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Organizational Structure
Need to create division of laborNeed to integrate these groups to
ensure organizational effectivenessDimensions of Macro StructureMicrostructure Management
Dimensions and Processes
Firm Growth as Evolutionary Process
Single Business
GeographicDiversification
(Foreign Sales as %Total Sales)
Product Diversification
(Product Diversity)
Product and GeographicDiversification
Horizontal Differentiation
degree to which tasks are divided into distinct homogeneous groups– function-wise
– geographic-wise
– product-wise
– production stage-wise
Prod 1 Prod 2 Prod 3 Prod 4
C EO
M kt M fg F inance R & D Log is tics
C E O
Vertical Differentiation
Number of levels within the organization
Sr. VP
VP
Asst. VP Asst. VP
Asst. B ranch Mgr
B ranch Mgr. B ranch Mgr.
Asst. VP
VP VP
Sr. VP
E VP E VP E VP
C EO
Spacial Dispersion
Degree to which activities are located in different areas
Finance R &D Legal
Support
U S
Prod 1
Mfg.
Pacific
Prod 2
Mfg
Eur.
H Q
Pre
ssu
res
for
Glo
bal
Eff
icie
ncy
and
Cen
tral
izat
ion
Pressures for Local Responsiveness and Decentralization
High
Low
HighLow
Horizontal Differentiation?
Vertical Differentiation?
Spacial Dispersion?
Structure Follows Strategy
Export
U.S.
Germany
Mexico
Malaysia
Functional Structurew/ International Sales Division
F in ./Acct.
M anufacturing M arketing Log istics
In ternationa lSa les
R & D
H Q
Multidomestic
U.S.
Germany
Mexico
Malaysia
Geographic Structure
Mkt. M fg. R & D
N . Am er. Eur. Latin Am er.
Prod. A Prod. B Prod. C
Pac.R im
H Q
Pure Global
U.S.
Germany
Mexico
Malaysia
Global Functional StructureFor Single-business Firms
F in ./Acct.
M anufacturingM exico
M arketingG erm any
R & DM alaysia
H QU .S .
Product Division StructureFor Product-diversified Firms
M fg . M kt. R &D
Product A
M fg . M kt. R &D
Product B
M fg . M kt. R &D
Product C
H Q
Transnational (1)
U.S.
Germany
Mexico
Malaysia
Matrix Structure (A)
R &D
U S
Eur
M exico
M alaysia
M arketing M anufacturingM exico
H QU .S .
Matrix Structure (B)
U S
Eur
Asia
Geographic A reas Product 1 P roduct 2 P roduct 3 P roduct 4
H Q
Transnational (2)
U.S.
Germany
Mexico
Malaysia
Engines
Final Assembly
Trim, seats,glass
Steel
R &D
Log istics
IntegratedFunctions
M arketing
G erm any
D rive tra in
M arketing
U S
Body/F ram e
M arketing
M alaysia
G lass/P lastic
M arketing
M exico
F ina lAssem bly
H Q
Matrix Structure (B)
Mixed Structure
Mfg.
Mkt.
R&D
PC s
Faxes
Mobil Phones
Copiers
U S
Faxes
Mobil Phones
Copiers
Europe
Faxes
Mobil Phones
Copiers
Pacific
H Q
Stopford-Wells Structure Model P
rodu
ct D
iver
sity
Lo
Hi
Foreign Sales as % of Total Sales
0% 100%
Intl.Division
ProductDivisions
GeographicDivisions
Mixed /Matrix /Network
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 of key managers Career 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 decentralizedOld way…strategy-structure-systems:
– chief strategist
– structural architect
– information and control systems
Vertical Structural HierarchyTop-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 processCompetence-building processRenewal process
Entrepreneurship
Def.: externally-oriented, opportunity-seeking, ownership-motivated
Employees are most important assetGrow and divide principal25-5 ruleThe market is far better judge of new
products than some analyst or manager
Competence-BuildingTraditional 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
RenewalReduce complacencyGroves: Only the Paranoid SurviveAn 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