With large foreign operations that are not dominated by a single country or area including the headquarters, but well spread out geographically Multinational Enterprises use geographic divisions. Global Geographic (Region/Nation/Area) Division Structure is more common to European MNEs, such as Nestle. Nestle uses this structure because no one region dominates its operations.
Merits of Global Geographic Division Structure
The structure is useful when maximum economies in production can be gained on a regional rather than a global basis because of market size or the production technologies for the industry. A global geographic structure puts managers closer to the scene of operations than are managers at central headquarters. Regional managers are well positioned to be responsive to local situations such as the needs of regional customers and to fluctuations in resources. Thus regional divisions are often able to find solutions to region-specific problems and to use available resources more effectively than are managers at corporate headquarters. This structure facilitates teamwork. People are sometimes able to pool their skills and knowledge and brainstorm new ideas for products or improved customer service. This structure facilitates decision making as divisions develop a common identity and approach to solving problems. This increases cohesiveness and the result is improved decision making.
Demerits of Global Geographic Division Structure
A drawback is possible costly duplication of work among areas. For example, Ford abandoned its geographic structure in favor of a product division structure because of costly design duplication between Europe and North America.
Suitability of Global Geographic Division Structure
An organization facing the problem of controlling its activities on a national or global level is likely to use a geographic structure and group functions into regional divisions to service customers in different geographic areas. Each geographic division has access to a full set of the functions it needs to provide its goods and services.