What are the advantages and disadvantages of the five structures?
Frynas & Mellahi (2015) defined the five structures followed by multinationa organizations to be international division structure, geographic division structure, product division structure and a matrix structure. Depending on the needs and the volume of the activities of a multinational company, a structure from these five may be utilized to run business activities in different countries. Some of these structures are centralized some are not. In the following discussion, I have provided the advantages and disadvantages of the five.
Advantages and disadvantages of functional structure
The functional structure is an organizational structure that divides its operations into separate departments or units according to the role of each department. For example the accounting activities of different operations are grouped in on accounting department. Speaking of a multinational organization, accounting activities from all the regional offices and the headquarters would be handled by one accounting department.
The advantage of functional structure is that the different functional units of the company get specialization in their specific operations and can carry these activities more efficiently. The disadvantage of this approach is that there is specialization within a unit in its specific activities but different units may find it had to work in collaboration with other units which could make the overall management of different units to be difficult.
Advantages and disadvantages of international division structure
In an international context, a division structure is utilized to break down the organization into many divisions and each division is responsible for a combination of functions. This is a more democratic structure where the divisions are free to make their own decisions based on their analysis of the situations.
The advantage of the division structure is that each division is performing their own set of functions, it is easy to manage and measure its performance. The managers of each division can be held responsible if something goes wrong.
The disadvantage of this approach is that each division my need professional managers to lead them. It could mean the allocation of more financial resources to each division. Different divisions may also develop rivalries with each other in order to get financial resources invested in them.
Advantages and disadvantages of geographic division structure
When a multinational corporation makes geographic divisions, they would delegate power downward to these geographic divisions which would enable timely decision making in accordance with the needs of the geographic area.
Employees in the same geographic division tend to develop personal relations with each other, which might be termed as an advantage as well a disadvantage. A disadvantage, because this could mean more communicating on division level but less communication on multinational level with headquarter and other subsidiaries.
Advantages and disadvantages of a product division structure
In this kind of structure, different divisions are made to handle different products. The advantage of the product division structure is that a division would get full expertise in handling a specific product.
The disadvantage of this organizational approach is that it can be difficult to measure, and the organization may end up with multiple resources as different divisions try to be autonomous.
Advantages and disadvantages of a matrix structure
In a matrix structure, the power is delegated on two primary basis, first is the functional are and the second is project to project. These structures are reported to be good for a productive resource coordination. The downside of this approach is that the roles of different people may change according to a change in the project. This could create a psychological stress among these individuals as an element of uncertainty would always exist.