Organizational structure can be influenced by many different aspects of globalization. In this lesson, we will explore organizational structure and the impact globalization can have on it.
Globalization and Organizational Structure
Organizational structure is a very complex issue. When we talk about organizational structure, we are talking about how a company links organizational departments, functions or geography to accomplish its goals.
You see, if an organization does not develop its own structure, it will self-organize, which means it will develop a structure on its own. That is why companies organize themselves in ways that help them produce the product or service they make as efficiently as possible.
Taking this thought process and blending in globalization, we can discuss how organizational structure is impacted or influenced to change by globalization.
Three Main Aspects
There are three main aspects to consider that relate to organizational structure and globalization. In many ways, these aspects are present if a company does not have globalization pressures put upon it, but they take on a different perspective when globalization is involved.
Most companies plan a strategy to go to market with their products. First, let us look at an organization that is not influenced by globalization. They would develop a strategy to go to market with the resources and perspectives they have from here in the United States. If we incorporate globalization, they will have additional resources (materials, knowledge and human capital) outside of the United States with which to work.
Having these additional aspects can and does influence planning, and hence, structure. For instance, what if a company finds that an office in Dubai can make a widget better and cheaper than they can in the United States. The company would shift production there, and that would change planning as to how the company will price, ship and incorporate the widget from Dubai into the company's finished product. Since the company has access to better or lower-cost production, they can change their strategy as it relates to how they go to market.
If that widget that Dubai is making is a critical part of the finished product, organizationally, Dubai now becomes more important to the U.S.-based company. That could mean that the managers and executives in Dubai might have more power than their U.S. counterparts.
With more individuals to work with, or we could say with a larger labor pool, leadership strategy could change as well. If a company acquires an overseas organization and they find that the overseas organization has a Harvard-educated executive that is sharper and more business savvy than the individuals running the company in the U.S., does it not make sense to potentially bring that person to the U.S. to run the entire company? Leaders develop strategy, but that does not mean the leaders present are the best at it or are developing the right strategy. Having a larger pool of employees to choose from can, and most of the time does, change leadership strategy in an organization.
Change in Structure
Everything we have discussed so far would lead to changes in structure. Now, this U.S.-based company has offices, resources and personnel it never had before, and blending those aspects into the organizations could result in a change to the company's structure. Product manufacturing expertise and management expertise, among others, can affect how a company needs to structure itself. Thus, globalization could change the way a company is assembled based on these aspects.
Globalization impacts almost every aspect of business today. As communications and technology make it more efficient to blend cultures, companies will change along with the business landscape. As this happens, organizational planning, leadership, and structure will change along with it. In many ways, the business world will become more homogenous and diverse. The business world we see today may change drastically in years to come, and that change will impact organizational structure from a globalization perspective.
This video lesson could prepare you to discuss the complexity of organizational structure. You might have the ability to highlight the three main aspects of organizational structure as well as the impact of globalization with relation to it.