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Learn how to structure subunits & control mechanisms to achieve strategic goals. Explore functional, product, geographic structures & hybrid models for international strategies. Understand control & coordination systems for effective organizational design.
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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?
THE FUNCTIONAL STRUCTURE WORKS BESTWhen organization has: • Few products • Few locations • Few types of customers • A stable environment • Routine technology
PRODUCT AND GEOGRAPHIC STRUCTURES • Usually less efficient than the functional organization • Allow a company to serve customer needs that vary by region or product
WHEN? • Product or an area sufficiently unique to require focused functional efforts on one type of product or service
PRACTICALITIES • Organizations mix structures to best implement strategies • Mixed form organizations called hybrid structures
EXPORT DEPARTMENT • Created when: • Exports become significant • A company wishes greater control over export operations • Deals with international sales of all products
INTERNATIONAL DIVISION • Usual step after export department • Deals with all products • Manages overseas sales force and manufacturing sites
PRESSURES TO ABANDON THE INTERNATIONAL DIVISION • Diverse products too complex • Not close enough to local markets • Cannot take advantage of global economies of scale or global sources of knowledge
TWO SOLUTIONS • Worldwide Geographic Structure • Worldwide Product Structure
A WORLDWIDE GEOGRAPHIC STRUCTURE • Implements a multilocal or regional strategy • Country-level divisions • Separate divisions for large market countries
A WORLDWIDE PRODUCT STRUCTURE • Implements strategies that emphasize global products • Each product division assumes responsibility to produce and sell its products or services though out the world
HYBRIDS AND WORLDWIDE MATRIX STRUCTURE • Support strategies that include local adaptation and concern for globalization. • Mix geographic units with product or function units
THE MATRIX STRUCTURE • Balances the benefits produced by area and product structures • Creates lines of authority for products and areas • Requires near equal demands from the environment
Requires extensive resources for communication and coordination • Requires middle and upper level managers with good human relations skills
THE TRANSNATIONAL NETWORK STRUCTURE • Implements the transnational strategy • Combines functional, product, and geographic subunits in networks
Has no symmetry or balance in its structural form • Resources, people, and ideas flow in all directions • Nodes or centers in the network coordinate product, functional, and geographic information
NETWORK STRUCTURES HAVE • Dispersed subunits • Specialized operations • Interdependent relationships
CONTROL AND COORDINATION SYSTEMS • Top managers must design organizational systems to control and coordinate the activities of their subunits.
BASIC FUNCTIONS OF CONTROL • Measure or monitor the performances of subunits • Provide feedback to subunit managers regarding the effectiveness of their units
COORDINATION SYSTEMS • Provide information flows among subsidiaries • Link the organization horizontally
CONTROL SYSTEMS • Output • Bureaucratic • Decision making • Cultural
Exhibit 8.11 shows the relationship between the control mechanisms and basic multinational organizational structures.
COORDINATION SYSTEMS • Paperwork (memos, reports) • Direct contact • Liaison roles • Task forces • Full-time integrator • Teams
CONCLUSIONS • Strategy+Organizational Design = Effectiveness • Basic Structures • Structures for multinational operations • Coordination and control
