 Dear students, we are talking about the stages of internationalization and this is the third stage of international foreign operations and that is the international division. We will be looking at how an international division operates in the international context and what type of organizational structure is established to operate this international division. In this picture you can see that the organization has got headquarters in the parent country. This organization is manufacturing various different products. So there are product line A, product line B and product line C which is operated in the form of a division. So there are domestic division for product A, domestic division for product B and domestic division for product C and when you are going into international operations in a divisional structure you will have an international division head who is managing all your product lines and your area divisions in different foreign countries. So your international operations, international divisions will have a separate head which will operate in your headquarters, house headquarters and that will manage all your international divisions, international production facilities, international sales subsidiaries and your headquarter to establish coordination. In this diagram you can see that in these three areas of this organization operations are working. One is their European division, one is their Middle Eastern division, one is their African division. This is a hypothetical structure and this is not exactly replicating any real organization. This is only hypothetical. So European, Middle Eastern, African divisions and in that divisions then you have a general manager who may be looking after either product A, B or C or he may be looking after all the products. So you can see that there is and or written over there. So a product A, B or C, so the general manager would be looking after all the products that are being sold in Europe. They may be being manufactured in Europe as well. And then general manager looking after product A, B or C in the Middle Eastern area and general manager looking after product A, B or C in the African division. And then you can see that under those then there are separate functional units. So from the sales subsidiary structure you go for this divisional structure in which the sales subsidiary structure does not have functional units under each division, each international division. But now you have created a structure which is more complex and now you have separate functional units operating under each division of your international operations. So you will be having HR function, you will be having finance function, you will be having production function, you will be having marketing function under each division which is operating in the international context. How an international division may be established? Number one, converting sales subsidiary to a production or service facility. It is a relatively small step for those organizations who are already assembling products. Sometimes you produce parts in your parent country but you assemble them in foreign country. For example, you know that all the auto industry which is operating in Pakistan, for example Toyota or Honda, parts of all their cars come from their parent country, from Japan and the plants which are here, you just assemble them. And assembling if you are doing it means that you have planted a plant, you are doing production and you have aligned all your functions. It is easy for you to completely take over production in such a system. So it is a relatively small step if you are already doing the assembling function. It is a relatively big step if you go for directly establishing a production facility. So if you have only a sales subsidiary where you are only selling and now you have to go for the production, the complete production of your product in a foreign country, it is a relatively bigger step, a larger step and therefore you will need to employ greater resources and it will be a little bit more complex process to directly establish production facilities in a foreign country. For that you can do that many companies do joint venture or acquire a local company. For example, when walls were established, they took over the local companies which were already operating in the local market. So they bought their factories and they bought their production facilities and that is how they established themselves. So if there is a local company which is working in the same business, you can go for taking over the production facilities of that company. When you establish an international division, initially how the structure will look like, it will look like a miniature replica of the parent country headquarters initially. Later on when the organization is more embedded in the foreign environment, it may evolve into a different type of structure but initially when you establish your organization in a foreign country, it looks like a miniature replica of your parent country. All the subsidiary managers, they report to the head of international division. It is possible that there is some informal reporting to respective functional heads. So it is possible that there is some informal reporting between the functional heads as well. So this is how an international division looks like in form of this structural outlook and how it goes into operation initially in the international phase.