expandingAmy Kates and Greg Kesler
Strategize Magazine, 2011

It is an axiom that structure follows strategy. Decide where your business needs to go, and build an organization that can deliver the capabilities you need. When you are expanding your business internationally, however, the way in which you configured regional clusters can influence the strategic discussion.

Dispite advances in communication and management technologies, most companies still group countries into regional structures reflecting the continents, typically North and South America, Europe and Asia. Managers perfer to cover a group of countries that are contiguous and can be visited easily. However, a number of companies are experimenting with groupings that reflect stage of market development, common customers, and growth potential rather than just common location. For some organizations, these new clusters replace the old continental regions. All others, they serve as overlays – decision frameworks to guide investments and management attention or communties of practice for idea sharing.

Organization Structure

The trend is to look at some organizing mechanism as a layer to top of the basic continents that recognizes commonalities that make sense for managers to talk about. MetLife has used overlays to reflect market maturity and growth potential. “Driver” countries, such as Mexico and Korea, have large populations with high growth and attractive market charateristics for insurance. “Growth” markets have more moderate outlooks either because they are mature markets, such as those in Western Europe, or have underdeveloped consumer financial sectors but large populations, such as China and India. “Contributor” countries are developed, make solid current profit, but have the least growth potential. These include Chile, Australia and Taiwan. Chile has only 17 million people and a well-developed insurance sector. These overlays help MetLife leaders to direct investment and energy to the countries that may not have high revenues today, but have the population and potential for the future.

Coca Cola pays a lot of attention to similarities and differences in the distribution systems in various geographies – where there are a few large, sophisticated francise bottling partners versus many small ones. The latter require more marketing talent in the field operations to support the smaller bottlers. Coke also has created clusters that reflect distributor ownership structures. Some of the big Latin America bottlers are owned by Spanish families. Creating the right conversations between Coke managers in South America and Iberia becomes important.

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Expanding Internationally – on pages 8 and 9