As a firm develops international business activities, its corporate structure must adapt to the changing environment in order to accommodate foreign operations effectively. The organizational structure that emerges will depend on many factors, including the location and type of foreign facilities, the impact of international operations on total corporate performance, the nature of assets employed in pursuit of business abroad, and the time horizons for achieving international and total corporate goals.
Firms must establish legal and organizational structures at home and abroad to meet company objectives. Within each foreign country these arrangements may differ because of the unique nature of activities and environmental requirements. Layered above the country organizations are additional structures that coordinate activities in more than one country. The form, method, and location of operational units at home and abroad will affect taxes, expenses, and control. Consequently, organizational structure has an important effect on the fulfillment of corporate objectives.
The more important the foreign operations, the higher they report in the structure.