Introduction
This research paper is a close examination of the international business. It has tacked the management and governance structure found in international business and how each relates to the success of the international business.
Those structures usually depend upon many factors when it comes to consideration of diversification of goods and services. They also (structure) dictate the kind of branding a business puts into the businesses across the globe. Still those structures have their strength and weakness which has been tackled as advantages and disadvantages.
International Business
International business is the business which describes all the transactions which are commercial in nature between the countries or regions. These transactions may include sales investment logistics and purchases. Many governments do engage themselves in international business as a collective decision or political reason which has been reached by the government officials. The government may sell the product or service in exchange of money for the purpose of completing the commercial activities.
Private company can also get involved in international business but unlike the government their main role is to get profit, private company may invest in goods and services across the boarder in form of economic resources e.g. capital. Import is simply moving of good and services among nations. Exporting is regarded as moving of goods and services to other nations.
Matrix structure
This structure considers the complexity of business most likely the geography the functionability of the business and the technology. Matrix structure deals with internal complexity in the business as well as external complexities this is done by reflecting those external complexities by analyzing the structure of the business internally. This structure realizes and considers the importance of geography functional grouping of the customer product and technology.
When using matrix structure it’s more emphasize on the clarity which yield more flexibility. Matrix cannot solve the complexities in business but working together of the people in the organization dictates the success or failure of the business.
Global market structure
According to Zinzaro (2010), this structure reflects the global philosophy which states that world is just one homogeneous market. The philosophy sees the world as a monolithic market with tastes and preferences which are similar. In Global structure it assumes that the national tastes and preferences are not different hence standardized products are put into consideration hence the structural process are integrated so that the coordination of activities are the same worldwide i.e. production marketing and planning.
Decision making comes from the corporate headquarters and directed to the parts of the business. Hence decisions are centralized and for this matter the importance ones. For example they are decisions which are made at corporate level and not subsidiary level. These are the issues of research, product range and branding.
In some instances they are some services which should be closer to the customer but their policies still are set at corporate level.
Global structure does not consider geographical aspects but focuses on products and markets and how to globally implement success of products and markets.
Domestic structure
This is usually fragmented into some trends. Some are talked in this research.
Horizontal corporation
This is directed to eliminating vertical hierarchy and it bases its structure on process instead of functions the management is usually delegated to the teams which has been formed in the regions (Zinzaro, 2010). It usually assists in the close contacts to the customers.
Those teams do perform their tasks independently and makes sure that they include all the skills to accomplish their tasks.
Dynamic Networks
This is usually based on outsourcing where the hierarchy which is vertical is replaced by controls of the market as the core activities are kept by the organization.
Dynamic network has got low administrative overhead and very flexible in resources allocation. It has got some of weakness which sometimes makes it impossible to define the organization and its employees do not have loyalty.
Factors to consider when choosing appropriate structure for international business
Governance
When it comes to governance the structure to be considered should be taken into account because some business are governed by boards while some structures may require some legal restriction which requires the business to have another entity board for the diversification factors or to manage the international business.
Corporate veil
International business usually because of their size do separate the corporation from its owners hence owns liability is limited to the investment made by the new entity its like starting another company standing on its own so when deciding to look for the structure consideration must be into consideration.
Administrative costs
There is additional cost which comes hand in hand when a business has been diversified for example business taxes record keeping. Sometimes they are ventured if the international business is operating globally and from a centralized position. This factor should be considered on which structure to adapt.
Capitalization
Start up funds is taken into account when an international business wants to be diversified. Hence some structure like matrix structure will need a lot of funds because of its decentralized nature it also requires funds to cater for numbers of manages involved (Zinzaro, 2010). So it’s the decision of the business owners to lay out plan considering the cost involved in various structures and hence adopting the promising and profitable structure.
Advantages of global market structure
- This can enable the international business to introduce the product by using a very powerful tool called advertisement due to present of global advertising tool like internet its possible for Global market structure to do the
- There is presence of economy of scale due to the fact that individual needs and preferences are universal those markets produces good and services in large quantity hence the cost is reduced considerable consequently enjoying economies of scale.
- There is informing in practices like marketing because this structure ensures that all individual are similar hence the information required should be directed as if it was going to a single person.
- When it comes to branding it is consistent in the source that all the practices of branding has been centralized and all the decision comes from a single source but directed worldwide.
Disadvantages of global market structure
- Global market structure sometimes its ‘philosophy’ doesn’t work at all instances because customers need and usage of produces is not always universal sometimes its different according to many factoring such as geographical factors cultural and many more.
- Sometimes customer from one region may not respond to the products as the same way others may respond.
- In international business the issue of competition usually occurs we find that some areas are more competitive than others in the brand and product development hence in Global structure this issue may not be put into consideration due to its philosophy.
- In some regions away from home market there are some administrative procedures which might be different from the one from home markets this may affect the international businesses because of trying to adapt to those procedures which might Jeopardize the success of the business.
- In some regions there is complexity difference when it comes to legal processes some are harsh than others for example in some regions operations of those business may be limited to a number of homes while others may be operating in 24hours system this may also be as a result of security issues environment and crime rates (Joshi, 2009).
Advantages of matrix structure
- Matrix structure by its ability to consider the geographical set up is able to improve the access of resources across the geographical set up. This usually enhances the
- Organizations using matrix structure usually have better coordination when it comes to the sharing of technologies for example information technologies companies who share technologies do have better coordination.
- In matrix structure the governance is usually decentralized and this allows effective and fast decision making. This usually saves time because the consultation of each sector is put into consideration without the bureaucratic process which undermines other decisions.
- This structure usually allows access to skills and perspectives which are diversified because of its nature we have seen that when it comes to management and governance it usually considers many sectors such as geography technology and functions.
- Because of its diversification it usually improves projects which are regional and also global projects. This usually enhances the success of the business due to diversification of its resources.
- People who are usually concerned in those businesses which have adopted matrix structure they usually develop in skills which are broaden due to a great exposure which matrix structure gives.
- Matrix structure engages in decentralization of its governance this usually is very effective when it comes to communication and coordination of the business activities.
- Matrix structure enhances a holistic outlook upon its customers whether regional or global it makes sure that their needs are met.
- It also enables adaptation and responses which are instant to the complexity of the world because of the skills its participant has.
Disadvantages of matrix structures
- Due to it decentralized nature sometimes it might be difficult to follow up the teams and their operations because decision making is independent of the sector. This form of independence may jeopardize the whole system most likely if there is a poor transition from one sector to the next.
- Due to creation of many project teams this also gives the need to increase numbers of managers to lead those projects which consequently leads to increase in costs.
- When it comes to allocation of resources and there is difference in policies between the line manage and project manages this may bring delay and conflict to a particular international business when allocation of resources id urgent.
- It is also hand to reach into final decision because of number of managers involved (Joshi, 2009). If we compare with line management here we usually have double number of managers which makes decision making to delay.
- Sometimes it’s regarded as an outdated method to organize a company because the top most sectors may not be aware of the activities happening in regional sectors and this may compromise the success because it lacks that chain of command which in some cases scrutinizes every sector of the international business.
- When there is conflicting loyalties this brings about the confusion amongst the employees they do not know which policies to follow or the guiding principals in the business this can lead to failure of the business.
Conclusion
It’s evident that we cannot survive without international business, many companies which are universal do usually have better terms than those which are domestic in nature as indicated above there is issue of economies of scale this assist the business itself and the consumer because goods manufactured at bulk will cost less compared to goods which are produced in small quantities, this is also reflected to prices of the goods and services to the consumers since the business produces more with less they will also reduce the cost (Joshi, 2009).
When it comes to management we have seen that in matrix structure there is decentralization this enable the policies which are set to favor the local because the managers on the ground have got the actual touch of reality as far as need and preferences of that region is concerned.
This also brings about good relations between regions because of universally of the management and governance of the business.
On the other hand international markets also do have some negative effects towards a particular region because some of the needs and preferences might be different from what is known from the home company. Due to dynamic nature of society sometimes the international business takes time to catch up and make changes because of bureaucratic process involved.
Reference List
Joshi, M., 2009. International Business. Oxford: Oxford University Press. Web.
Zinzaro, F., 2010. Market Global Structure. Web.