A regional division is a multinational firm’s organizational structure by which the primary division of the firm is by a small number of geographic regions. For example, an insurance firm may be primarily divided into four regional divisions (Americas, Africa/Middle East, Asia/Pacific, Europe), and each of these divisions may then contain various product, market, and country structures.

A school of thought exists, largely led by Alan Rugman and associates, that sees regionalism as an a priori level of analysis. However, most writers seem to understand the regional mind-set with respect to global and multinational mind-sets. Whereas the global mind-set sees the similarities across markets and tends to compete as if national borders did not exist and the multidomestic philosophy recognizes the uniqueness of national markets and organizing the firm to compete at that level, the regional philosophy seeks to emphasize that there are significant similarities within the world’s geographic regions.

The traditional way to think of regional divisions was as some variation on the “multidomestic structure.” Thus, having recognized the uniqueness in the Argentinean versus the Brazilian versus the Colombian national markets, and granted some level of autonomy to subsidiary businesses units in each country, the firm with a regional worldview would likely set up a South American regional office. The basic purpose of this regional division would be to coordinate and aggregate managerial efforts for this part of the world. However, the region itself may have a strategic imperative—for example, to growth, profit, or innovation—searching for synergies within the region and may give different countries within the region different strategic roles.

Thus, for example, the Nestle Group has three global geographic zones (Europe, Americas, and Asia/Oceania/Africa), each headed by a zone director who reports to Nestle’s CEO and also sits on the corporate board. Additionally, as an indication of the local responsiveness (or multidomestic) aspect of the overall structure, it is telling to note that each of the geographic zones is divided into individual countries or country groups. For example, the Americas zone contains the Latin American and Caribbean groups and the United States and Canada.

The other way to think of regional divisions is as a variant of a global strategy and structure. Thus, the baseline mentality would be one that considers the world as one market and tends to ignore national boundaries. However, the firm may see some strategic advantage to setting up a few regional divisional offices for some combination of administrative/control and strategic purposes. Microsoft, for example, which has a highly integrated global strategy and standardized products, has hundreds of local sales offices clustered into six regions, namely Asia, Europe, Middle East and Africa, North and Central America, South America, and South Pacific. These offices are mainly for marketing, sales, product support, and customer service.

George Yip reminds us that a region does not necessarily imply geographic proximity. He provides the example of Gillette, which uses a socioeconomic/usage criteria resulting in countries like Canada, the United States, Britain, Australia, and New Zealand being included in the same region. Another example comes from the Nissan Corporation. In addition to its corporate headquarters in Japan, Nissan has three regional offices with various roles. The North American office in Tennessee serves as headquarters for North American operations, for the manufacturing and sale of vehicles and auto parts. Nissan International SA, based in Switzerland, covers the management of European sales and manufacturing operations. And Nissan Europe S.A.S, based in France, is a holding company for European subsidiaries and pan- European operational support.

The regional concept is more relative than taxonomical. Structures of contemporary multinational firms are complex, commonly featuring global, regional, multidomestic, matrix organizations.

Bibliography:

  1. Christopher A. Bartlett, Sumantra Ghoshal, and Paul W. Beamish, Transnational Management (McGraw-Hill, 2007);
  2. Simon Collinson and Alan M Rugman, “The Regional Nature of Japanese Multinational Business,” Journal of International Business Studies (v.39/2, 2008);
  3. Stuart Paterson and David M. Brock, “The Development of Subsidiary Management Research: Review and Theroretical Analysis,” International Business Review (v.11/2, 2002);
  4. Michael Porter, Competition in Global Industries (Harvard Business School Press, 1986);
  5. K. Prahalad and Gary Hamel, “The Core Competence of the Corporation,” Harvard Business Review (May–June 1990);
  6. Alan M. Rugman, The End of Globalization (Random House, 2000);
  7. Alan M. Rugman and Alain Verbeke, “A Perspective on Regional and Global Strategies of Multinational Enterprises,” Journal of International Business Studies, (v.35/1, 2004);
  8. David Strang, “The Diffusion and Strategy of TQM Within a Global Bank,” Geography and Strategy (v.20, 2003); George Yip, Total Global Strategy II (Prentice Hall, 2003);
  9. Stephen Young and Ana Teresa Tavares, “Centralization and Autonomy: Back to the Future,” International Business Review (v.13/2, 2004).