Global Product Structure: Benefits and International Division

Global Product Structure: Advantages

• Global vision
• Resource leverage
• Strategic focus
• Simplicity
• Accountability
• Standardized product introductions
• Enhanced speed and decision quality
• Self-contained product development and introduction
• Development of talent
• Low interference from other divisions

Disadvantages

• Limited cooperation, communication, and sharing of information between divisions
• Costly to maintain
• Duplicated functions

International Division Structure

Focus: Focuses on domestic business by shifting all foreign operations into a semi-independent division. This structure evolved out of the growing scope of international activities and a realization that foreign markets often offered the most promising growth opportunities.

Characteristics of International Division Structure

• Organized by function, product, or by geography — such as country units within a region.
• Reflects a shortage of capabilities: with few employees having knowledge and experience in international operations, it made sense to cluster them together rather than to spread them throughout the organization.
• Used mainly by firms with a low ratio of foreign to domestic revenues and low foreign product diversity.
• This is functional compartmentalization into areas such as research and development, marketing, production, and human resources. This structure can be found in all organizations, including those differentiated primarily along product line, customers, or geography.

Characteristics of International Division Structure

• Organized by function, product, or by geography — such as country units within a region.
• Reflects a shortage of capabilities: with few employees having knowledge and experience in international operations, it made sense to cluster them together rather than to spread them throughout the organization.
• Used mainly by firms with a low ratio of foreign to domestic revenues and low foreign product diversity.

Global Product Structure Decision Involves

• Locating manufacturing and other value-creation activities in the most appropriate global locations to increase efficiency, quality, and innovation.
• Considering coordination and integration problems.
• Choosing a structure that can coordinate resource transfers between corporate headquarters and foreign divisions while providing the centralized control that a global strategy requires.
• Enabling managers to decide how best to pursue a global strategy.
• Providing benefits for diversified companies managing a portfolio of businesses in a rapidly changing environment.
• Responding to the growing need to serve customers across borders.