The worldwide product divisional structure

Question

BlackTom AI · Accepted Answer

Question restatement: The worldwide product divisional structure
Options:
1) inhibits the realization of location economies.
2) motivates country managers to develop products and services for local customers.
3) limits the transfer of core competencies between areas.
4) is weak in local responsiveness.

Analysis of each option:
Option 1: "inhibits the realization of location economies." A worldwide product divisional structure concentrates on product lines and global product management rather than on geographic clustering. This tends to deprioritize geographically driven efficiencies (location economies) in favor of product standardization. However, the statement uses absolute language that implies a definitive inhibition of location economies, which is not universally true in all implementations. Some firms still realize location-based benefits through regional manufacturing, sourcing, or distribution decisions even within a product-focused structure. Therefore this option overstates the impact and is not the best general characterization of the structure.

Option 2: "motivates country managers to develop products and services for local customers." This contradicts the essence of a worldwide product divisional structure, which centralizes product strategy around global product lines rather than tailoring to each local market. Local adaptation is typically limited because product decisions are driven by global product managers. Thus this statement is inaccurate.

Option 3: "limits the transfer of core competencies between areas." A product divisional structure is organized by product lines across borders, which can actually facilitate sharing product-specific know-how within the same product division across regions. While some cross-area transfer of broader capabilities may be reduced compared to a more matrix or area-focused structure, the claim that it universally limits transfer of core competencies between areas is too strong and context-dependent. In many cases, core competencies aligned with a product can be leveraged globally within that product division, so this option is not a definitive characteristic of the structure.

Option 4: "is weak in local responsiveness." This is a widely cited strength/weakness trait of a worldwide product divisional structure: by centering on global product lines, the structure tends to standardize offerings and processes, which can make it less responsive to local market nuances, preferences, and regulatory differences. This description aligns with common international business theory about product divisional (global product) structures being less responsive to local conditions compared to a geographic or matrix structure.

Summary of reasoning: Options 1–3 make claims about location economies, local customization, and cross-area transfer that are not universally accurate determinations of a worldwide product divisional structure. In contrast, option 4 concisely captures the well-known drawback of the structure—reduced local responsiveness—making it the most consistent choice with the typical characterization of this organizational form.

The worldwide product divisional structure

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