small corporations or subsidiaries might use the global functional structure, especially if their marketing
strategy targets small markets. Those organizations that target more diversified markets tend to use the
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global product structure, while matrix structures “combine geographic support UNIT
for both
global integration
and
x STUDY
GUIDE
local responsiveness” (Deresky, 2017, p. 260).
Title
Each of these structures must be carefully considered and will drive the strategies being used. Whichever
structure is chosen, managers have to ensure they attend to rules and regulations and to the cultures within
which those rules and regulations will apply.
As plans move forward, companies have to focus on producing products targeting specific markets and
understanding those markets sufficiently to build effective control systems. As they do so, managers must rely
on strategic alliances. Cultural interactions are important and managers must be fully aware of cultural
differences that help them to create and maintain positive alliances. Control systems must be carefully
designed so that, should a structure fail, it would not be difficult to get rid of a bad partner.
Managers should not underestimate the importance of the control systems they put in place. Attention must
be paid to the reporting systems, ensuring that the corporation or subsidiary is meeting the organization’s
standards and goals. They are also responsible for meeting any international accounting standards or other
standards that may apply in the host country.
When considering e-business, managers will have to work with both e-exchanges and traditional exchanges.
When running an e-network, stakeholders include suppliers, contractors, distributors, buyers, and sellers. All
exchanges occur in cyberspace. With the connectivity of the world’s population today, consumers all over the
globe can be checking out your goods and services by simply accessing the World Wide Web with their
computer, tablet, or phone. Small businesses all over the planet can attract customers next door, across
town, elsewhere in the country or even on other continents. So how can that be bad? It is not bad, but it does
raise challenges such as shipping overseas, taxes, duties, local cultural demands, customs laws,
environmental concerns, consumer protection issues, or child labor laws. Those considering international etrade need to be aware of guidelines set forth by the Organization for Economic Cooperation and
Development (Federal Trade Commission, 2000).
The reporting systems referred to in your textbook can be set up and maintained using information systems
that provide reliable data. Managers should be able to make comparisons across countries. There should be
clear links between strategy, structure, and culture.
Additional variables affecting structural choices include geographic dispersion and cultural attitudes toward
foreign businesses. These variables introduce further layers of complication. For example, during the past ten
years, Africa’s total GDP has increased by approximately 135%, while the European Union’s collective GDP
only increased around 37% (International Business Degree Guide, n.d.). Corporations entering new markets
will no doubt be interested in what is happening in these fast-growing economies and will rely on their
managers to understand all the cultural advantages and barriers.
Other topics about which international business executives should stay informed are trade news (the TransPacific Partnership, North American Free Trade A, and so on) and the United States' membership in world
organizations such as the United Nations Human Rights Council (UNHRC). NAFTA is being renamed
USMCA (United States Mexico Canada Agreement), and the member countries of the US, Canada, and
Mexico must approve the new agreement in their respective Congress (Collins, 2018). New trade deals mean
businesses have to learn about tariffs that may impact their industry and customers.
The United States pulled out of the United Nations Human Rights Council in June 2018, which may have
some impact on businesses. Also, the Business Human Rights Organization cites some hot button issues
impacting international business are environmental safety issues, labor issues, child labor and/or slavery,
rights of indigenous peoples, access to water, workplace safety, to name a few (Business & Human Rights
Resource Centre, n.d.).
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References
UNIT x STUDY GUIDE
Title
Business & Human Rights Resource Centre. (n.d.). Business & human rights – A brief introduction. Retrieved
from https://www.business-humanrights.org/en/business-human-rights-a-brief-introduction
Collins, M. (2018, June 20). Canada agrees to join U.S. and Mexico in new trade deal to replace NAFTA, say
US and Canadian officials. USA Today. Retrieved from
https://www.usatoday.com/story/news/politics/2018/09/30/nafta-canada-agrees-join-u-s-mexico-newtrade-agreement/1453244002/
Deresky, H. (2017). International management: Managing across borders and cultures (9th ed.). Hoboken,
NJ: Pearson.
Federal Trade Commission. (2000). Electronic commerce: Selling internationally a guide for
businesses.Retrieved from https://www.ftc.gov/system/files/documents/plain-language/alt067electronic-commerce-selling-internationally-guide-businesses.pdf
International Business Degree Guide. (n.d.). Business is booming in Africa? Retrieved from
http://www.internationalbusinessguide.org/africa/
Kopun, F. (2015, January 15). How ‘arrogance’ led to Target’s pullout. Toronto Star. Retrieved from
http://www.thestar.com/business/2015/01/15/breaking-target-to-pull-out-of-canada.html
Suggested Reading
In order to access the following resources, click the links below.
The following articles are suggested readings or resources that can provide further information on intercultural
management.
International Business Degree Guide. (2013). 10 successful American businesses that have failed over-seas.
Retrieved from http://www.internationalbusinessguide.org/10-successful-american-businesses-thathave-failed-overseas/
Lewis, K. (2011). Nine steps to an international marketing strategy. Retrieved from
http://www.business2community.com/strategy/nine-steps-to-an-international-marketing-strategy044946
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