Question

Explain the factors that influence the organizational structure of MNCs.

Answer 1

Multi National Corporation is an enterprise that manages production or delivery services in more than one country. Multi national corporations aims to achieve greater efficiency by producing in the locket market and then exporting the product. The factors which influence the organisation structure of of multinational corporations are as follows

*Economic factors

Economic factors are mainly related to the economic system of the country where the firm has its operation. economic factors such as inflation ,interest rate ,income distribution ,employment level allocation of government budget etc directly impacts the operations of the MNC. The demand and supply for the product or service along with the wages and salary structure have an impact on the organisational structure of the company.

*Political and legal factors

Political factors suggest changes in tax rates ,policies and actions of the government political stability of the country affects the. working of a MNC. The organisation structure of the MNC is supposed to be established in accordance with the norms and policies of the government and it should not avoid the rules as it might create consequences in the future.

*Technology

Technological changes havetremendous influence on the working of MNC .Technological developments helps in increasing the efficiency of business processes. Technology has quickened the communication flow from one level of organisational structure to another which has influenced the organisational structure in a large way. Technology has also reduce the human resource requirements in multinational companies which has does, directly affected the organisational structures since how many numbers of employees required or hierarchy required is based on the amount of work and the task that would be performed by those employees.

*Social Factors

Social factors education, awareness and trends and status of people in the society affect the consumer behaviour to purchase various goods and services. So the company should take into consideration the culture values and beliefs of the society and plan for organisational structure accordingly.

* Environmental factors

Environmental factors such as weather climate change temperature effect the demand pattern of various goods and services. since MNCs operates at a different geographical locations which have differences in the timings, weather conditions and does not match with the subsidiary operating another country which does becomes a crucial for India at the time of the election of organisational structure

Apart the factors mentioned above there are another factors .These factors are the most common factors influencing the organisational structure of any company.

> size of the company

The largest the company the more complicated its structure. Does ice help the company in choosing the optimum organisational structure in order to conduct the business operations.

>Product ranges and services

The company has to select the best organisation structure for proper coordination and communication among various branches and to handle the operations related to the products and its range as well as the services properly.

>Strategy

How a company is going to position itself in the market in terms of its product is considered it strategy. The organisational structure of the company must fit the strategy.

The organisational structure is of vital importance to any MNC as it reflects the architecture of the business competence , functional relationship and management function and help in carrying out business function smoothly and efficiently.