The International Division
Historically, when firms have expanded abroad they have typically grouped all their international activities into an international division. This has tended to be the case for firms organized on the basis of functions and for firms organized on the basis of product divisions. Regardless of the firm's domestic structure, its international division tends to be organized on geography. This is illustrated in Figure 13.3 for a firm whose domestic organization is based on product divisions.
Many manufacturing firms expanded internationally by exporting the product manufactured at home to foreign subsidiaries to sell. Thus, in the firm illustrated in Figure 13.3, the subsidiaries in Countries 1 and 2 would sell the products manufactured by Divisions A, B, and C. In time it might prove viable to manufacture the product in each country, and so production facilities would be added on a country-by-country basis. For firms with a functional structure at home, this might mean replicating the functional structure in every country in which the firm does business. For firms with a divisional structure, this might mean replicating the divisional structure in every country in which the firm does business.
This structure has been widely used; according to a Harvard study, 60 percent of all firms that have expanded internationally have initially adopted it. Nonetheless,