Network & International
Designs
Network Structure
A network structure is a cluster of different organizations
whose actions are coordinated by contracts and
agreements rather through a formal hierarchy of
authority. Most major organizational functions are
subcontracted to suppliers, who move into or out of the
organization as needed to meet changing
needs.
This type of structure has become increasingly popular in
fast-changing environments. It has been made possible
largely by the advent of sophisticated information systems
that allow real-time access to company data.
The Network Design
Distribution
Accounts
Receivable
Manufacturing
Health
Products, Inc.
(Central Hub)
Marketing
Public
Relations
Advantages of Network Structure
• Costs are reduced by finding reliable,
low-cost partners for functional activities
• Avoid high-cost bureaucratic structures
to provide value-creation activities
• Can act in an “organic” way, for fast
response to changes in the environment
• Allows access to low-cost, foreign sources
of inputs and functional specialties
Disadvantages of Network Structure
• Close interaction is required between
partners, and is not always easy to achieve
• Coordination between distant partners doing
parts of an overall task can be very difficult
• Difficult to build “core competencies” in a
dispersed organization
• Little loyalty among partners, who are often
replaced frequently as needs change
The Horizontal Organization
The horizontal organization is the most recent approach to
organizing. It organizes employees around core processes,
making it similar to a matrix based upon functions and
processes.
Structure is created around cross-functional core processes
rather than tasks, functions or geography. Self-directed
teams, not individuals, are the primary organizational
elements. Process owners have responsibility for each core
process in its entirety. Cross-trained team members are
given necessary skills, knowledge & authority to do the job.
Highly customer-driven, flexible & seeks continuous
improvement
An Example of a Horizontal
Structure
CEO
Process
Owner
Team 1
Team 2
Team 3
Process
Owner
Team 1
Team 2
Team 3
Strengths of Horizontal Structure
• Promotes flexibility & rapid response to changes in
customer needs
• Directs the attention of everyone toward the production
& delivery of value to the customer
• Each employee has a broader view of organizational
goals
• Promotes a focus on teamwork & collaboration
• Improves quality of life for employees by offering them
the opportunity to share responsibility, make decisions,
and be accountable for outcomes
Weaknesses of Horizontal Structure
• Determining core processes is difficult & time
consuming
• Requires changes in culture, job design, management
philosophy, and information & reward systems
• Traditional managers may balk when they have to give
up power and authority
• Requires significant training of employees to work
effectively in a horizontal team environment
• Can limit in-depth skill development
Structural Forms Used for
International Operations
Structural forms used for international operations vary
depending largely upon the degree of involvement in
international business.
Increasing types of involvement:
1. Importing/exporting
2. Licensing
3. Joint Ventures
4. Direct Investment
Most approaches involve modification of either the
Product Departmentalization form or the Conglomerate
form.
Simple, International Division
CEO
Production
Marketing
Example: Levi Strauss, Inc.
Finance
International
Division
Extension of Geographical
Departmentalization
CEO
North
American
operations
European
operations
Asian
operations
Example: Ford Motor Company, Coca Cola
Extension of Product
Departmentalization
CEO
Product
Manager A
Product
Manager B
Product
Manager C
Europe
Asia
North
America
Example: Unilever, NV, FedEx, H.J. Heinz
Extension of Multi-Divisional
(SBU) Departmentalization
CEO
SBU A
US
SBU B
Germany
SBU C
Japan
SBU D
France
Examples: General Electric, BOC, Ltd.
SBU E
Taiwan
Global Matrix Design
Example: N.V. Phillips