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 How does the Global Market Influence Organisations?

How does the Global Market Influence

Organisations?
BUSINESS MANAGEMENT SECTION

How does the Global Market Influence

Organisations?

iQualify UK

September 14, 2023

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1.0 Introduction
With intense competition in the current competitive environment, firms are looking for
ways in which they can market their products and services globally. This has given way
to globally standardised products instead of locally customised ones: a global market is
now the focus of many firms. This necessitates adapting a firm’s strategy, structure, and
other five elements of McKinsey 7S model in order to remain competitive and/or survive.

This article discusses how the global market influences organisations in the context of
McKinsey 7S model of organisational structure. This is done in section 2.0. Section 3.0
draws conclusion from the discussion. References are provided at the end of the article
for further reading.
2.0 The Global Market and
McKinsey 7S Model
2.1 Features of the Global Market
A global market has globally standardized products which are advanced in functionality
and reliability while sold at relatively low prices. Formally hard-to-reach areas are now
accessible through new technologies, such as the internet. This has led to convergence
of tastes and preferences thus enabling firms to standardise products and sell them to a
global market. This has enabled firms such as Coca-Cola to establish and enjoy
economies of scale as they produce their drinks for a global consumer market. This
implies that ‘global firms’ are able to produce, market and sell their standardised
products in a similar way worldwide. Therefore, the global market can be assumed to be
homogenised. This is why successful firms are those which are able to offer “the best
combinations of price, quality, reliability, and delivery for products that are globally
identical with respect to design, function, and even fashion” (Levitt, 1983, p.5). Such
global standardisation of products for global markets has implications for organisation
structure and other McKinsey 7S elements as discussed in the next subsection.

2.2 McKinsey 7S Model of

Organisational Structure
McKinsey 7S model is a strategic planning tool which is used to analyse a firm’s internal
environment by considering alignment of interconnected and interdependent 7S
elements: structure; strategy; systems; style; staff; skills; and shared values. These
elements are shown in figure 1.
Fig.1. McKinsey 7S Model of Organisation Structure. Source: Nejad, Behbodi and
Ravanfar (2015, p.45).

Hard Elements

Structure. This shows how the firm is organised, for example, in terms of divisions and
strategic business units (SBUs) which shows the flow of information, span of control and
chain of ‘command’ in the firm. It shows who supervises who; who reports to whom; who
is in charge of a certain group of people; who takes responsibility for a certain group’s
decisions and actions; etc. This is represented by an organisational chart in the firm’s
documents. A firm’s structure is determined by: its age and size; technology involved in
its operations; organisational culture; complexity and dynamism of its environment; the
qualifications of staff; and external control that the firm faces. For example, a firm
serving a global market has high degree of specialisation in its structure since it must go
through formal and complicated procedures along the value chain. This is why most
firms have a divisional structure in which a division is responsible for a certain
geographical area. Such areas may include: Europe, Africa, Middle East, North America,
etc. However, some have a blend of divisional structure and matrix structure to
effectively serve customers’ high expectations as the environment changes. This implies
that the firm will try to flatten its structure or adopt a horizontal structure such that
hierarchical arrangement does not be very bureaucratic and rigid. Therefore, within a
divisional structure, a firm needs to have small teams of employees who can flexibly
respond to the changing needs of customers in the local market. This is because a firm’s
structure and systems can either be a source of competitive advantage or competitive
disadvantage.
Structure alone cannot bring competitive advantage to the firm. It needs appropriate
systems and strategy—the three hard elements need to be aligned together and with
soft elements.

Systems. This refers to the routines/processes and procedures that a firm’s employees
go through in creating value for customers. This implies that systems are what transform
a firm’s inputs into outputs. This involves making daily decisions and choices to meet set
goals following the firm’s strategy—it involves putting strategy into action. For a firm that
serves a global market, this necessitates dividing work into several tasks/jobs: division
of labour enables putting people where they perform best. Similarly, a global market
forces the firm to have some level of decentralisation such that some decisions and
choices are taken nearest to the customers in local markets. However, to maintain some
level of control, some units, for example, strategic planning have to remain at the
headquarters/centralised such that strategic direction of the firm guides decision making
at all functional and operational levels. This is why global firms have formal hierarchical
communication channels to ensure that the corporate centre controls standards and
costs in decentralised units.

Strategy. This refers to the overall direction and plan of action of the firm aimed at
achieving competitive advantage over the long-term. This is derived from the firm’s
vision, mission and long-term goals as the firm attempts to compete successfully in the
global market. A firm may decide to increase its sales by a certain target percentage by
expanding its market for existing products using similar marketing activities. This
becomes the strategy that operational units must follow to increase sales. Another firm
may target increasing sales by selling existing products to a bigger market but using
locally customised marketing activities. These two different strategies will depend on the
structure and systems of a particular firm.

Soft Elements

Style. This refers to the leadership style expressed by the firm’s top management. This
encompasses how managers make decisions and choices (their behaviour) at the
workplace. A global market may necessitate having a balance between participatory and
authoritarian leadership style since there is need for both giving employees a chance to
innovate and retaining control over the firm’s strategic direction. This is why global firms
tend to emphasise clearly stated goals which are derived from the overall vision and
mission (at a strategic level) and communicated downwards to guide implementation at
functional and operational levels. This requires having clear formal instructions down the
management hierarchy for consistent strategy implementation.

Staff. This refers to the number of employees a firm needs and how they will be
recruited, rewarded, etc. A global firm needs staff that knows the diversity of their global
market and targets it accordingly. Such diversity dictates the appropriate structure the
firm should use, for example, a decentralised divisional structure. The structure adopted
then determines the number of staff needed to serve the global market. For example, the
number of staff at headquarters/the corporate centre can be reduced while that in
divisions increased to fully serve and satisfy customers in local markets. The corporate
centre may remain with strategists and customer support staff while other functions like
finance and operations are decentralised.
Skills. This refers to what the firm’s employees can do well: the firm’s competences. A
global market will need staff with diverse competences to suit the diverse customer
needs, tastes, preferences, and cultures. Whereas there tends to be convergence of
cultures, standardisation of products and procedures may not work competitively
everywhere and every time. There may be a need for ‘customised standardisation’ (a
little dose of customisation) depending on diversity of the global market served. Still, the
required skills will be determined by the firm’s structure, systems and strategy. For
example, a decentralised structure may require that certain skills be possessed by each
cluster of leaders in the divisions while a centralised traditional hierarchical structure
may need the skills to be concentrated at the corporate centre. The need for diverse
skills in a global market justifies the need to continuously train staff to ensure that their
competences enable satisfying changing customer needs, tastes and preferences.

Shared Values. These are the traditions, norms, standards, etc. which are the basis for
employees’ behaviour, choices, and decisions: the agreed and sometimes unwritten way
of doing things in the firm. This guides the structure to be adopted by the firm and
systems to be used. For example, if a global market requires valuing participation of all
members in decision making, innovative risk taking, and recognising individual input, a
bureaucratic controlling structure will be considered inappropriate. This is because there
will be a need for flexibility to allow room for innovation and creativity which too much
control can frustrate.

3.0 Conclusion
A global market determines: what structure a firm should adopt; what systems the firm
should use; what strategy the firm should follow; what leadership style the firm’s
management should express; how many staff it should have; what skills its employees
need to have; and what shared values should be cherished by the firm. Therefore, a
global market influences organisations by influencing all McKinsey 7S elements of a
given firm since all the elements are interconnected and interdependent in complex
ways.

References
Alshaher, A. A. (2013) The McKinsey 7S Model Framework for E-Learning System
Readiness Assessment. International Journal of Advances in Engineering & Technology,
6(5), pp. 1948-1966.

Birnleitner, H. (2013) Influence of Macro-Environmental Factors to the Process of

Integrating a Foreign Business Entity. Industry, Science and Policy Makers for
Sustainable Future: Proceedings of the 14th Management International Conference.
Koper, Slovenia, 21-23 November 2013.

Gupta, M. (2015) Organizational Structure Affected by Strategic Change. IJARIIE, 1(3),

pp. 372-376.
Kalowski, A. (2015) Structure Determining Factors of Business
Organization. International Journal of Innovation, Management and Technology, 6(3),
pp. 206-212.

Levitt, T. (1983) The Globalization of Markets. Harvard Business Review, 1983 Issue.
Available at: https://hbr.org/1983/05/the-globalization-of-markets (Accessed: 17
February 2020).

Nejad, A. T., Behbodi, R. M. and Ravanfar, M. M. (2015) Analyzing Organizational

Structure based on 7s model of McKinsey. International Journal of Academic Research
in Business and Social Sciences, 5(5), pp. 43-55.

Stverkova, H. and Pohludka, M. (2018) Business Organisational Structures of Global

Companies: Use of the Territorial Model to Ensure Long-Term Growth. Soc. Sci. 7(98),
pp. 1-9. doi:10.3390/socsci7060098

Tomás Cabello, C., María Ángeles, C. R. and Manuela, V. V. (2014) The Relationship
between Organizational Structure and Market Orientation: An Empirical Approach. The
International Journal of Management Science and Information Technology (IJMSIT), 11,
pp. 1-48.

Yen, Q. T. and Tian, Z. Y. (2012) Organizational Structure: Influencing Factors and

Impact on a Firm. American Journal of Industrial and Business Management.
doi:10.4236/ajibm.2012.

1. Achieving Quality
In the classroom, there are children with behavioural, emotional, social or other
challenges that may limit their learning abilities. Therefore, when the teacher identifies
their weaknesses and applies measures to overcome them, their learners acquire
education without any barriers. This ensures that the challenged learners do not feel left
out or discriminated from the rest.

2. Developing Talents
The needs in the classroom are not always negative. Learners, especially young ones,
are usually undergoing the process of understanding their skills. The teacher, however,
is experienced enough to tell that a certain learner has a particular skill or talent. In this
case, skills and talents become needs too because they require nurturing to develop.
Therefore, once the teacher identifies them and provides the essential support to
develop them, they help the learners to discover and grow them.

3. Creating Interest
Identifying and meeting individual learner needs boosts their morale and encourages
them. In some cases, the learner does not gain much from mass instruction. As such,
when the teacher provides individually prescribed instruction (IPI) it significantly helps
many learners to understand and grasp educational concepts. This applies more to
subjects such as mathematics and art. If a student feels supported by their tutor, they
develop rather than lose interest in learning.

4. Planning Classroom Activities

Once the teacher is familiar with the personal needs of their learners, they can easily
plan their day-to-day classroom activities, so they cater to all of them. For instance, the
teacher will know how to plan the timetable for counselling, individual tutoring, group
interactions and general supervision. In short, each activity targets the needs of specific
students such that by the end of the day, every learner’s needs are fully met.

5. Organising the Classroom

The best way for a teacher to organise the classroom is by first identifying the
characteristics of each learner. The learners that need more personalised instruction can
sit closer to the teacher. If a student has visual difficulties, the teacher can sit him or her
closer to the blackboard. They can also sit near a door or window where there is an
abundance of light. In a nutshell, the needs of the learners should determine the
availability of supplementary material, accessibility of equipment and supplies, as well as
the seating arrangements.

Evidently, it is paramount that the teachers identify and meet individual learner needs
when teaching. This is because it allows them to devote their energies beyond regular
teaching into effective education that is supportive and considerate for each learner. In
this way, the students are motivated, supported, empowered, and developed because
optimum learning conditions are created.

By an iQualify UK staff writer

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