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Published on July 30, 2007

A variety of different options exists, ranging from a centralised approach in which headquarters calls all the shots on brand development to a decentralised approach in which local subsidiaries are given free reign to execute against broad brand guidelines.

While there is no single solution that makes sense in every situation, many fast-moving consumer-goods companies have pioneered matrix organisational structures deployed as regional hubs around the world to globalise their brands. Such structures have allowed companies to leverage brand strength and synergies - such as economies of scale, advertising and innovations - over wide geographies without losing the ability to execute locally.

In its simplest form, the matrix organisational structure allows firms to regulate decision-making over brand development between local and regional brand-management teams.

For years, consumer-products companies struggled over how decisions on brand development should be shared. Specifically, how should country general managers split accountability for brand development with regional brand-management teams? Who should have, say, the final decision regarding which products are introduced into the marketplace?

On the one hand, those who favoured giving greater authority to country general managers argued that local management understood the nuances of the marketplace and was best positioned to create products that resonated with consumers. Furthermore, if general managers were to be held accountable for results, they should have complete control over decisions that affected their business.

On the other hand, those who favoured giving regional brand-management experts authority over decisions affecting brands believed this was the best way to strengthen brand equity and drive synergy across several countries within a region.

One European multinational consumer-product and food firm, for example, has vacillated over the years between giving regional brand management very little control, such as merely making suggestions on brand development, and complete control over brand decisions.

Early results were mixed. In countries where local and regional brand teams worked closely to define consumer needs and execute strategies, the company introduced successful innovations regardless of who had authority to make decisions about brands. However, in circumstances where there was weak collaboration between local and regional teams, the results were poor performance, finger-pointing and low morale.

As its matrix structure has evolved, this company has learned that success depends on rigorous alignment of business objectives between local and regional brand teams, excellent collaboration and clear roles.

For this company, the role of regional brand-management teams is to develop brand strategies, lead products and packaging development, create innovation projects and commission market research. Local brand managers have the role of executing brand strategies.

Of course, there are challenges in making a matrix organisational structure work. First, regional brand management must not lose touch with local consumer needs. What works in one country might not work in another. Large detergent packages that work in Singapore, for example, might not do in a less-developed country like Thailand, with less disposable income.

Second, there is constant tension in the matrix structure between country general managers who are accountable for achieving local results and regional brand managers who are measured on regional brand performance. Both want control over local brand managers.

Larry Chao

Larry Chao is managing director of the Chao Group, an organisation-change consultancy in New York and Bangkok (www.chaogroup.com).