Chapter 11: Organizational Structure and Controls 365Differences exist in the degree of centralization, the focus of the performance evalua-
tion, the horizontal structures (integrating mechanisms), and the incentive compensation
schemes. The most centralized and most costly structural form is the cooperative struc-
ture. The least centralized, with the lowest bureaucratic costs, is the competitive structure.
The SBU structure requires partial centralization and involves some of the mechanisms
necessary to implement the relatedness between divisions. Also, the divisional incentive
compensation awards are allocated according to both SBUs and corporate performance.11-3f Matches between International Strategies and Worldwide Structure
In Chapter 8 we explained that international strategies are increasingly important for
companies’ long-term competitive success in what is today virtually a borderless global
economy.^84 Among other benefits, firms are able to search for new markets and then form
the competencies necessary to serve them when implementing an international strategy.^85
As with business-level and corporate-level strategies, unique organizational structures
are necessary to successfully implement individual international strategies, given the dif-
ferent cultural, institutional, and legal environments around the world.^86 Forming proper
matches between international strategies and organizational structures facilitates the
firm’s efforts to effectively coordinate and control its global operations. More importantly,
research findings confirm the validity of the international strategy/structure matches we
discuss here.^87Using the Worldwide Geographic Area Structure to
Implement the Multidomestic Strategy
The multidomestic strategy decentralizes the firm’s strategic and operating decisions to
business units in each country so that product characteristics can be tailored to local
preferences. Firms using this strategy try to isolate themselves from global competitive
forces by establishing protected market positions or by competing in industry segments
that are most affected by differences among local countries. The worldwide geographic
area structure is used to implement this strategy. The worldwide geographic area
structure emphasizes national interests and facilitates the firm’s efforts to satisfy local
differences (see Figure 11.8).
Using the multidomestic strategy requires little coordination between different coun-
try markets, meaning that formal integrating mechanisms among divisions around the
world are not needed. Indeed, the coordination among units in a firm’s worldwide geo-
graphic area structure that does take place is informal in nature.
From a historical perspective, we note that the multidomestic strategy/worldwide
geographic area structure match evolved as a natural outgrowth of the multicultural
European marketplace. Friends and family members of the main business who were sent
as expatriates to foreign countries to develop the independent country subsidiary often
adopted the worldwide geographic area structure. The relationship to corporate head-
quarters by divisions took place through informal communication.
Founded in San Francisco, CA, in 2009, Uber Technologies, Inc. claims that it is
“evolving the way the world moves by seamlessly connecting riders to drivers through
more possibilities for riders and more business for drivers.”^88 Now growing rapidly out-
side its U.S. home market, Asia is the target of Uber’s most recent international growth
ambitions. Early evidence from the firm’s entry into China, obviously a key market in Asia,
is encouraging. In fact, the firm’s China expansion manager recently said that “China has
exceeded our wildest dreams.”^89 Seemingly critical to this success is Uber’s decision to
“go local” in serving Chinese customers. Technology used to track its services, payment
systems in place, and the marketing of its operations were all localized in the first 13
Chinese cities in which Uber chose to operate. Indeed, the firm decided to treat each city
The worldwide geographic
area structure emphasizes
national interests and
facilitates the firm’s efforts to
satisfy local differences.