6- Functional Structure Groups people on the basis of their common skills, expertise, or resources they use Bedrock of horizontal differentiation Groups tasks into functions to increase the effectiveness

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Advantages Opportunity to Learn Peer supervision and control Norms and Values

6- Control Problems Communication Problems Measurement Problems Location Problems Customer Problems Strategic Problems

6- Solution? How to integrate?

6- Boundary Conditions for Functional Structure Functional structure is appropriate if the organization: Limits itself to producing a small number of similar products Produces those products in one or a few locations Sells them to only one general type of client or customer

6- Towards Complex Structures As organizations grow They produce more products that may be different from one another Increase production at a number of locations To serve many different types of customers More complex structure is based on: Increasing vertical differentiation Increasing horizontal differentiation Increasing integration

6- Moving to a Divisional Structure Divisional structure to solve control problems (due to product, market and geographical complexity) Divisional structure is a response to control problems: Create smaller, more manageable subunits Product structure Geographic structure Market structure

6- Product Structure Product structure: a divisional structure in which products (goods or services) are grouped into separate divisions according to their similarities or differences Organizations need to decide how to coordinate its product activities with support functions Leads to three kinds of product structure

6- Product division structure: a structure in which a centralized set of support functions service the needs of a number of different product lines Support function is divided into product-oriented teams of functional specialists who focus on the needs of one particular product division

6- Product Division Structure (Heinz)

6- Product-Oriented Functional Teams to Individual Divisions

6- Multi Divisional Structure Multidivisional structure: A structure in which support functions are placed in self-contained divisions Each division has its own set of support functions and controls its own value Corporate headquarters staff: responsible for overseeing the activities of the managers heading each division Allows a company to operate in many different businesses

6- Multidivisional Structure

6- Advantages of a Multidivisional Structure Increased organizational effectiveness (Within Unit Control) Increased Strategic Focus (Corporate Office free from day to day operational issues) Greater profitability due to Greater Accountability of DMs Development of Leadership pool

6- Multidivisional Structure in Which Each Division Has a Different Structure

6- Disadvantages of a Multidivisional Structure Managing the corporate-divisional relationship Coordination problems between divisions Transfer Pricing Bureaucratic Costs Tall hierarchies

6- Product team structure: specialists from the support functions are created that specialize in the needs of particular kind of product Focus on the needs of one product (or client) or a few related products A product team structure is more decentralized than a functional structure or a product division structure, and specialists in the various product teams are permitted to make on-the spot decisions

6- Product Team Structure

6- Geographic Structure When the control problems that companies experience are a function of geography, a geographic divisional structure is appropriate Allows the organization to adjust its structure to align its core competences with the needs of customers in different geographic regions Allows some functions to be centralized and others decentralized

6- Geographic Structure

6- Market Structure Aligns functional skills and activities with the needs of different customer groups Each customer group has a different marketing focus, and the job of each group is to develop products to suit the needs of its specific customers Each customer group makes use of centralized support function

6- Market Structure

6- Matrix Structure Groups people and resources in two ways: Functions and Products A rectangular grid that shows a vertical flow of functional responsibility and a horizontal flow of product responsibility The members of the team are called two-boss employees Team is the building block and principal coordination and integration mechanism

6- Matrix Structure

6- Advantages of a Matrix Structure Maximize its use of skilled professionals, who move from product to product as needed The dual functional and product focus promotes concern for both cost and quality

6- The Multidivisional Matrix Structure A structure that provides for more integration between corporate and divisional managers and between divisional managers Makes it easier for top executives from divisions and corporate headquarters to cooperate and jointly coordinate organizational activities

6- Multidivisional Matrix Structure

6- Network structure Boundary less Organizations E-Commerce (B2B and B2C)

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