Submitted by: Nishant Singh (E058)P&GUS Organisational Structure change from 1950s to 1980s1950 US Divisional Structure in 1950s P&G created individual operating divisions to better manage growing lines of products Each operating division has its own line and staff organisations Organisation developed along Functions and Brands Brand managers are responsible for profitability and focus on matching company strategy with product category dynamics Brand managers in the same product division competed in market place Best practices and talent across brands are shared by divisional functions1980 US Matrix Category/Function Business Unit Structure, 1980s Historic shift from competitive brand management system Brands are managed as component of category portfolios by category general managers Product categories require more differentiated functional activities 39 US business categories were created Each category is run by a general manager to whom both brand and dedicated functional manager would report Each category business unit had its own sales, product development, manufacturing and finance functions Functional leaders report to both business leadership and functional leadershipEuropean structure from 1950s to 1980s:Original Structure: Company created mini-U.S.es in each country Developed along three dimensions- country, function, and brand Portfolio of self-sufficient subsidiaries led by country general managers (GMs) Adapted P&G technology and marketing expertise to local markets New product technologies were sourced from U.S. R&D labs Was inaugurated to house a European corporate R&D and process-engineering function. Developed products & manufacturing processes that Country Managers could choose to adapt to & launch in their own countriesNeed of a new model Unstandardized and subscale manufacturing operations in each country were expensive and unreliable. Products were tweaked unnecessarily leading to pack-size and formulation variations that added no value for the consumer but significant cost and complexity to the supply chain. Country R&D labs were expensive to maintain and reinvented the wheel with each new product initiative Responsibility of profit and market strategy lay with Country Managers instead of Brand Managers Innovation and Brands took years to globalize(Pampers) Complete disconnect from US operations, worked in Silos Focus was fragmented by Countries, leading to region wide strategies Difficult to attain economies of scaleNew Model(1980s) Regional committees composed of large-country managers & corporate functional leaders Product-category division VP positions were established Full P&L Responsibility on them Country GMs were replaced with multiple-country product-category GMs who reported to the division VPs Europe was split into three sub regions where the leaders were given secondary product responsibilityAdvantages: Shift from COUNTRY MANAGEMENT to PRODUCT CATEGORY MANAGEMENT Facilitating cross border cooperation Eliminated needless product variations, coordinated marketing communications, prioritized product launches and orchestrated competitive responses across the regionFit Between Strategy and Structure:1950s Structure Requirement according to Strategy : US Market Homogenous and European Markets Heterogeneous(Decentralized Model) Individual product lines structure - > quicker and more consumer focussed business decisions -> brand managers bore responsibility for profitability and can run that brand as individual company1980s Structure Requirement according to Strategy : Expanding Horizons Lack of control of country functional activities to corporate functions Product Categories required differential functional activities Coexistence of functions and productsWhy P&G adopted Matrix Structure In late 1980s, expansion opportunities in Japan and other parts of world led P&G to develop globalization model. Corporate functions in Brussels still lacked direct control of country functional activities. Shift from early functional organization into multidivisional product organization Balance required between products and functionsHow did the New Matrix Structure Worked? In global matrix structure, country functions were consolidated into continental functions reporting through functional leadership and direct reporting through the regional business manager. All country category GMs had reporting to their global category president. The globalcategory presidents and R&D VPs developed product category platform technologies that could be applied to global branding strategies. In 1995 this structure was extended to rest of the world through creation of four regions North America , Latin America , Europe /Middle East/Africa and Asia.Pros and Cons of Global Matrix StructurePros creation of powerful and independent global functions promoted the pooling of knowledge, transfer of best practices, elimination of intraregional redundancies, and standardization of activities. Allowed for manufacturing, purchasing, engineering, and distribution to be integrated Standardization of activities.Regionally managed product supply groups could extract massive savings by consolidating country manufacturing plants and distribution centers into high scale regional facilities.Cons Most functions nominally had straight line reporting through regional management and also reporting through functional management, the function retained a high degree of de-facto control. They develop their own strategic agenda, maximize power, do not coordinate with other functions and business units. As regional managers were responsible for profit and loss they were hesitate to launch new product.What are the key distinguishing features of Organisation 2005? Change of control hierarchy from Geographical, Product, Function to product , geography and managed functional services Shift from matrix organizationto interdependent organizations: Global Business Units Market Development Global Business Services Primary profit responsibility shifted from 4 regional organizations to 7 global business units President led the GBU with functional VPs reporting to him. Eliminated 6 management layers , reducing the total from 13 to 7 Focus on new product development than process improvements No approvals required from the regional manager Faster rollouts of innovations and new brands