Organizational Structure

Horizontal differentiation Vertical differentiation Spacial dispersion Degree of formalization Degree of centralization

Need to create division of labor Need to integrate these groups to ensure

organizational effectiveness Dimensions of Structure

Firm Growth as Evolutionary Process

Single Business

GeographicDiversification

(Foreign Sales as %Total Sales)

Product Diversification

(Product Diversity)

Product and GeographicDiversification

Horizontal Differentiation

degree to which tasks are divided into distinct homogeneous groups– function-wise

– geographic-wise

– product-wise

– production stage-wise

Prod 1 Prod 2 Prod 3 Prod 4

C EO

M kt M fg F inance R & D Log is tics

C E O

Vertical Differentiation

Number of levels within the organization

Sr. VP

VP

Asst. VP Asst. VP

Asst. B ranch Mgr

B ranch Mgr. B ranch Mgr.

Asst. VP

VP VP

Sr. VP

E VP E VP E VP

C EO

Spacial Dispersion

Degree to which activities are located in different areas

Finance R &D Legal

Support

U S

Prod 1

Mfg.

Pacific

Prod 2

Mfg

Eur.

H Q

Pre

ssu

res

for

Glo

bal

Eff

icie

ncy

and

Cen

tral

izat

ion

Pressures for Local Responsiveness and Decentralization

High

Low

HighLow

Horizontal Differentiation?

Vertical Differentiation?

Spacial Dispersion

Structure Follows Strategy

Export

U.S.

Germany

Mexico

Malaysia

Functional Structurew/ International Sales Division

F in ./Acct.

M anufacturing M arketing Log istics

In ternationa lSa les

R & D

H Q

Multidomestic

U.S.

Germany

Mexico

Malaysia

Geographic Structure

Mkt. M fg. R & D

N . Am er. Eur. Latin Am er.

Prod. A Prod. B Prod. C

Pac.R im

H Q

Pure Global

U.S.

Germany

Mexico

Malaysia

Global Functional StructureFor Single-business Firms

F in ./Acct.

M anufacturingM exico

M arketingG erm any

R & DM alaysia

H QU .S .

Product Division StructureFor Product-diversified Firms

M fg . M kt. R &D

Product A

M fg . M kt. R &D

Product B

M fg . M kt. R &D

Product C

H Q

Transnational (1)

U.S.

Germany

Mexico

Malaysia

Matrix Structure (A)

R &D

U S

Eur

M exico

M alaysia

M arketing M anufacturingM exico

H QU .S .

Matrix Structure (B)

U S

Eur

Asia

Geographic A reas Product 1 P roduct 2 P roduct 3 P roduct 4

H Q

Transnational (2)

U.S.

Germany

Mexico

Malaysia

Engines

Final Assembly

Trim, seats,glass

Steel

R &D

Log istics

IntegratedFunctions

M arketing

G erm any

D rive tra in

M arketing

U S

Body/F ram e

M arketing

M alaysia

G lass/P lastic

M arketing

M exico

F ina lAssem bly

H Q

Matrix Structure (B)

Mixed Structure

Mfg.

Mkt.

R&D

PC s

Faxes

Mobil Phones

Copiers

U S

Faxes

Mobil Phones

Copiers

Europe

Faxes

Mobil Phones

Copiers

Pacific

H Q

Stopford-Wells Structure Model P

rodu

ct D

iver

sity

Lo

Hi

Foreign Sales as % of Total Sales

0% 100%

Intl.Division

ProductDivisions

GeographicDivisions

Mixed /Matrix /Network

Kimberly-Clark’s Old Structure

M fg . M kt.

U S

M fg . M kt.

Europe

U .S . H QC EO

Kimberly-Clark’s New Structure

M anufacturing

U S

M anufacturing

Eur

Geographic A reas M arketingTissue P roducts

M arketingP ersonal C are P roducts

U .S . H QC EO

Kimberly-Clark’s New Structure

M arketingP ersonal-C are

P roducts

M arketingTissue P roducts

Integ ratedU nits

U .S .M fg.

EuropeM fg.

U .S . H QC EO

Formalization

Degree to which rules, procedure, lines of authority/responsibility are enunciated or specified

More formality: eliminates confusion and uncertainty, limits creativity and innovation

Less formality: imbues flexibility, creative solutions.

Centralization

Degree to which authority and decision making is at higher levels of the organization

Centralized: tight org control, managers are order-takers

Decentralized: managers closest to product and/or customer able to make decisions

Data Management Control Mechanisms

Information systems Measurement systems Resource allocation procedures Strategic planning Budgeting processes

Managers’ Management Control Mechanisms

Choice/selection of key managers Career paths Rewards and punishment systems Management development Patterns of socialization

Organizational Learning/Conflict Resolution Control Mechanisms

Decision responsibility assignments Integrators Transnational teams Coordination committees Task forces