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Organizational Structure
Horizontal differentiation Vertical differentiation Spacial dispersion Degree of formalization Degree of centralization
Need to create division of labor Need to integrate these groups to ensure
organizational effectiveness Dimensions of Structure
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Firm Growth as Evolutionary Process
Single Business
GeographicDiversification
(Foreign Sales as %Total Sales)
Product Diversification
(Product Diversity)
Product and GeographicDiversification
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Horizontal Differentiation
degree to which tasks are divided into distinct homogeneous groups– function-wise
– geographic-wise
– product-wise
– production stage-wise
Prod 1 Prod 2 Prod 3 Prod 4
C EO
M kt M fg F inance R & D Log is tics
C E O
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Vertical Differentiation
Number of levels within the organization
Sr. VP
VP
Asst. VP Asst. VP
Asst. B ranch Mgr
B ranch Mgr. B ranch Mgr.
Asst. VP
VP VP
Sr. VP
E VP E VP E VP
C EO
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Spacial Dispersion
Degree to which activities are located in different areas
Finance R &D Legal
Support
U S
Prod 1
Mfg.
Pacific
Prod 2
Mfg
Eur.
H Q
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Pre
ssu
res
for
Glo
bal
Eff
icie
ncy
and
Cen
tral
izat
ion
Pressures for Local Responsiveness and Decentralization
High
Low
HighLow
Horizontal Differentiation?
Vertical Differentiation?
Spacial Dispersion
Structure Follows Strategy
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Export
U.S.
Germany
Mexico
Malaysia
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Functional Structurew/ International Sales Division
F in ./Acct.
M anufacturing M arketing Log istics
In ternationa lSa les
R & D
H Q
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Multidomestic
U.S.
Germany
Mexico
Malaysia
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Geographic Structure
Mkt. M fg. R & D
N . Am er. Eur. Latin Am er.
Prod. A Prod. B Prod. C
Pac.R im
H Q
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Pure Global
U.S.
Germany
Mexico
Malaysia
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Global Functional StructureFor Single-business Firms
F in ./Acct.
M anufacturingM exico
M arketingG erm any
R & DM alaysia
H QU .S .
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Product Division StructureFor Product-diversified Firms
M fg . M kt. R &D
Product A
M fg . M kt. R &D
Product B
M fg . M kt. R &D
Product C
H Q
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Transnational (1)
U.S.
Germany
Mexico
Malaysia
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Matrix Structure (A)
R &D
U S
Eur
M exico
M alaysia
M arketing M anufacturingM exico
H QU .S .
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Matrix Structure (B)
U S
Eur
Asia
Geographic A reas Product 1 P roduct 2 P roduct 3 P roduct 4
H Q
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Transnational (2)
U.S.
Germany
Mexico
Malaysia
Engines
Final Assembly
Trim, seats,glass
Steel
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R &D
Log istics
IntegratedFunctions
M arketing
G erm any
D rive tra in
M arketing
U S
Body/F ram e
M arketing
M alaysia
G lass/P lastic
M arketing
M exico
F ina lAssem bly
H Q
Matrix Structure (B)
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Mixed Structure
Mfg.
Mkt.
R&D
PC s
Faxes
Mobil Phones
Copiers
U S
Faxes
Mobil Phones
Copiers
Europe
Faxes
Mobil Phones
Copiers
Pacific
H Q
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Stopford-Wells Structure Model P
rodu
ct D
iver
sity
Lo
Hi
Foreign Sales as % of Total Sales
0% 100%
Intl.Division
ProductDivisions
GeographicDivisions
Mixed /Matrix /Network
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Kimberly-Clark’s Old Structure
M fg . M kt.
U S
M fg . M kt.
Europe
U .S . H QC EO
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Kimberly-Clark’s New Structure
M anufacturing
U S
M anufacturing
Eur
Geographic A reas M arketingTissue P roducts
M arketingP ersonal C are P roducts
U .S . H QC EO
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Kimberly-Clark’s New Structure
M arketingP ersonal-C are
P roducts
M arketingTissue P roducts
Integ ratedU nits
U .S .M fg.
EuropeM fg.
U .S . H QC EO
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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.
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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
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Data Management Control Mechanisms
Information systems Measurement systems Resource allocation procedures Strategic planning Budgeting processes
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Managers’ Management Control Mechanisms
Choice/selection of key managers Career paths Rewards and punishment systems Management development Patterns of socialization
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Organizational Learning/Conflict Resolution Control Mechanisms
Decision responsibility assignments Integrators Transnational teams Coordination committees Task forces