Horizontal International Division
As technological advances have occurred in the modern world, the way businesses operate has changed dramatically. A key aspect of business progression in the past has been the development and growth of ‘horizontal’ international divisions. This paper will look to define horizontal international division, explore the advantages and disadvantages it can bring, analyze the potential risks that it carries and discuss the best practices in must be taken to ensure successful horizontal international divisions.
Horizontal international division occurs when a single business branch is shared between different countries to produce a product or service. This transfer of work does not require one partner to do the entire job, but rather each partner takes on certain aspects based on the advantage and expertise that they offer. This has allowed businesses to benefit from lower costs, a wider variety of expertise and a greater access to a wider market. In a horizontal international division, the production of goods and services co not just be cheaper but also more efficient, as the goods or services in question can be produced at multiple speed and consistently better quality.
One of the major advantages of a horizontal international division, then comes in its lower cost of production. By moving away from carrying out all production in one country, to collaborating with multiple, companies can access resources more freely and efficiently. This can help to reduce costs significantly and potentially lead to more successful operations. Other advantages include the potential for increased quality, faster production and a broad range of expertise. For example, a company may be able to get more efficient production from a partner in a different country due to the skills or expertise that they can access in that area.
Beyond advantages, there are a number of potential risks that must be considered when looking at horizontal international divisions. One of these is related to quality. Quality control can be difficult to monitor in such an arrangement, as the businesses involved in production in different countries can have different standards. This can lead to a variety of issues, including delays in production, higher costs and customer dissatisfaction. Other concerns may relate to intellectual property rights, trust between partners, language barriers and cultural differences.
To reduce risk, there are a number of best practices that must be considered when looking at horizontal international divisions. Firstly, businesses must understand their partners and the areas in which they are operating. This means ensuring thorough research is carried out into potential partners and the cultural and legislative differences that may arise between countries. Companies must also be sure to protect their intellectual property rights by understanding theirs and their partners’ jurisdictions. Finally, there must be strong dialogue, periods of testing and quality assessment between all partners involved and an understanding of the commercial and legal risks that come with a horizontal international division.
In conclusion, horizontal international divisions can bring a number of advantages and opportunities to businesses, however they do come with potential risks that must be managed and delegated. With strong research and understanding of all partners, best practices applied and regular communication, there is the potential for a successful horizontal international division to be established that can lead to increased quality, efficiency and cost reduction.
