International Human Resource Management-MJ Version

variables identified by Stopford and Wells. For companies that increase their
foreign sales without significantly increasing product diversity, the most likely
choice is a worldwide area division. In this type of structure, the world is
divided into separate areas, which might be either a country or a group of
countries, depending on the size of the market. In this case, the country in
which the headquarters is located is simply one of the areas. Each area division
usually operates in a rather autonomous way and oversees its own production,
R&D, marketing, etc. This approach might work well if the company has a nar-
row product line (low level of foreign product diversity), which needs to be
adapted to different local tastes and values. Local responsiveness is usually a
key competitive advantage of these structures. Even more so than for the inter-
national division structure, however, this type of structure suffers from a lack
of coordination. Activities will be duplicated and because each unit functions
independently, essential information and experience may not be transferred

Strategy and Structure of Multinational Companies 43

Global matrix

(or ‘grid’)

International division Area division

Worldwide product

division

Alternate paths of

development

Foreign sales as a percentage of total sales

Foreign product diversity

FIGURE 2.2

Stopford and Wells’s international structural stages model (adapted from

Stopford and Wells, 1972)