MIT Sloan Management Review

Corporate Strategy, International Business

 

Managing Across Borders: New Organizational Responses

By Christopher A. Bartlett and Sumantra Ghoshal

October 15, 1987

THE AUTHORS HAVE ARGUED that limited organizational capability is the most critical constraint facing international companies that attempt to respond to new strategic demands ("Managing across Borders: New Strategic Requirements," SMR, Summer 1987). Here, they describe how companies have overcome this constraint by building a "transnational" organization able to cope with the increasing complexity of the international environment. Ed.

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IN A COMPANION ARTICLE (Summer 1987), we described how recent changes in the international operating environment have forced companies to optimize efficiency, responsiveness, and learning simultaneously in their worldwide operations. To companies that previously concentrated on developing and managing one of these capabilities, this new challenge implied not only a total strategic reorientation but a major change in organizational capability, as well.

Implementing such a complex, three-pronged strategic objective would be difficult under any circumstances, but in a worldwide company the task is complicated even further. The very act of “going international” multiplies a company’s organizational complexity. Typically, doing so requires adding a third dimension to the existing business- and function-oriented management structure. It is difficult enough balancing product divisions that bring efficiency and focus to domestic product-market strategies with corporate staffs whose functional expertise allows them to play an important counterbalance and control role. The thought of adding capable, geographically oriented management— and maintaining a three-way balance of organizational perspectives and capabilities among product, function, and area—is intimidating to most managers. The difficulty is increased because the resolution of tensions among product, function, and area managers must be accomplished in an organization whose operating units are often divided by distance and time and whose key members are separated by culture and language.

From Unidimensional to Multidimensional Capabilities

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