Geographic Organization Structure

Organizational structure is the framework a company uses to man its operations. The structure groups people and job positions, lays out relationships between positions, establishes lines of communication and a chain of command and distributes responsibility and accountability. The structure is built specifically to support a company's strategic goals. A geographic structure organizes people by a company's operations in remote locations.

The geographic structure is one of several organizational designs. This particular structure brings workers together in geographical divisions. Other divisional structures group according to product, service or customer. Each division operates as if it is a company in itself, complete with the personnel to carry out various business functions such as finance, marketing and production. The divisions establish themselves in the geographical area they serve, creating regional, national or international operations.

Bringing together employees from different functional specialties allows a geographical division to respond more quickly and efficiently to the division's needs than would be possible if some operations had to be met from a remote, centralized location. Being together, specialties within the division also find it easier to coordinate with one another to meet the unique challenges of their geographical location. The geographical grouping focuses all worker efforts solely on the objectives of their own division, increasing results. This structural approach also demands leadership from managers, who gain valuable experience that expands the company's executive talent pool. Managers who have operated a geographical division know what it takes to effectively lead at the top of a chain of command.

Though efficiency might increase within SBUs, it decreases for the company as a whole, since geographical divisions duplicate both activities and infrastructure. There may be several marketing departments, for instance, one for each area's division, along with several ways of producing, several distribution networks and several research departments. This uses resources while sacrificing economies of scale. Economies of scale refers to increases in efficiency and savings as the same activities are performed in increasing scope. Different divisions might have to compete with one another for resources from the parent company. Also, employee expertise doesn't necessarily transfer between regions.

Divisions are best able to serve the needs and desires of distinct groups. In the case of geographical divisions, differing cultures, rules, languages and customer preferences between areas make establishing geographical divisions a good idea. Additionally, logistical concerns can give rise to geographical divisions. When it is more logistically sound to ship locally, use local resources and hire local people, a geographical structure may be the best choice.