Global product divisions are part of the organizational structure of a multinational when the main division of the company’s activities is based on product (or service) categories. For example, an automobile manufacturing company can be mainly divided into a truck division, a passenger car division, and an SUV division; or a large professional services company can be divided into auditing, business consulting, information technology, and tax divisions. Each of these “Global Product Divisions” can then be divided into several geographic (eg America, Africa-Middle East, Asia-Pacific, Europe) and / or market (eg corporate, government and customer) subdivisions. private). The strategic rationale behind the global product division is the need to focus resources at the product (or product group) level.
Therefore, in the car example above, the company may feel that these three markets are quite independent and that the appointment of a separate management team for each division will allow each to focus on its markets and therefore develop your business and compete more effectively. In addition, CK Prahalad and Gary Hamel and other advocates of the resource-based vision of the company would insist that the company should be structured around the key resources that give it a sustainable competitive advantage. Thus, for example, a certain set of products could be based on certain technologies and competencies, and a global product division is a natural structure to house these products and resources. Traditionally, a global product division had control over most of the value chain relevant to its market.
For example, Procter & Gamble (P&G) has three global product divisions, namely, Global Beauty, Global Home Care, and Global Health and Wellness (as well as a Global Operations division). Therefore, the Global Beauty division would have its own manufacturing facilities, suppliers, brands, distribution network and service department. However, contemporary managerial and organizational approaches have downplayed the desirability of this type of control for two sets of reasons. In the first place, as Stephen Young and Ana Teresa Tavares affirm, total autonomy is not necessarily an optimal situation.
In this sense, authors such as Julian Birkinshaw have suggested that the global company in general is better off with coordination mechanisms in its global divisions that seek to find economies of scale, economies of scope, and other efficiencies and synergies. Therefore, the normative trend would be to share information systems, production, facilities and services among its product divisions; and P & G’s Global Operations division would be mandated to facilitate many of these synergies.
Another popular contemporary approach is the “outsourcing” (or offshoring) of parts of the value chain, such as multi-component production or a call center, to an external service provider. For example, Stanley Holmes writes that Boeing is outsourcing more than 70 percent of the 787’s fuselage, allowing Italian, Japanese, and Russian engineers to design and build important parts of the fuselage and wings. The benefits of these programs include reducing costs and building relationships with potential clients. For example, Kristien Coucke and Leo Sleuwaegen report on a recent study in which offshoring programs increase the likelihood that Belgian manufacturing companies will survive.
However, there is widespread acceptance and adoption of global product divisions by multinational companies. This is especially the case for corporations moving away from international divisional structures: over time, national and international businesses recombine and then split into product, market, or geographic structures. However, throughout the same development process, these structures often continue to evolve into some form of matrix, whereby managerial authority descends to the company through two (or sometimes three) dimensions. For example, one dimension can be like the global product structure responsible for multiple offerings and the other can be geographic.
A more advanced stage of development would be what Chris Bartlett and Sumantra Ghoshal call the “transnational” structure, whereby the company develops a dual capacity to deal with both local (national) and global contingencies.