Advantages And Disadvantages Of Vertical Differentiation

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Firstly, NLC will have to change its original vertical differentiation structure since an additional market needs coordination. Therefore, an international division structure should be implemented, which is the original domestic structure that contains its domestic divisions plus a new international division. This means that each division will keep its original responsibilities in terms of operating decisions, but the headquarters need to take an extra division into account. A disadvantage of this structure is the possible inhibition of new technologies and products that are diffused globally. To cope with this weakness, NLC should pay extra attention to its integrated mechanisms. If eventually this project becomes a success and NLC decides to do more FDI’s in other markets, a transition from an international division to a more worldwide area structure is required. In addition, NLC’s structure will also find changes in its vertical differentiation. In the short-term, when NLC is creating its subsidiary in Chile, factors that could create delays and obstructions for a quick and successful set-up may arise. To avoid these, a centralized structure in the short-term is advised as it brings more…show more content…
By implementing the integrated systems as mentioned before, NLC will create a control system that uses personal contact with subordinates. However, the necessity of this type of control can be reduced by creating a strong culture within the firm that promotes self-control. The use of a code of conduct that is clear to all employees will encourage this. Self-control is preferred over strong personal control as the latter one may affect relationships negatively. Furthermore, NLC should try to make clear expectations for its performances in Chile, such as quality and quantity of its services. By doing this, NLC can prevent performance ambiguity and prepare realistic

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