Alternative Organizational Structures What are alternative ways to design an organizational structure? What are the advantages and disadvantages of various design alternatives ? How do we make these choices in light of organizational context? External environment Organizational life-cycle Organizational technology

Functional Structures Strengths: Economies of scale in-depth skill development Stable Environment Routine Technology Weaknesses: Slow in responding environment Hierarchy overload Poor horizontal coordination Emphasis on functional goals Less emphasis on innovation

Divisional Structures Structures that are uni-focussed in that the divisions are organized according to product groups, services, geography,programs, or markets. Product Structure (Self contained product groups structure) Geographic Structure Market Structure

Self contained product groups structure Strengths: increases coordination across functions allows adaptations decentralizes decision making accommodates large size Weaknesses: reduces coordination across product lines reduces economies of scale reduces specialization reduces standardization

Geographic Structure

Divisional Market Structure

Hybrid Structures Product division structure Multidivisional structure Structures that are multi-focussed in that both product and function, or product and geography, are emphasized at the same time. Product division structure Multidivisional structure Product team structure

Product division structure

Multidivisional structure

Product team structure Product Development Teams PTM Product Div..

Generic Hybrid Structures Product Division Advantages More adaptive at division level without sacrificing efficiency in centralized functions Better alignment between functional and divisional goals Disadvantages Higher administrative overhead Misalignment between vertical & horizontal coordination Multi-Divisional Advantages More sophisticated control & integration systems Better capital resource allocation decisions corporate level can focus on long-term strategies Disadvantages Measurement of divisional performance New layers in management Product Team Advantages Higher decentralization Higher integration at team level responsive to market demands and shorter development time Disadvantages Limited coordination across teams Loss of corporate control

Matrix Structure Strengths Reduces functional barriers Increases communication Flexible use of human resources Product & functional focus Weaknesses Lacks stable control structure Ambiguity of dual authority Time consuming May increase costs

A Critical Contextual Factor: THE EXTERNAL ENVIRONMENT Why is it important? Need for INFORMATION Need for RESOURCES How is it conceptualized? The Critical Dimensions of Environment Complexity (Homogeneous ---- Heterogeneous) Dynamism (Stable ---- Unstable) Munificence (Resource Rich ---- Resource Poor) Organization of the environment (Market Structure)

Environmental Dimensions and Organizational Design Internal Strategies Specialization Buffering Departments Centralization Coordination Standardization Complexity Contingency Perspective Dynamism Task Environment External Strategies Strategic alliances Cooptation Interlocking directorates Executive recruitment Public relations Mergers & Acquisitions Political activity Trade Associations Munificence Resource Dependency Perspective Market Str.

Pharmaceutical Industry Years between the launch of a drug and its first competitor Internal Strategies Supply chain management Reduction of inventories Strategic sourcing Advertising directly to consumers Differentiated advertising

Strategies for managing environmental Uncertainty Add new positions and departments as the task (Specific) environment becomes more complex. Establish buffer mechanisms to protect the technical core of the organization from environmental changes. Create new boundary roles that monitor the environmental demands.

Strategies for Managing Symbiotic Interdependencies Symbiotic interdependencies arise when the output of one organization is input for another. Interorganizational Strategies: Developing a good reputation Co-optation Strategic alliances Long-term contracts Networks Minority ownership Joint-ventures Mergers, takeovers, and vertical integration

Strategies for Managing Competitive Interdependencies Competitive interdependencies arise when organizations compete for similar scarce inputs or outputs. Interorganizational Strategies Collusion and cartels Trade associations Political activity (Regulations and lobbying) Strategic alliances Mergers and takeovers