Business Organisational Structures of Global
Companies: Use of the Territorial Model to Ensure
Hana Stverkova 1, *
and Michal Pohludka 2
Department of Business Administration, Faculty of Economics, VSB—Technical University of Ostrava,
17. listopadu 15/2172, 708 33 Ostrava, Czech Republic
ZKV Career, s.r.o., Chomutovska 38/10, 161 00 Praha, Czech Republic; firstname.lastname@example.org
Correspondence: email@example.com; Tel.: +42-059-732-2217
Received: 1 June 2018; Accepted: 11 June 2018; Published: 14 June 2018
Abstract: In today’s turbulently expanding business environment, during the fourth industrial
revolution, it is necessary to respond to market trends and to adapt strategy and organisational
structure appropriately. The article is focused on the reorganisation and optimisation of the business
organisation structure of global companies. The purpose of this paper is to analyse and evaluate
the use of the territorial business structure, within the framework of a global company, based on
experimental research. Experiences with the introduction of a territorial organisational structure
in a corporate enterprise have proven to be highly effective long-term, with productivity and
sales volumes increasing. This territorial setting can be considered as a competitive advantage,
which matches predicted market trends and is suitable for global businesses.
Keywords: business model; global companies; Industry 4.0; market transformation; organisational
structure; new economy; territorial model; territory management
The goal of every global company is to grow steadily and gain maximum market share.
These companies are characterised by a complicated set of operations, emphasis on quality, brand
awareness, and high quality staffing. This can be effective if the setup of the organisational structure
is fully in line with the nature of the market and the product portfolio. The organisational structure
of global companies is evolving over time, but they are currently similar in all companies across all
segments. Considering the trends of changes within Industry 4.0, the central issue in Economy 4.0 is to
understand the impact of digital transformation, the creation of the connection networks, and to adapt
business models to increasingly demanding customers.
Corporate companies operating on the global market are, generally, geographically divided into
several zones, and then further broken down. Most companies in the European area fall into a zone called
Europe, Middle East, and Africa (EMEA). This zone is then further divided into regions. The EMEA
zone contains a large number of countries with different purchasing power, size, and maturity. Its role,
in terms of business and corporate governance, is also played by religious, historical, and cultural context.
Such a varied zone requires different business and marketing strategies (Porter 1996;
Alford and Greve 2017). The business model can be divided into two basic types: direct and indirect
(more in Honeycutt et al. 2003; Kotler et al. 2007; Kim et al. 2018). With direct sales, the company
is represented in the country as a local company with a local organisational structure. Depending
on the size of the country, the purchasing potential, and the amount of sales, all components of
the company—such as sales, marketing and finance departments, technical and customer support,
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and more—are present in the country. In smaller countries, global companies have only a fraction
of the components present, such as business and finance departments, and all others are shared
across multiple countries. In the indirect sales model, the companies are represented by partners or,
in certain cases, distributors. Collaboration may take several forms, two of which are exclusive and
non-exclusive. The first is exclusive cooperation, in which the distributor is the exclusive and only
sales channel in the country. This model is on the decline because, in times of crisis, global firms
have a very limited scope for change in response to a situation. That is why the second collaboration
model, non-exclusive cooperation, is used more extensively. In this model, a global company does
not commit itself to exclusivity and, if necessary, can enter the market directly or use different sales
channels (Salvioni et al. 2016).
If we focus on a direct representation business model for global companies, in a given country,
a key factor in sales efficiency is setting up a good business structure (see Kraus et al. 2018). Selecting
a suitable model depends on several parameters. It is often very difficult to choose the right one.
In many companies, after the introduction of one model there may be a transition to another, after a
very short period of time, as expectations have not been met or other elements motivate the company
to change. One of these elements may be a rapid increase in costs, which negatively affects the financial
soundness of the company from different areas, such as profit and cash flow.
Determining the sales structure and the number of sales people that will be most effective is a
complex and important decision. It is a decision that determines the success and failure of a company
in the short, medium and, if there are no changes, long-term (Andrews et al. 2017; Schumacher 2017;
Farah and Gomez-Ramos 2014).
The main aim of this article is to describe and evaluate the introduction of a territorial business
structure. The first partial aim is to focus on a territorial business structure within the framework
of a global company in the Czech Republic. The second partial goal is to define the key attributes
necessary to set up a new business structure according to territorial management. The authors focus
on reorganising the organisation. Furthermore, the authors evaluate the final effect of the whole
reorganisation and generalise the process of setting up the territorial business infrastructure for
Setting up the sales model is not a rigid thing and can be changed while running the company.
Each change is, however, associated with two major negative effects that are intertwined. The first is,
in most cases, the reluctance of people in the sales department to embrace change. This reluctance has
a secondary effect, which is a short-term decline in turnover. However, after a certain period, there is
a turnaround and subsequent growth, assuming that the direction determined by the change is the
correct one. The length of this period depends mainly on management and how they can motivate and
persuade individual members of a business team that a new vision and a new model bring a more
positive future for them and for the company. This can be brought in the form of competitiveness,
increase of the market share, and turnover, over the long-term.
2. Methodological Background for the Introduction of Territorial Management
There are quite a number of ways to break down the competencies and organisation of work in a
company. Each of the organisational structures is suitable for a different type of business, and each has
its practical application. It is therefore not possible to say which of the alternatives is the right one
and the most effective. However, it is correct to say that the organisational structure is definitely not,
or at least should not be, something unchangeable (Kovacs and Kot 2016). The company naturally
changes with time: its portfolio of products and services, the number of employees, their experience,
and so on, all change. It is important that all these changes are reflected in how work is managed
and organised within the company. The most frequent factor in changing the organisational structure
can be the growth in the number of employees or the new market situation (Teplicka et al. 2015;
Darmanto et al. 2017; Okreglicka and Mynarzova 2015; Kasik and Snapka 2015).
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When designing and choosing a particular model, it is also necessary to take into account
personality skills in general, such as the ability of a manager to manage a certain number of employees
with some efficiency and attention. According to Graicunas’ theory (Veber 2000; Zikmund 2010, 2011),
one leader is able to manage a maximum of five subordinates. As soon as they have more, they
are quickly freed of certain relationships, and the situation and subordinates can easily get out of
control or, on the contrary, the subordinates may miss the leadership and attention that the manager
should provide them. Therefore, if a company does not change its organisational structure at the
appropriate moment, it may stumble at a certain stage of its development or even begin to stagnate
(Dedina and Maly 2005; Pachura 2017).
If we focus on a business organisational structure, it can be divided into four groups
(Cejthamer and Dedina 2010; Dedina 1996):
Territorial sales arrangement—a sales team divided by geographical territory.
Product sales—a sales team divided by products or product groups.
Sales by individual markets.
Combination of previous models.
The territorial organisation of sales is based on the fact that each sales person is in charge of a
certain geographical area with a precisely defined set of customers, where the products offered are
the complete portfolio of the company. This model brings with it many advantages, especially a clear
customer list structure, customer segmentation, possibility to quantify the potential of the territory, direct
responsibility of the seller for the given sales management in the given territory, simple implementation
of Key Account Management for the company as a whole, and a reduction in travel costs.
The product layout is based on the fact that each sales person is in charge of only a part of the
company’s products. This arrangement is primarily chosen by companies that have many products of
different kinds that are also very distinctive and technically complex. It is also used in sectors where a
highly skilled sales person who knows the products in great detail is an added value, and an advisory
style, mostly from a technical or application point of view, is used more than commercially-driven
business relations (Dedina 1996; Spaho 2010; Lin et al. 2018).
The sale by individual markets is characterised by the fact that the sales territories are established
according to the market served—industrial, food, or other segment—or even the composition of
customers themselves ,which are close in their profile (e.g., sales representatives for the automotive
industry, and so on).
To create a sales organisational structure, consider the following attributes (Blair 2011; Cejthamer
and Dedina 2010; Dedina 1996):
Purchasing power and the size of market.
Competitive environment and clusters of competing companies.
Anticipated turnover in several years and in different outcome variants.
Analysis of the sales portfolio, with emphasis on the key products.
Analysis of the sales territories.
Customer analysis, customer segmentation, or potential for individual customers.
The size of the total sales territory.
The estimated costs associated with the sale of the P&L (profit and loss statement) of the
Pricing policy: market prices, product pricing, and separation of the top products from the
perspective of pricing.
The basic methods and techniques used to create a new organisational structure according to
the territorial management include: recency, frequency, and monetary value, customer value, lifetime
value of customers (Fader et al. 2005), complete analysis of competition in terms of substitutions,
product portfolio, price comparisons, added value (Lenzo et al. 2018; Ali et al. 2018; Balance et al. 1987)
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(i.e., competitive advantages), the SWOT analysis of each competitor, finding competitive advantages,
eliminating weaknesses against competitors, and finding market space. In addition, it is necessary to
prepare an action plan with clear objectives and strategies, to set up a network analysis with the setting
of individual control points at the time of recapitulation of success or failure, and a plan for individual
customers in terms of prices and product offerings, based on customer needs analysis (Chytilova 2015).
3. Reorganisation According to the Territorial Management
A global company acting in the field of health has set ambitious growth targets over the medium
term. One component was to streamline company operations and business models at local levels.
The second was subsequent acquisitions.
Long-term and ambitious growth can only be achieved by executing pre-prepared changes, both
globally and in individual countries. That is why, in the first phase, a complete change of the internal
structure in all the components of the company took place. The second phase, which is the subject of
this thesis, is the setting up of a new business model at the national level in the Czech Republic and
the introduction of business management standards. At the final stage, once the company’s operations
have been set up, as well as a new business model, it is still possible to move on to acquisition activities.
Creating an efficient and fully functional business structure is a demanding process that requires
a clear and long-term vision that is in line with the vision of the whole company. The whole process
must have a clear timetable. Any deviations from the plan in the process of reorganisation can result
in fatal consequences.
The basic steps in introducing the territorial business model and business standards can be
described by the following points. Only this complex system is fully functional, long-term, and efficient:
Setting up the Territory Management.
Collaboration with distributors and integrators.
Create a Sales Support Specialist position and introduce him or her into a team.
Introducing the CRM (Customer relationship management) system and introduction of reporting
Introduction of financial reports.
Set up of the Funnel Management aimed to effectively manage commerce.
Introducing the Customer Segmentation and creating the Key Account Management.
In this article, the authors will focus on the first three steps: setting up the territorial business
model, creating a sales network with distributors for a selected product group and for a defined
business opportunity, and creating a new Sales Specialist position, with subsequent implementation of
the entire team.
Territorial breakdown was made on the basis of historical sales to individual customers in order
to set up three geographical areas with an equal turnover (33%, 33%, and 34% of total turnover) and a
similar customer structure in terms of size and sales potential. An integral part of the setup is also
taking into account the cost of the new model and, on the other hand, increasing the efficiency of the
sales representatives. This can be increased by minimising the time spent on the road and by increasing
the number of negotiations within a defined time horizon.
In the Gantt’s diagram (see Figure 1), the process of setting up the Territorial Business Model
In-depth market analysis: 2 weeks to 1 month.
Decisions and consultations with the management of the company: 1 month.
Team change notice and personnel issues: 1 month.
Start of the new module, setting operative: after 3 months.
Accommodation, decrease in performance, decrease in productivity, and in sales: 6 months.
Effect of change, growth of performance, productivity growth, and efficiency: after 9 months.
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Setting up a new model is a time-consuming process that runs continuously. The implementation
of some of the above points is intertwined, but the first is to set territories including a list of customers.
further steps and set-up of the entire business operation, such as reporting,
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forecasting, introducing a CRM system, and so on. The territory’s own set-up, based on sales analyses,
steps have been tracked, evaluated, and eventually modified to avoid demotivating people and
reducing their performance. The entire process was run by the management, and the local managerfor
Figure 1. Gantt´s diagram.
Figure 1. Gantt´s
Three territories for three sales representatives were created to achieve the goal. Two located in
and the Bohemian
in the in
city of Olomouc to minimise travel, and for this reason a new employee model––Home Office––was
a new employee
team members, and setting up the regular personal team meetings.
Figure 2. Map of the territorial division.
Figure 2 shows the division
three sales territories. Two business
representatives are based in Prague (blue location) and one in the Home Office work model in
three sales territories.
the level of
Figure 2 shows
division also resulted in an even travel burden.
representatives are based in Prague (blue location) and one in the Home Office work model in
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