Discuss the advantages or disadvantages a global firm might experience if it wer

Question

Discuss the advantages or disadvantages a global firm might experience if it were to decentralize the decision making process through the assignment of teams according to geographic location. Address the following questions: What organizational changes might a firm be obliged to consider, if it makes geographically based divisions? Do you believe the complexity of global decision making has become easier, or more complex, in the last twenty years? What examples of companies successfully or not-so-successfully implementing such an organizational structure can you find? Are there examples where a firm would have performed better by using such an organizational architecture?

Explanation / Answer

De-centralization of business is a great thing to do, Infact most of the large corporations have different business units that are intentionally created to work as completely different entity in different region.

Examples: If you are a global company operating in China or India these countries are very large with too many structural problems for global headquarters of any firm to handle, So de-centralization and creation of seperate entity is very much desired and this is the thumb rule for any corporation

Example 2: Europe for example has many laws and similar business practices. Infact there are many similarities between US and European businesses, In such case having a central organization which takes decisions around this region can be great.

Centralized economic planning also has its own merits, It is much more faster to take decision at very top and force everyone to accept it, Sometimes this can be of great help if you need quick action. But de-centralization will reduce power of parent organization and gives oppurtunity to local units to effectively learn, understand and invest in business as a local firm. This will provide long term advantage in case of market cycles.

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