ORGANIZATIONAL DESIGN How organizations structure subunits and coordination

ORGANIZATIONAL DESIGN How organizations structure subunits and coordination and control mechanisms to achieve their strategic goals.

BASIC QUESTIONS OF ORGANIZATION DESIGN (1) How to divide work among the organization's subunits? (2) How to coordinate and control the efforts of the units created?

EX 8. 1 FUNCTIONAL STRUCTURE

THE FUNCTIONAL STRUCTURE WORKS BEST When organization has: u. Few products u. Few locations u. Few types of customers u. A stable environment u. Routine technology

PRODUCT AND GEOGRAPHIC STRUCTURES u. Usually less efficient than the functional organization u. Allow a company to serve customer needs that vary by region or product

EX 8. 2 PRODUCT STRUCTURE

EX 8. 3 GEOGRAPHIC STRUCTURE

WHEN? u. Product or an area sufficiently unique to require focused functional efforts on one type of product or service

PRACTICALITIES u. Organizations mix structures to best implement strategies u. Mixed form organizations called hybrid structures

ORGANIZATIONAL STRUCTURES FOR INTERNATIONAL STRATEGIES

EXPORT DEPARTMENT u. Created when: – Exports become significant – A company wishes greater control over export operations u. Deals with international sales of all products

EX 8. 4 AN EXPORT DEPARTMENT

INTERNATIONAL DIVISION u. Usual step after export department u. Deals with all products u. Manages overseas sales force and manufacturing sites

EX 8. 5 INTERNATIONAL DIVISION

PRESSURES TO ABANDON THE INTERNATIONAL DIVISION u. Diverse products too complex u. Not close enough to local markets u. Cannot take advantage of global economies of scale or global sources of knowledge

TWO SOLUTIONS u. Worldwide Geographic Structure u. Worldwide Product Structure

A WORLDWIDE GEOGRAPHIC STRUCTURE u. Implements a multilocal or regional strategy u. Country-level divisions u. Separate divisions for large market countries

A WORLDWIDE PRODUCT STRUCTURE u. Implements strategies that emphasize global products u. Each product division assumes responsibility to produce and sell its products or services though out the world

EX 8. 6 APPLE’S GEOGRAPHIC STRUCTURE

EX 8. 7 WORLDWIDE PRODUCT STRUCTURE

EX 8. 8 P&G’S INTL. DIVISION

HYBRIDS AND WORLDWIDE MATRIX STRUCTURE u. Support strategies that include local adaptation and concern for globalization. u. Mix geographic units with product or function units

THE MATRIX STRUCTURE u. Balances the benefits produced by area and product structures u. Creates lines of authority for products and areas u. Requires near equal demands from the environment

u. Requires extensive resources for communication and coordination u. Requires middle and upper level managers with good human relations skills

THE TRANSNATIONAL NETWORK STRUCTURE u. Implements the transnational strategy u. Combines functional, product, and geographic subunits in networks

u. Has no symmetry or balance in its structural form u. Resources, people, and ideas flow in all directions u. Nodes or centers in the network coordinate product, functional, and geographic information

NETWORK STRUCTURES HAVE u. Dispersed subunits u. Specialized operations u. Interdependent relationships

EX 8. 10 EXAMPLE GEOGRAPHIC LINKS

EX 8. 11 EXAMPLE PRODUCT LINKS

EX 8 -12 STRATEGY AND STRUCTURE

CONTROL AND COORDINATION SYSTEMS u. Top managers must design organizational systems to control and coordinate the activities of their subunits.

BASIC FUNCTIONS OF CONTROL u. Measure or monitor the performances of subunits u. Provide feedback to subunit managers regarding the effectiveness of their units

COORDINATION SYSTEMS u. Provide information flows among subsidiaries u. Link the organization horizontally

CONTROL SYSTEMS u. Output u. Bureaucratic u. Decision making u. Cultural

Exhibit 8. 11 shows the relationship between the control mechanisms and basic multinational organizational structures.

COORDINATION SYSTEMS u. Paperwork (memos, reports) u. Direct contact u. Liaison roles u. Task forces u. Full-time integrator u. Teams

CONCLUSIONS u. Strategy+Organizational Design = Effectiveness u. Basic Structures u. Structures for multinational operations u. Coordination and control