Examine the extent to which the classical organisation model no longer meets the needs of today’s multinational corporations as they struggle to compete in a dynamic, fast moving and constantly changing global business environment. Identify the key

            In the later years of 19th century and in the beginning of the 20th centuries, there has been notable emergence of new enterprise structure which was seen in the creation of multinational corporations (MNCs). The emergence of these changes was due to the advances in technology especially in the transportation and communication, enabling the business people to overcome the challenges of administering business units scattered across wide geographical distances and different time zones.

            There have been many scholars that question whether a new dominant organizational structure will evolve for the early 21st century having compared the trends of a century or so ago with recent development in information and communication technologies. In addition, some thoerists suggested several blueprints going under such names as dynamic networks (1986), the virtual organization (  1992), the hypertext organization (1995), and the platform organization (1996).

Moreover, (1958) argued that the extensive usage of computers would lead to tight and centralized organizational structures. Early theorists tended to argue for the extensive use of vertical information and communication technologies to help handle the information processing needs of complex organizations (1973 and 1977). This influential perspective was echoed by (1982) with specific reference to MNCs;  (1977) ended up in much the same camp by supporting the centralization argument, with the caveat that while usage of computers might reduce the number of managerial levels in an organization, the fundamental hierarchical structure would not change. The gist of these early inquiries was that information and communication technologies would assist in automating existing activities and ways of doing things, leading to increased efficiency, rather than implying any fundamental organizational change.

            allow different structural configurations rather than mandate particular outcomes. Information and communication technologies, in this period has become a versatile tool for dealing with increased organizational complexity and are generally seen as enabling different organizational structures (1998).

Information and communication technologies and complexity figure prominently enable MNCs to co-ordinate across geography and product lines, to distribute knowledge globally and to cope with uncertainty and change. Some influential formulations are the heterarch' (1986), the transnational (1989), the horizontal organization (1990), and the hypertext organization (1995).

According to (1958), the notion that corporations are basically information-processing systems is rooted in classical organization theory. This concept describes corporations as communication systems, decision-making systems, and systems which have to cope with uncertainty. Information-flows within corporations are seen as an answer to reduce the uncertainty caused by corporations' environment and technology choices (1967; 1978). A corporation's environment can be differentiated according to the internal and external factors predominant at different markets where the corporation is operating.

 (1973) has re-conceptualized, extended, and specified the traditional idea of information-processing. He viewed corporations as having a good structural fit when their information-processing capacities matched the information-processing requirements of their environments. Efficient and effective corporations were those that align their information-processing capacities to the amount of uncertainty they faced.

Furthermore, he stated that when a corporation faced increased information-processing and decision making demands, it can either reduce the need for information or increase its capacity to process it. Whilst the development of slack resources and the creation of self-contained tasks served to reduce the need for information-processing capabilities, an investment in vertical information systems and the creation of lateral relations increased the capacity to process information (1973). Since the former strategy is difficult to implement, corporations tended to invest both in vertical information systems and in developing lateral relations in order to increase their information-handling capacities.

Moreover,  argued that if uncertainty and information-processing requirements increased, corporations tended to use lateral relations to support the information-processing capacity defined by the vertical information systems.

In addition, according to  (1993), MNCs’ environment vary substantially both in the degree of uncertainty and in the degree of managerial discretion they permit because of the heterogeneity between the home and host country in terms of its economical, legal, social, technical and ecological conditions. Therefore, for that reason, it is argued that MNCs are generally forces to develop a high level of information processing capacity and that they will have a strong tendency towards the establishment of lateral relations to handle the level of uncertainty present in the environment.

However, the situation is seem to be ambiguous because the spectrum of MNCs includes a wide range of corporations, from small firms which are casual exporters, to large conglomerates with numerous foreign subsidiaries representing highly integrated networks.

Because of the multiplicity of MNCs,  (1991) has developed a general framework which distinguished between different forms of information-processing in MNCs. Similar to earlier approaches rooted in other theoretical concepts,  argued that horizontal information systems such as direct contacts, task forces, teams, integrating roles, or matrix designs will have the highest capacity to process reciprocal and non-routine information.

The information-processing approach seems to be an appropriate platform for the analysis of networks and heterarchies, because these concepts are mainly referred to the organization of multinational corporations; an aspect which is traditionally one of the main application areas of the information-processing approach. Moreover, the core variable of information-processing analysis is the dispersion of information and knowledge between the corporations’ subsystems a phenomenon which the advocates of the network and heterarchical concept consider as being most critical to the efficient and effective functioning of multinational corporations.

With today’s dynamic and turbulent business environment, organizations are required to be more flexible and to be fast responsive to the changing business needs. Many organizations have responded by adopting decentralized, team-based, and distributed structures (1994; 1988) variously described in the literature as virtual, network, and cluster organizations ( 1994;  1993;  1995; 1991).

During the seventies, two significant changes have caught the literature on the management and organization of MNCs. First, while the majority of previous writing favored hierarchical models of organizing MNCs, where headquarters and home country managers govern MNCs' decisions, during the last decades egalitarian models of MNC organization have dominated academic discussion circles. According to these new models the foreign subsidiaries as well as host and third country managers exert a substantial influence on MNCs' strategic decisions. Thus, according to these new models, the organization of MNCs is dominated by horizontal and not by vertical lines ( 1990; 1996), and "starworks" have turned into networks. Consequently, academic interest has shifted from the dyadic headquarters-subsidiary relationship in MNCs to lateral relations between MNCs subunits (1990).

Second, since the seventies, numerous international management scholars have refrained from interpreting MNCs as monolithic, symmetric blocks with a uniform organization pattern. They (1986; 1989) dispute that the "miniature replica" (1980;  1984) is the dominant model of MNCs' foreign subsidiaries. According to them, at least some foreign subsidiaries fulfill specific roles or mandates ( 1995) for the MNC and therefore, the structuring of the organization and the use of coordination mechanisms should vary from one subunit to the other. In the terminology of this paper, "starworks" have transformed themselves to heterarchies.

It is evident that the specific shape and the evolutionary pattern of the study of MNC and its environments have favored the rise of these new organizational concepts. Although numerous changes challenge MNCs' organization (1995), four trends seem to be highly relevant: First, a growing interdependence across national markets force MNCs to decide carefully where they locate their key resources. Second, increasing transnational competition has changed the pattern of MNCs' foreign direct investments. MNCs now split their value chains and assign their elements to different foreign subsidiaries.

Third, because of competitive educational standards of newly industrialized countries, highly qualified professionals are available nearly world wide.

 Fourth, after a period of pure globalization, in many industries, local interest groups have extended their influence on MNCs' operations. (1991) developed a similar catalogue of significant changes and consider structural indeterminacy, internal differentiation, integrative optimization, information intensity, latent linkages, fuzzy boundaries, and learning and continuity as emerging challenges of MNCs. Seen from a more general perspective, these trends have increased MNCs' environmental complexity, which is characterized by a higher level of diversity, a higher rapidity of change, and a higher density of relationships inside and outside the corporation (1994). All the trends mentioned here call for MNCs' ability to respond quickly, individually, and competently; thus, thinking in innovation potentials has taken the place of the traditional scale model of organization.

With the global market trends, MNCs' Human Resource Management (HRM) units are confronted with similar environmental trends thus giving good reasons to apply horizontal and heterarchical modes of organization in this functional area. With respect to the first trend, the establishment of free trade zones and other liberalization plans has led to an increased interdependence of labor markets. Moreover, as a consequence of the second trend, MNCs' subunits require very different personnel qualifications. For instance, while the US subsidiary of a German MNC recruits mainly engineers, Portuguese subsidiary will hire unskilled workers. The third trend will increase the importance of the host country HRM units, because they will start to recruit key personnel. And finally, in view of the fourth trend, numerous host countries have raised the standards of their labor legislation, so that MNCs have to adjust to the specific host country situation. Because of this and other HRM related issues (1994), an unequal handling of host country nationals on the one hand and the home country nationals on the other is neither possible nor justifiable; moreover, the structure and processes of the MNCs' HRM units have to be aligned to the heterogeneity of the foreign environments.

The evolution of the network concept in the business world is accompanied by a general trend towards a disaggregation and looser coupling of societal systems. These are discussed as adequate responses to increasing systems' complexity and environmental turbulence. The rise of the network concept might be interpreted as a correction of the principal deficiencies of organizational structures traditionally used (1992). Generally, networks are regarded as sets of connected exchange relationships between actors controlling activities ( 1992). An overall characteristic of networks, as they are discussed in contemporary business research, is that they contain clusters of actors which are neither coordinated by administrative orders nor by price mechanisms, but by trust, cooperation, and loyalty (1991). Because of their alternative coordination mode, networks are organizational concepts which are located somewhere between markets and hierarchies (1986). They differ from traditional organizational concepts in several respects (1991; 1992):

Ø  Networks are characterized by numerous vertical and lateral relationships between organizations' subunits,

Ø  networks' subunits recognize their interdependence and accept to share information, to cooperate with each other, and to customize the outcome of their activities,

Ø  networks apply the idea of informal relationships between essentially equal social agents and agencies,

Ø  networks are based on the fiction of partnership and of common values, which link the members of the organization,

Ø  networks solve conflicts on the basis of norms of reciprocity,

Ø  networks consequently decentralize decision-making competencies,

Ø  the behavior of networks is influenced by relational networks located in the environment of the network, and

Ø  often, but not necessarily, networks are thought as flat organizational forms.

With globalization, network concept in the business world in a comparatively coherent manner. (1984) argue that if diversity, task variability, and task interdependence are high, corporations are confronted with a high level of equivocality; in order to manage this situation, they should design additional, lateral coordination instruments which pass information directly between MNCs' units. equivocality are attributes that are typical of MNCs' HRM units. First, as MNCs employ more and more people abroad ( 1994, 1996), the balance of power between the headquarters' HRM units and those of the foreign subsidiaries shifts towards the latter. Second, the development of disciplined, highly skilled, and productive work forces by developing countries has caused foreign subsidiaries' staff become increasingly crucial as a pool of high potentials designing and running the future operations of the entire MNC. And third, the trend of MNCs to split up their value chains to several countries cause considerable personnel interdependencies between their subunits.

Lateral, network-building relationships enable a reduction of MNCs' equivocality, as they help managers to overcome differences in values, goals, and frames of reference. For example, the HRM managers of different subsidiaries usually have different views of the role of employees in the firm and the way in which they should be hired, trained, lead, compensated etc. If these HRM managers come in direct contact with each other they have the chance to discuss their different points of view, to jointly develop contingent or absolute patterns of managerial behavior, and to work out a "common grammar and perspective" (1986). If they don't do so, incompatible behavioral patterns might co-exist and the managers might not understand the rationale underlying the position of the other side.