Divisional & Matrix StructureDefinition, Advantages & Disadvantages

TRADITIONAL FORMS OF ORGANIZATIONAL STRUCTURE

Org Structur

e

Simple

DIVISIONAL

Functional

Matrix

DIVISIONAL STRUCTUREA.k.a. “multidivisional” / “M-form”

◦An organizational form in which products, projects, or product markets are grouped internally.

*Divisional executives determine:1. Product market and financial

objectives2. Division’s contribution to overall

corporate performance

DIVISIONAL STRUCTUREAdvantages:1. Increases strategic and operational

control, permitting corporate-level executives to address strategic issues

2. Quick response to environmental changes

3. Increases focus on products and markets

4. Minimizes problems associated with sharing resources and functional areas

5. Facilitates development of general managers

DIVISIONAL STRUCTUREDisadvantages:1. Increased costs2. Dysfunctional competition

among divisions may detract from overall corporate performance

3. Difficult to maintain uniform corporate image

4. Overemphasis on short-term performance

DIVISIONAL STRUCTURE

Let’s take a look at an example…

INTEL’s DIVISIONS (2008)Digital Enterprise – largestFlash MemoryDigital HomeMobilityDigital healthChannel Platforms

DIVISIONAL STRUCTURE

Variations:

Strategic Business

Units

Holding Company Structure

STRATEGIC BUSINESS UNIT (SBU)

◦An organizational form in which products, projects, or product market divisions are grouped into homogeneous units.

STRATEGIC BUSINESS UNIT (SBU)More related businesses, fewer

SBUsEach SBU operates as a profit

center

STRATEGIC BUSINESS UNIT (SBU)

ADVANTAGES DISADVANTAGES

More manageable planning and control

Individual businesses can react more quickly to changes in the environment

Difficulty of achieving synergies across SBUs

Increased expenses

Corporate office is further from divisions

DIVISIONAL STRUCTURE

Variations:

Strategic Business

Units

Holding Company Structure

HOLDING COMPANY STRUCTURE

◦An organizational form in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters.

HOLDING COMPANY STRUCTURE

ADVANTAGES DISADVANTAGES

Cost savingsAutonomy

increases motivational level of divisional executives; enables them to respond quickly to market opportunities and threats

Inherent lack of control and dependence

Very little “bench strength”

If problems arise, may be difficult to turn around individual businesses

TRADITIONAL FORMS OF ORGANIZATIONAL STRUCTURE

Org Structur

e

Simple

MATRIX

Divisional

Functional

MATRIX STRUCTURE◦an organizational form in which there are multiple lines of authority and some individuals report to at least two managers.

Combination of functional & divisional structures

MATRIX STRUCTUREAdvantages:1. Increases market responsiveness

through collaborations & synergies among professional colleagues

2. Allows more efficient utilization of resources

3. Improves flexibility, coordination & communication

4. Increases professional development through a broader range of responsibility

MATRIX STRUCTUREDisadvantages:1. dual-reporting relationships can

result in uncertainty regarding accountability

2. Intense power struggles may lead to increased levels of conflict

3. Excessive reliance on group processes and teamwork may impede timely decision making

MATRIX STRUCTURE

Let’s take a look at an example…

MATRIX STRUCTURE

Nike Matrix Organization (before 2009 Financial Crisis)

CorporateFunctions:HR/Finance/IT/Etc.

Equipment

Apparel

Footwear

USA Europe Asia/Pacific

The America

s

Regions

Pro

duct

Type

Nike Matrix Organization(Post 2009 Financial Crisis)

CorporateFunctions:HR/Finance/IT/Etc.

Basketball

Soccer

Running

NorthAmerica

WesternEurope

Eastern Europe

ChinaGeographic Locations

Categories

Japan Emerging Markets

Training

Wm’s Fitness

Sports Culture

Other