Organizational Structure
 Need
to create division of labor
 Need to integrate these groups to
ensure organizational effectiveness
 Dimensions of Macro Structure
 Microstructure Management
Dimensions and Processes
Firm Growth as Evolutionary Process
Single Business
Geographic
Diversification
(Foreign Sales as %Total Sales)
Product
Diversification
(Product Diversity)
Product and Geographic
Diversification
Horizontal Differentiation

degree to which tasks
are divided into
distinct homogeneous
groups
–
–
–
–
function-wise
geographic-wise
product-wise
Mkt
production stage-wise
CEO
Prod 1 Prod 2 Prod 3 Prod 4
CEO
Mfg
Finance
R&D
Logistics
Vertical Differentiation

CEO
Number of levels
within the
organization
EVP
EVP
EVP
Sr. VP
Sr. VP
VP
VP
VP
Asst. VP
Asst. VP
Asst. VP
Branch Mgr.
Asst. Branch Mgr
Branch Mgr.
Spacial Dispersion

Degree to which
activities are located in
different areas
HQ
Finance
US
Pacific
Eur.
Support
Mfg.
Mfg
Prod 1
Prod 2
R&D
Legal
Pressures for Global Efficiency
and Centralization
Structure Follows Strategy
High
Horizontal Differentiation?
Vertical Differentiation?
Spacial Dispersion?
Low
Low
High
Pressures for Local Responsiveness and Decentralization
Export
Germany
U.S.
Mexico
Malaysia
Functional Structure
w/ International Sales Division
HQ
Fin./Acct.
Manufacturing
Marketing
Logistics
International
Sales
R&D
Multidomestic
Germany
U.S.
Mexico
Malaysia
Geographic Structure
HQ
N. Amer.
Mkt.
Mfg.
Eur.
R&D
Latin Amer.
Pac.Rim
Prod. A Prod. B Prod. C
Pure Global
Germany
U.S.
Mexico
Malaysia
Global Functional Structure
For Single-business Firms
HQ
U.S.
Fin./Acct.
Manufacturing
Mexico
Marketing
Germany
R&D
Malaysia
Product Division Structure
For Product-diversified Firms
HQ
Product A
Mfg.
Product B
Mkt. R&D Mfg.
Product C
Mkt. R&D Mfg.
Mkt. R&D
Transnational (1)
Germany
U.S.
Mexico
Malaysia
Matrix Structure (A)
HQ
U.S.
R&D
Marketing
US
Eur
Mexico
Malaysia
Manufacturing
Mexico
Matrix Structure (B)
HQ
Geographic Areas
US
Eur
Asia
Product 1
Product 2
Product 3
Product 4
Transnational (2)
Germany
U.S.
Engines
Steel
Mexico
Final
Assembly
Malaysia
Trim, seats,
glass
Matrix Structure (B)
HQ
R&D
Integrated
Functions
Logistics
Drivetrain
Body/
Frame
Glass/
Plastic
Final
Assembly
Germany
US
Malaysia
Mexico
Marketing
Marketing
Marketing
Marketing
Mixed Structure
HQ
PCs
US
Europe
Pacific
Mfg.
Faxes
Faxes
Faxes
Mkt.
Mobil Phones
Mobil Phones
Mobil Phones
R&D
Copiers
Copiers
Copiers
Stopford-Wells Structure Model
Product Diversity
Hi
Lo
Product
Divisions
Intl.
Division
0%
Mixed /
Matrix /
Network
Geographic
Divisions
100%
Foreign Sales as % of Total Sales
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
 Career
of key managers
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
Decentralized Federation Configuration
Model
Flows?
Controls?
Changing Role of Top Management
 Paradoxes…how
to be:
– global and local
– big and small
– centralized and decentralized
 Old
way…strategy-structure-systems:
– chief strategist
– structural architect
– information and control systems
Vertical Structural Hierarchy
 Top-down
view:
– order, symmetry, uniformity
– neat decomposition of tasks & responsibilities
 Bottom-up
view:
– reporting lines
– documentation
– reviews
 The
organization has its face toward the
CEO and its ass toward the customer.
– Jack Welch, CEO General Electric
Structural Management of a
Portfolio of Processes
 Entrepreneurial
process
 Competence-building process
 Renewal process
Entrepreneurship
 Def.:
externally-oriented, opportunityseeking, ownership-motivated
 Employees are most important asset
 Grow and divide principal
 25-5 rule
 The market is far better judge of new
products than some analyst or manager
Competence-Building
 Traditional
role…cross-unit “matchmaker”
 New role…informational conduit,
facilitator (on-line dating)
 Kao’s VAN: dense info network linking
mfg, mkt, R&D, engineering, etc.
– sift through data for customer clues and latent
technologies
 Intel’s
“crisis support” culture
Renewal
 Reduce
complacency
 Groves: Only the Paranoid Survive
 An organization should stretch itself to the
point where it almost becomes unglued
– Jack Welch, CEO General Electric
 ABB:
Challenge business units with
scenario-planning exercises
 New 3M CEO’s: 30-5 rule