1
CHAPTER 10
MARKETING ORGANIZATION, IMPLEMENTATION,
AND CONTROL
Chapter Outline
A. Organizational Structure
1. Organizational Designs
2. Evolution of Organizational Structures
B. Implementation
Chapter Objectives
This chapter begins by explaining the alternative organizational structures for international
operations. It then highlights the factors that affect decisions about the structure of international
Suggestions for Teaching
The chapter on organization is often perceived as lacking in interest and excitement. The subject
has to be brought closer to the students to show the importance of this area in international
Annual reports may be used to outline how different companies approach international operations
from the organizational point of view. By comparing the organizational structures of firms with
different emphases, e.g., consumer vs. industrial, firms that are only in a few countries vs. those
involved around the world, an appreciation develops for the complexities of organizational issues.
2
Group projects may be concentrated on company analyses: organizational structure and control
Chapter Summary
A. Organizational Structure
The basic functions of an organization are to provide:
• A route and locus of decision making and coordination
1. Organizational Designs
The basic configurations of international organizations correspond to those of
purely domestic ones; the greater the degree of internationalization, the more
complex the structures can become. The types of structures that companies use to
manage foreign activities can be divided into three categories based on the degree
of internationalization:
• Little or no formal organizational recognition of international activities
of the firm: This category ranges from domestic operations handling an
3
Little or No Formal Organization: In the very early stages of international
involvement, domestic operations assume responsibility for international
marketing activities. The share of international operations in the sales and profits
of the corporation is initially so minor that no organizational adjustment takes
place.
As the firm becomes more involved in foreign markets, the export department
structure will become obsolete. The firm may then undertake joint ventures or
The International Division: The international division centralizes in one entity,
with or without separate incorporation, all of the responsibility for international
activities. The approach aims to eliminate a possible bias against international
operations that may exist if domestic divisions are allowed to independently
serve international customers.
Global Organizational Structures: Global structures have grown out of
competitive necessity. Six basic types of global structures are available:
• Global product structure, in which product divisions are responsible for
all manufacturing and marketing worldwide
4
efficiency through centralization of manufacturing facilities. This is crucial in
industries in which competitive position is determined by world market share,
which in turn is often determined by the degree to which manufacturing is
rationalized.
Area structure: The firm is organized on the basis of geographical areas.
Regional integration continues to play a major role in area restructuring. The
driver of structural choices may also be cultural similarity.
The area approach follows the marketing concept most closely because
individual areas and markets are given concentrated attention. If market
Functional structure: It emphasizes the basic tasks of the firm. This approach
works best when both products and customers are relatively few and similar in
nature.
A variation of this approach is one that uses processes as a basis for structure.
The process structure is common in the energy and mining industries, where one
corporate entity may be in charge of exploration worldwide and another may be
responsible for the actual mining operation.
5
making business managers, functional managers, and strategy managers
cooperate. However, the matrix requires sensitive, well-trained middle managers
who can cope with problems that arise from reporting to two bosses.
Many companies have found the matrix structure problematic. The dual reporting
channel easily causes conflict; complex issues are forced into a two-dimensional
2. Evolution of Organizational Structures
Ideally, the structure allows a corporation to best meet the challenges of global
markets. Companies develop new structures in stages as their product diversity
develops and the share of foreign sales increases.
1. Locus of Decision Making
6
Exhibit 10.6 summarizes the different levels of coordination between country
units.
If subsidiaries are granted a high degree of autonomy, the result is termed
opportunities, have adopted global strategy formulation, which by definition
requires some degree of centralization. What has emerged as a result can be
called coordinated decentralization. This means that overall corporate strategy is
provided from global or regional headquarters, but subsidiaries are free to
implement it within the range established in consultation between headquarters
Organizationally, the forces of globalization are changing the country manager’s
role significantly. Today, many companies have to emphasize the product
dimension of the product-geography matrix, which means that the power has to
2. Factors Affecting Structure and Decision Making
The organizational structure and locus of decision making in multinational
corporations are determined by a number of factors including:
• The human resource capability of the firm
3. The Networked Global Organization
Exhibit 10.7 depicts a networked global organization.
Many of the most successful global companies have adopted an organizational
approach that provides clear global strategic direction along with the flexibility to
adapt to local opportunities and requirements. The term “glocalization” has been
dimension relates both to the development of global managers who can find
opportunities in spite of environmental challenges as well as to creating a global
perspective among country managers. The last dimension relates to the
development of a cooperative mindset among country organizations to ensure
effective implementation of global strategies.
touch through electronic means and meetings.
4. Promoting Global Internal Cooperation
If there are impediments to the free flow of information across organizational
boundaries, important updates about changes in the competitive environment
might not be communicated in a timely fashion to those tasked with
incorporating them into strategy.
The term “network” implies two-way communications between headquarters and
subsidiaries themselves. This translates into intercultural communication efforts
focused on developing relationships. This communication has traditionally taken
the form of newsletters, traveling executive “road shows,” or regular and periodic
meetings of appropriate personnel. Companies now use regular audio podcasts to
managers and functional-area personnel to make to-the-minute decisions
anywhere in the world
The networked approach is not a structural adaptation but a procedural one,
calling for a change in management mentality. It requires adjustment mainly in
the coordination and control functions of the firm.
9
5. The Role of Country Organizations
Country organizations should be treated as a source of supply as much as they are
considered a source of demand.
The role that a particular country organization can play depends on that market’s
overall strategic importance as well as the competencies of its organization. From
development is lower.
• The black hole is a situation that the international marketer has to work
out of. A company may be in a “black hole” situation because it has read
the market incorrectly or because government may restrict its activities.
Depending on the role, the relationship between headquarters and the country
The function of the organizational structure is to provide a framework in which
objectives can be met. A set of instruments and processes is needed, however, to
influence the behavior and performance of organization members to meet the goals.
Controls focus on actions to verify and correct activities that differ from established
1. Types of Control
Most organizations display some administrative flexibility, as demonstrated by
variations in the application of management directives, corporate objectives, or
measurement systems. A distinction should be made, however, between
variations that have emerged by design and those that are the result of autonomy.
• Best practice must be legitimized
In the design of the control system, a major decision concerns the object of
control. Two major objects are typically identified:
• Output controls: These consist of balance sheets, sales data, production
data, product line growth, or a performance review of personnel.
• Cultural controls: These are much less formal and are the result of shared
beliefs and expectations among the members of an organization.
Exhibit 10.9 provides a comparison of the two types of controls and their
objectives.
Bureaucratic or Formalized Control: The elements of bureaucratic or formalized
controls are:
• An international budget and planning system
• Planning and coordination of global production capacity and supplies
• Evaluation of subsidiary performance
• Communication and information exchange among subsidiaries, product
organizations, and corporate headquarters.
Long-range plans, on the other hand, extend over periods of two to ten years, and
Cultural Control: Cultural controls require an extensive socialization process, and
informal, personal interaction is central to the process. Substantial resources must
be spent to train the individual to share the corporate culture.
The primary instruments of cultural control are the careful selection and training
of corporate personnel and the institution of self-control.
2. Exercising Control
Within most corporations, different functional areas are subject to different
guidelines. The reason is that each function is subject to different constraints and
varying degrees of those constraints. As a result, many multinational
corporations employ control systems that are responsive to the needs of the
12
particular country is earning a superior return on investment relative to
risk may be irrelevant to the contribution an investment may make
worldwide or to the long-term results of the firm.
To design a control system that is acceptable not only to headquarters but also to
the organization and individuals abroad, a firm must take great care to use only
Key Terms
Product structure: An approach to organizational structure that gives worldwide responsibility
to strategic business units for the marketing of their product lines.
Area structure: An approach to organizational structure based on geographical areas.
Functional structure: An approach to organizational structure that emphasizes the basic tasks of
the firm–for example, manufacturing, sales, and research and development; this approach works
best when both products and customers are relatively few and similar in nature.
themselves so that they can better cope with two sets of pressures: (1) The customer side, needs
them to move faster, make more decisions locally, and alter the incentives and career
opportunities offered to employees. (2) As new markets emerge, the need to manage increased
complexity is necessary.
Decentralization: When a firm grants its subsidiaries a high degree of autonomy; controls are
relatively loose and simple.
Centralization: When a firm maintains tight controls and strategic decision making is
concentrated at headquarters.
13
accessible system using Internet-based technologies such as e-mail, newsgroups, and the World
Wide Web.
Strategic leader: A role of a country organization; a highly competent national subsidiary
located in a strategically critical market.
Contributor: A role of a country organization with a distinctive competence, such as product
1. Firms differ, often substantially, in their organizational structures even within the same
industry. What accounts for these differences in their approaches?
Firms differ, often substantially, in their organizational structures even within the same
industry. Some of the reasons for these differences in their approaches are:
• The type of organization that provides the best framework for operational
2. Discuss the benefits gained in adopting a matrix approach in terms of organizational
structure.
14
Matrix organizations combine product, regional, and functional expertise. In an attempt to
3. Video Collaboration Studios (VCS) is continually growing new studios globally. The
immersive environment created by VCS allows employees to connect face to face from any
part of the world as if they were in the same room. These studios greatly reduce the need for
travel—saving money and time and reducing carbon footprint. What factors are overlooked?
Students’ answers will vary.
4. Is there more to the “not-invented-here” syndrome than simply hurt feelings on part of those
who believe they are being dictated to by headquarters?
It can be argued that globalized programs are often perceived by subsidiaries as cutting into
their autonomy and the dictatorial approaches taken by headquarters. Country managers are
treated more like subordinates rather than customers; i.e., no internal marketing is even
5. How can systems that are built for global knowledge transfer be used as control tools?
While designing the control system, two major objects of control are identified. These include
the output control and the behavioral control. An organization can exercise controls over
6. “Implementers are the most important country organizations in terms of buy–in for effective
global marketing strategy implementation.” Comment.
The critical mass for the international marketing effort is provided by implementers. These
country organizations may exist in smaller, less-established markets in which corporate
Internet Exercises
1. Every big company has in–house experts. So why do they not use them more? Search systems
that apply social-computing tools such as internal blogs, wikis, and social networks can fill
2. See how Dow’s “solutionism” (www.dow.com/about/index.htm) is addressing some of the
world’s biggest challenges. The more we talk together, the more we solve together. Wind
turbines today are truly revolutionizing energy generation across the globe. The Orkney