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Forms of Organizational Structure
CHAPTER 6
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Learning Objectives
rms/osm401
After reading this chapter, you should be able to
discuss the factors that influence a firms organizational structure.
describe centralization and decentralization, delegation, andauthority as the key ingredients in establishing the decision-makinghierarchy.
explain the differences among functional, divisional, matrix, andinternational organizational structures.
describe the informal organization and discuss intrapreneuring.
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Forms of Organizational Structure
rms/osm401/Chapter 6
DivisionalOrganization
International
Organization
FunctionalOrganization
MatrixOrganization
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Basic Forms
rms/osm401/Chapter 6
Functional structure
Divisional structure
Matrix structure
International structure
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Functional Structure
rms/osm401/Chapter 6
Mostly practiced by small to medium-size firms.Such organizations are usually structured around
basicbusiness functions such as marketing, operations,
financeThe benefits of this approach: specialization within functional areas smoother coordination among them
Functional organization may foster centralization
and makes accountability more difficult
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Divisional Structure
rms/osm401/Chapter 6
Organizational structure in which corporate divisionsoperate as autonomous businesses under the largercorporate umbrella
Relies on product departmentalization
Structured around several divisions departmentsthat resemble separate businesses in that theyproduce and market their own products
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Divisional Structure
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Matrix Structure
rms/osm401/Chapter 6
Organizational structure created bysuperimposing one form of structure onto another
It is organized along two dimensions, such ascombining a functional and a divisional structure
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International Structure
rms/osm401/Chapter 6
Developed in response to the need tomanufacture, purchase, and sell in global markets
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Informal Organization
rms/osm401/Chapter 6
Network, unrelated to the firms formal authoritystructure, of everyday social interactions amongcompany employees
Negative reinforce office politics that put the
interests of individuals ahead of those of the firmCan cause harm due to distorted or inaccurate
information communicated without management inputor review
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3 Elements of Informal Organization
rms/osm401/Chapter 6
Informal groups
Organizational grapevine
Intrapreneuring
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Informal groups
rms/osm401/Chapter 6
Informal groups
Groups of people who decide to interact amongthemselves Positive impact on the company if they work together to
support the organization Negative impact on the company if they work together against
the organizations interests or dong doing something irrelevantto the organization
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Organizational Grapevine
rms/osm401/Chapter 6
An informal communication network that can runthrough an organization
How can manager eliminate this:
Maintaining open communication and responding
vigorously to inaccurate informationUse the key person in grapevine to sound out
employee reactions to new ideas
Manager may get valuable information from thegrapevine and use it to improve decision making
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Intrapreneuring
rms/osm401/Chapter 6
Process of creating and maintaining the innovationand flexibility of a small-business environment withinthe confines of a large organization
Experienced managers recognize that the informalorganization exists whether they want it or not
Managers know how to use the informalorganization to reinforce the formal organization
The energy of the informal organization can beharnessed to improve productivity