Which of the following is a potential drawback of the global area structure? A. It encourages fragmentation of the organization into highly autonomous entities. B. It is inconsistent with a localization strategy. C. It discourages local responsiveness. D. It is not suitable for firms with a low degree of diversification and a domestic structure based on functions.

Question

Brando

Business

12 October, 13:17

Which of the following is a potential drawback of the global area structure? A. It encourages fragmentation of the organization into highly autonomous entities. B. It is inconsistent with a localization strategy. C. It discourages local responsiveness. D. It is not suitable for firms with a low degree of diversification and a domestic structure based on functions.

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Answers (1)

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Natasha Bullock · Answer 1

Answer: A. It encourages fragmentation of the organization into highly autonomous entities

Explanation:

A Worldwide Area Structure refers to the division of a Multinational Company into different Geographical areas for easier management. For example you could hear something like Parrain Inc, Asia Zone or Parrain Inc Africa Zone.

This strategy facilitates local responsiveness and decentralizes authority so that decisions are taken faster and is very consistent with Localization strategies

A main disadvantage though is that it could lead to the Fragmentation of the company into Autonomous units that might start to be less efficient in working together. This can eventually lead to financial losses and damages to reputation from possible infighting. The Units might even end of competing against each other.