A small manufacturing firm approaches your office and believes there is a market

Question

A small manufacturing firm approaches your office and believes there is a market for handheld tools that are carefully crafted for local markets. After spending two months in Europe, the president of this firm believes that his company can create a popular line of these tools. What type of organization structure would be of most value to this firm in its initial efforts to go international? If the company in activity 1 finds a major market for its products in Europe and decides to expand into Asia, would you recommend any change in its organization structure? If yes, what would you suggest? If no, why? If this same company finds after three years of international efforts that it is selling 50 percent of its output overseas, what type of organizational structure would you suggest for the future?

Explanation / Answer

To start with they should follow Geographical Organisational Structure. It means it is organised by geographical regions. Each region is a complete unit that serves that region independently. This Organisational Structure is pretty scalable, as in you can expand to multiple countries and this structure would still work.
While expanding into Asia the Company can follow this same Organisational structure. If the scale of the operations in one region gets too big to handle, it can be split into multiple regions and the structure can remain the same.
This Org Structure might seem costly when entering a new market as you need a complete team to be present to handle the operations. But in the long run this is the best and cleanest Org Structure without any overlap of Roles and Responsibilities. Thats the reason many large corporations use this Org Structure.
In summary, Use Geographical Org Structure for expanding internationally. To enter into Asia set up Asia as a new region and expand there. Even when more than 50% of the output is sold overseas this structure works very well. The local team can be scaled down to control costs.

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