Under what conditions should a company consider adopting a g

Under what conditions should a company consider adopting a global geographic structure as opposed to a global product structure?

(Need about a 400 word answer)

Solution

Global geographic strucure and global product structures are two different organizational structures observed in modern multinationals. An organization structure indicates relations among different hierrechy levels of the organization.

You know multinationals operate in different countries. Their orientations are outside the domestic country where their headoffices are located. These types og organizations are followed by them according to their suiability.

In global product structure, at the head office top authority is oard of Directors. Under them there will be different managers or chief executive officers. Each executive will look after a specific product. such multinationals have different products center located in different countries. Each product center will specialize in a particular product. Manager of a global center is responsile to a specific CEO at head office who is concerned with that product only.

This structure provides som advantages. They are as follows:

1. As gloal divisions are concentrating on one product, specialization is possible. It will improve quality and productivity.

2.Products are manufactured after considering local advantages like resource availability, regional advantages, local culture etc.

3. Other divisions do not interfere in the activities. So independednce in decision making is possible.

4. Here research activities of a division concentrates on the specific product of the division. Hence eter result is possile.

5. It helps in better search for new markets where products can be sold.

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In spite of aboce advantages it has lots of limitations. They are as follows:

1. Knowledge sharing among different divisions of the same company is hardly possible.

2. Same funstions are performed by each division separately for their own product. So dpplication of work is observed.

3. Practically there is no communication or relation among the different divisions of the same company. Thus harmony or unity is absent. It may result in wastage and extra cost in many cases.

4. As managers in head office are looking after each job separately, no unity is observed among them. it appears as if they belong to different companies.

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In order to overcome these limitations many moderm multinationals are preferring gloal geographical structure now a days. In this method, each geographical area is independently handling the entire work right from production, recruitment to sale independently for that geographical area. Head office will only frame international strategic guifdelines which geographical divisions will follow in their functioning. Sometimes products are maufactured by local divisions. Their marketing are broadly guided by the head office. Each global unit is self suficient in all respect. They are controlled and fiunctions under the leadership of manager of the division. Manager of each division will report to head office CEO.

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This structure has many advantages. Some of them are descried below:

1. It is very effective when maximum advantages of production is available on geographic basis of operation.

2. Sometimes success of the division is closely related with the culture, habits, etc of local people. Electronic goods are typical example. In India workforece is cheaply available. They can e engaged for domestic work. As a result dish washer is not demanded by the people. Taking this point in mind, manufacturing of electronic goods by India division will concentrate more on television, washing machine, freeze etc. So better utilization of local culture, habits etc are possible in this structure.

3. As the global division manager is independently responsible to look after the functioning of its region, he can independly frame his plicy and implement them with great success. Multinational can appoint local experts to handle local work more effectively.,

4. It is very effective when company wants to concentrate on a a few specific global geograophic market.

5. As all flobal divisions are reporting to same executive at head office, better coordination and cooperation is found among the companies employees.

6. as functions are directed after considering local culture, requirements and availability, cost can be lowered and profitability can be improved.

considering above advantages many multinational are now prefereing global geographic structure rather than global product structure. Industries doing products of international demands like electronics, telecommunication, processed foods etc are using this structure. Among other service industries, it is very popular in retail business, hotel industries etc. Local rules and regulations, habits of local people, etc are very crucial for success of these items. Nestle, KFC etc are few examples of companies using this system. However product structure is still observed. It is used by only those comanies that have thousands of varieties in the prodiucts they are manufacturing.