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Introduction
In the international expansion of a firm, it is important to see the appropriate control on the foreign operations because of the presence of influencing factors that can affect the effectiveness and significance of its decisions related to the selection of organizational structure (Pudelko & Harzing, 2008). So, this paper would describe three major influencing factors and their impact on the selection of organizational structure in the context of an MNC.
Influencing Factors
Followings are the major factors that can influence the decisions of an MNC to select the organizational structure.
Different business strategies: In the concern of global business accessibility, strategy plays an important role in the context of an MNC along with its respective growth in host countries because of its direct impact on the strength of organizational structure. Therefore, this factor can influence the decision of an MNC related to the selection of organizational structure for doing business in foreign market (Voola & O’Cass, 2010). In general, the business strategy is useful for an MNC in competitive marketplace because it helps to determines how a MNC is going to position itself in the market of host countries in terms of its operational structure. The different types of strategies could be used by an MNC to make difference between organizational and the domestic manufacturers’ characteristics for covering the largest segment of market in host countries (Atkeson & Burstein, 2008).
Some of MNCs use distinction strategy to introduce the new and advanced products along with quality to attract new customers fruitfully. But, this type of strategy could be able to influence the innovative nature of an MNC along with its operating functions in both manners because the adoptability process of customers for new products by new seller could not be happen immediately (Etro, 2009). Hence, the innovative strategies play an influencing role in the selection of organizational structure by an MNC because it directly influences the stability measures of MNC to cover current marketplace. For covering the huge part of market, the strategies of the offered products and price could be more effective because it could help MNC to achieve its objective in host countries (Cui, Griffith, Cavusgil & Dabic, 2006). But, any lack would reduce the effectiveness of an MNC’s organizational structure in new business market and can affect the sustainability factors.
Environmental factors: Environment is a vital term for the organizational structure of an MNC along with its selection for host market because it could be able to affect sustainability and fertility of MNC’s in the host market. The internal environment can play a significant role in the growth of an MNC that can also help its management to improve the operating standards for facing the different circumstances in global market (Andersson, Forsgren & Holm, 2007). Therefore, there are several factors of environment such as technological change, business policies, and global economic condition, which can influence the structure of MNCs. The environment of any business place could be based on the economic system, legal and political aspect of that country. Therefore, it could influence the structure of an MNC for earning huge profits because of its responsive nature. The volatility of market along with the instability of hosting government can directly affect the growth of an MNC (Parry, 2012). So, the flexible structure of an MNC can be able to reduce the impact of volatility.
Promotional communication: The promotion of the products makes significant communication with customers in marketplace. So, the promotion policy is an effective marketing tool for MNCs that defines the communication activities in the global market. If an MNC goes for product promotion in global market, different consequences related to communication can influence the decision of firm related to the selection of organizational structure (Johnson & Demand Media, 2012). MNCs spend a lot of money in products endorsement that also increases the cost of the production therefore; the availability of high cost products in host country market could be a problem for MNC in its marketing communication because it can influence the decision of organizational structure (Bjorkman, Barner-Rasmussen & Li, 2004). In the context of an MNC, communication enables to generate new desires in the mind of customers. So, the continuous and effective relationship may increase the operational functions that significantly participate in the profit making structure of the organization (Chen, Hou & Fan, 2009). Next circumstance in the perfect and effective communication is the culture of host country that can affect the marketing functions of an MNC and consequently its structure selection.
Therefore, customers could not be able to adopt the products that can affect the marketing department along with the operational departments of an MNC. Hence, it could negatively influence the integrated structure of an MNC. If the MNCs communicate with customers then many cultural issues come like language, level of literacy, religion of customers’, along with their beliefs and work ethics (Evensky, 2005). It creates a barrier between potential customers and MNCs and also reduces the competency of MNCs structure in the context of other organizations in host country. So, organizations’ decision for selecting organizational structure is also influenced with communication requirements of the firm.
Conclusion
It is concluded that several influencing factors work at the different place of markets that could be able to influence the selection of organizational structure of an MNC. So, these factors help the MNC to understand the different business consequences to adopt relative structure to ensure long-term growth of the organization.
References
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Atkeson, A. & Burstein, A. (2008). Pricing-to-Market, Trade Costs, and International Relative Prices. Retrieved from: http://www.ssc.wisc.edu/~cengel/Econ872/Atkeson_Burstein.pdf
Bjorkman, I., Barner-Rasmussen, W. & Li, L. (2004). Managing knowledge transfer in MNCs: the impact of headquarters control mechanisms. Journal of International Business Studies, 35, 443-455.
Chen, A.S., Hou, Y. & Fan, K. (2009). The Effect of Organizational Change on Team Creativity, Job Satisfaction, Organizational Commitment, and Work Performance. Retrieved from: http://asbbs.org/files/2009/PDF/H/HouY.pdf
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Johnson, W. & Demand Media (2012). How Do Monopolistically Competitive Market Firms Make Price & Output Decisions?. Retrieved from: http://smallbusiness.chron.com/monopolistically-competitive-market-firms-make-price-output-decisions-15584.html
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Voola, R. & O’Cass, A. (2010). Implementing competitive strategies: the role of responsive and proactive market orientations. European Journal of Marketing, 44(1-2), 245-266.
