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Organizational Structure

Organizational Structure. Need to create division of labor Need to integrate these groups to ensure organizational effectiveness Dimensions of Macro Structure Microstructure Management Dimensions and Processes. Firm Growth as Evolutionary Process. Single Business. Product Diversification

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Organizational Structure

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  1. Organizational Structure • Need to create division of labor • Need to integrate these groups to ensure organizational effectiveness • Dimensions of Macro Structure • Microstructure Management Dimensions and Processes

  2. Firm Growth as Evolutionary Process Single Business Product Diversification (Product Diversity) Geographic Diversification (Foreign Sales as %Total Sales) Product and Geographic Diversification

  3. Horizontal Differentiation • degree to which tasks are divided into distinct homogeneous groups • function-wise • geographic-wise • product-wise • production stage-wise

  4. Vertical Differentiation • Number of levels within the organization

  5. Spacial Dispersion • Degree to which activities are located in different areas

  6. Structure Follows Strategy High Horizontal Differentiation? Pressures for Global Efficiency and Centralization Vertical Differentiation? Spacial Dispersion? Low Low High Pressures for Local Responsiveness and Decentralization

  7. Export Germany U.S. Mexico Malaysia

  8. Functional Structurew/ International Sales Division

  9. Multidomestic Germany U.S. Mexico Malaysia

  10. Geographic Structure

  11. Pure Global Germany U.S. Mexico Malaysia

  12. Global Functional StructureFor Single-business Firms

  13. Product Division StructureFor Product-diversified Firms

  14. Transnational (1) Germany U.S. Mexico Malaysia

  15. Matrix Structure (A)

  16. Matrix Structure (B)

  17. Transnational (2) Germany Engines U.S. Steel Mexico Final Assembly Malaysia Trim, seats, glass

  18. Matrix Structure (B)

  19. Mixed Structure

  20. Stopford-Wells Structure Model Hi Product Divisions Mixed / Matrix / Network Product Diversity Intl. Division Geographic Divisions Lo 0% 100% Foreign Sales as % of Total Sales

  21. 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.

  22. 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

  23. Data Management Control Mechanisms • Information systems • Measurement systems • Resource allocation procedures • Strategic planning • Budgeting processes

  24. Managers’ Management Control Mechanisms • Choice/selection of key managers • Career paths • Rewards and punishment systems • Management development • Patterns of socialization

  25. Organizational Learning/Conflict Resolution Control Mechanisms • Decision responsibility assignments • Integrators • Transnational teams • Coordination committees • Task forces

  26. Decentralized Federation Configuration Model Flows? Controls?

  27. Changing Role of Top Management • Paradoxes…how to be: • global and local • big and small • centralized and decentralized • Old way…strategy-structure-systems: • chief strategist • structural architect • information and control systems

  28. Vertical Structural Hierarchy • Top-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

  29. Structural Management of a Portfolio of Processes • Entrepreneurial process • Competence-building process • Renewal process

  30. Entrepreneurship • Def.: externally-oriented, opportunity-seeking, ownership-motivated • Employees are most important asset • Grow and divide principal • 25-5 rule • The market is far better judge of new products than some analyst or manager

  31. Competence-Building • Traditional 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

  32. Renewal • Reduce complacency • Groves: Only the Paranoid Survive • An 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

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