Understanding the Characteristics of International Division Structures

Characteristics of International Division Structure:

• Organized by function, product, or 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 location to increase efficiency, quality, and innovation.
• Considerations made on coordination and integration problems.
• Locating a structure that can coordinate resource transfers between corporate headquarters and foreign divisions while providing the centralized control that global strategy requires.
• Enables managers to decide how best to pursue a global strategy.
• Benefits for diversified companies managing a portfolio of businesses in a rapidly changing environment.
• Responding to the growing need to serve customers across borders.

Global Matrix Design

• Contains simultaneous, intersecting differentiation bases, with many employees reporting to two or more supervisors simultaneously.
• Design is costly because it involves duplication of functions across units.
• Coordination difficulties undermine strategic focus and divert many resources to coordination tasks.

Global Matrix Designs

• Multiple, intersecting levels of authority.
• Slow decision-making undermines accountability and performance evaluation, reducing the incentive for executives to undertake risks.
• Two-dimensional matrix structures in MNEs involve interfacing geographic/product or function/product combinations, while three-dimensional structures are based on function/geographic/product differentiation.