Heterarchy in business

CHAPTER 3 THE ORGANIZATIONAL CONTEXT

an increase in the number of employees needed to oversee the activities between the parent firm and its foreign affiliates. W i t h i n the human resource function, the development of managers able to operate in international environments generally becomes a new imperative.^'^

As the M N E grows and the trend t o w a r d a global perspective accelerates, it increasingly con-fronts the 'think global, act local' p a r a d o x . T h e increasingly complex international environ-ment - characterized by global competitors, global customers, universal products, rapid technological change and world-scale factories - push the multinational t o w a r d global integra-tion while, at the same time, host governments and other stakeholders (such as customers, sup-pliers and employees) push for local responsiveness. T o facilitate the challenge of meeting these conflicting demands, the multinational w i l l typically need to consider a more appropriate strucr rure, and the choice appears to be either: the matrix; the mixed structure; the heterarchy; the transnational; or the multinational network . These options are n o w described and discussed.

The matrix

In the m a t r i x structure, the M N E is attempting to integrate its operations across more than one dimension . As shown in Figure 3.9, the international or geographical division and the product division share j o i n t authority . Advocates of this structural f o r m see, as its advantages, that con-flicts of interest are brought out into the open, and that each issue w i t h p r i o r i t y in decision-mak-ing has an executive champion to ensure it is not neglected. In other w o r d s , the m a t r i x is considered to bring into the management system a philosophy of matching the structure to the decision-making process. Research on the matrix structure'' indicates that the m a t r i x ; 'contin-ues to be the only organizational f o r m which fits the strategy of simultaneous pursuit of multiple business dimensions, w i t h each given equal priority ... [The] structural f o r m succeeds because it fits the situation' . I n practice, firms that have adopted the matrix structure have met w i t h mixed success. One reason is that i t is an expensive structural f o r m in that it requires careful implemen-tation and commitment (and often a great deal of time) on the part of top management to be successful.

FIGURE 3,9 Global matrix structure

Area 1

Area 2

Area 3

Product division A

Product division I

>

Manager

here

belongs to division

B and area 2

Product division C

Source: Adapted from C. Hill, International Business: Competing in the Global Marketplace, 2nd edn (MoGraw Hill, Newark, 1997) © The McGraw-Hill Companies, Inc. Reproduced with permission.

In Figure 3.9, area managers are responsible for the performance of all products w i t h i n the various countries chat comprise their regions, while product managers are responsible for sales of their specific product ranges across the areas. For example. Product A Manager may be