What Is a Geographical Organizational Structure?

A geographical organizational structure organizes people within an organization by geographic location. This structure creates specific divisions for each location. Each division acts as if it is its own company, combining different types of personnel for various business functions.

Geographically structured Organizations.

When to use a geographical organizational structure

For a variety of reasons, large organizations or corporations may find a geographical organizational structure appealing. To better meet the unique needs or preferences of various groups, large corporations may opt for a geographical organizational structure. They may create geographic decisions based on different:

Some corporations favor geographical organizational structures for logistical benefits. For instance, they might decide to use this design to locate facilities in regions with lower labor costs or with easier access to supplies and clients. These logistical advantages could result in increased financial gains and cost savings for businesses.

What is a geographical organizational structure?

People are arranged within an organization according to their geographic locations using a geographic organizational structure. This structure creates specific divisions for each location. Each division conducts business as though it were its own company, utilizing a variety of workers for a range of tasks. For instance, each division might have its own marketing, production, sales, distribution, and other departments.

Geographic organizational structures frequently grant local divisions the autonomy to conduct their operations as they see fit. Divisions can comprehend and adapt to local preferences and demand while still adhering to corporate policy. Businesses with these structures are frequently more adept at creating effective local, regional, and global operations.

Advantages of geographical organizational structure

Here are some advantages of the geographical organizational structure:

Better efficiency for division

Geographical organization structures combine employees from different specialties. This could speed up the development of solutions and client responses in those places. This could lead to more effective operations compared to those at a centralized location.

Easier to coordinate

When an organization is geographically structured, each local division operates independently. All members of the business works in the same location. This makes it simpler for staff to plan meetings and handle challenges posed by the particular geographic location.

Improved focus

Employees who work in local divisions can only concentrate on the goals of their particular location. This may improve operational efficiency and overall results. Companies may enjoy increased profitability as a result.

Leadership opportunities

Businesses with geographical organizational structures need managers in each location who can effectively lead. Managers can take advantage of this to complete on-the-job training and gain beneficial experience. In order to prepare managers for potential C-level positions within the organization, these leadership opportunities teach them how to lead at the top of the chain of command.

Ability to track profits

The geographic sales organization structure enables the business to more accurately track its profits according to location. Businesses can monitor the sales performance for particular regions or divisions. Additionally, depending on customer demands, different regions may have different profit margins, sales techniques, and revenues.

Improved customer communication

Geographic organizational structures often result in local divisions that facilitate better customer communication. Local managers can keep their division’s operations tailored to best meet the needs and demands of the local customers by maintaining a regional focus. Additionally, being close to customers often makes it easier for employees to interact with them and develop and maintain relationships with them.

Flexible market response

Geographic divisions are knowledgeable about the specific circumstances in the region they cover. Theyre able to better monitor geographic changes. Divisions are free to decide how to change operations in response to shifting customer needs, wants, or preferences.

Logistical efficiencies

By using a geographic divisional structure, businesses can organize geographically rather than centrally. This gives each division the logistical autonomy they need to operate as effectively as possible. Depending on regional requirements, markets, and preferences, each division may decide for itself. This includes decisions related to:

Strong collaborative

Geographical organizational structures often encourage collaboration between employees. To solve problems, divisions need experts with various skills to collaborate. Additionally, this structure frequently promotes healthy competition between departments as a motivating factor at work.

Disadvantages of geographical organizational structure

Here are some disadvantages of the geographical organizational structure:

Duplicate activities

Within a geographical organizational structure, each division has its own departments. Each location, for instance, has its own warehouse, research department, and other departments. This may lead to duplicate activities throughout the company. While departments at each location may boost local efficiency, it may reduce the company’s overall efficiency.

More expensive

Geographic organization structures may be more expensive. When there are multiple infrastructures or activities within the organization, these structures might use more resources. Companies with this organizational structure may sacrifice economies of scale. Production may increase, but costs may also increase.

Competition for resources

Some companies may have limited access to resource. Due to this, it might be challenging to provide each division with the resources it requires. This may cause scarcity and unhealthy competition across divisions.

Difference in employee expertise

Each division employs employees with different backgrounds and expertise. These diverse teams give their division special advantages and a deeper comprehension of the region. But different locations’ levels of expertise might result in discrepancies in the company’s efforts.

Potential conflict

Companies with geographical organizational structures frequently give their divisions autonomy to make their own decisions. Conflicts between local division management and central or corporate management at the headquarters could arise as a result of this decentralized approach to decision-making. Therefore, corporate management may order local divisions to follow procedures that limit their autonomy.

Lack of company culture

Geographic organizational structures may make it difficult for businesses to establish a unified corporate culture. There may be difficulties communicating or coordinating among different divisions. However, each division may develop its own strong company culture.


What is geographical structure example?

An example of a company with a geographic structure is a medium-sized retail or fast-food chain that has locations throughout the state. Businesses like hospitality, retail, and transportation that must be close to customers or supply sources benefit from this type of structure.

What company uses geographical organizational structure?

Geographic organizational structures function best in businesses with strong leadership and employees who share a common vision. For instance, Daimler AG has its corporate headquarters in Stuttgart, Germany, as well as manufacturing facilities throughout Europe and sales divisions all over the world.

What are the 4 types of organizational structures?

Functional, divisional, flatarchical, and matrix structures are the four types of organizational structures.

What is an example of geographic departmentalization?

Geographic departmentalization A business might have distinct divisions for North America, Europe, and the Asia Pacific, for instance. This enables the business to modify its goods and services to satisfy the demands of customers in each region.

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