Question

What factors would drive a company to make a shift from a worldwide area structure to a worldwide product divisional structure?

What challenges do firms face when they try to change their organizational structure from worldwide area structure to worldwide product divisional structure?

100 words each

Answer 1

A.

The first factor is the degree of decentralization, autonomy in decision making process and increased level of responsiveness that will make the company to shift from worldwide area structure to worldwide product divisional structure. When there is an area based structure, that focus is only upon particular county or a set of countries with all the products. But it can slow the decision making process. In contrast to it, when there is a divisional product structure, then one product or line of product has to work within different markets. The second factor is the high scope of innovation and quality focus when a worldwide product divisional structure is adopted. In this case, one product in different markets, get specialized attention and become more ready to respond to changes in specific market. So, strategic advantage increases with this structure. The third factor is increased level of responsiveness towards the localized aspects of demand in the different markets. It is done efficiently when different product lines work independently of each other under worldwide product divisional structure.
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B.

The first challenge is the resistance from their own employees. The do not want to lose power and control, when the change takes place. It makes them resist the change. The second challenge is to transform the company in urgency mode under the product divisional structure. Now, with this structure, one product is catered differently in different markets, depending upon the local preferences and global brand value. It demands a high level of responsiveness and cultural understanding of markets across the world. Earlier, there was only one geographical region to focus upon in  worldwide area structure, but now, it is the whole world with one product division to work upon. The third challenge is the increased pressure to innovate and find ways to satisfy the demand in different markets. It increases the work burden and challenge for the employees, responsible for it.