Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Strategic Management: Text and Cases, 4e 10 Creating Effective Organizational Designs

Traditional Forms of Organizational Structure Organizational structure refers to formalized patterns of linking interactions Structure provides a means of balancing two conflicting forces -Need for the division of tasks into meaningful groupings -Need to integrate the groupings for efficiency and effectiveness

Simple Structure Simple structure is the oldest and most common organizational form -Direct supervision of all tasks -Decision making is highly centralized

Functional Structure Functional Structure is found where there is a single or closely related product or service, high production volume, and some vertical integration Adapted from Exhibit 10.2 Functional Organizational Structure Advantages? Disadvantages?

Dominant Growth Patterns of Large Corporations Adapted from Exhibit 10.1 Dominant Growth Patterns of Large Corporations Source: Adapted from J. R. Galbraith and R. K. Kazanjian, Strategy Implementation: The Role of Structure and Process, 2nd ed. (St. Paul, MN: West Publishing Company, 1986), p. 139.

Divisional Structure Adapted from Exhibit 10.3 Divisional Organizational Structure Organized around products, projects, or markets Divisions are relatively autonomous and consist of products and services that are different from those of other divisions

Divisional Structure What are some advantages of the divisional structure? What are some disadvantages of the divisional structure?

Divisional Structure Strategic business unit (SBU) structure Divisions with similar products, markets, and/or technologies are grouped into homogenous SBUs Appropriate when the businesses in a corporation’s portfolio do not have much in common

Matrix Structure Adapted from Exhibit 10.4 Matrix Organizational Structure

Matrix Structure A combination of the functional and divisional structures Individuals who work in a matrix organization become responsible to two managers Some advantages and disadvantages of matrix structure?

Boundaryless Organizational Designs Boundaries that place limits on organizations Barrier-free type of organization Permeable internal boundaries

Pros and Cons of Barrier-Free Structures Adapted from Exhibit 10.7 Pros and Cons of Barrier-Free Structures

Boundaryless Organizational Designs Boundaries that place limits on organizations Barrier-free type of organization Permeable internal boundaries Modular type of organization Outsources non-vital functions

Pros and Cons of Modular Structures Adapted from Exhibit 10.8 Pros and Cons of Modular Structures

Boundaryless Organizational Designs Boundaries that place limits on organizations Barrier-free type of organization Permeable internal boundaries Modular type of organization Outsources non-vital functions Virtual type of organization Continually evolving network of independent companies linked together

Pros and Cons of Virtual Structures Source: R. E. Miles and C. C. Snow, “Organizations: New Concepts for New Forms,” California Management Review,” Spring 1986, pp ; R. E. Miles and C. C. Snow, “Causes of Failure in Network Organizations,” California Management Review, Summer 1999, pp ; and H. Bahrami, “The Emerging Flexible Organization: Perspectives from Silicon Valley,” California Management Review, Summer 1991, pp Adapted from Exhibit 10.9 Pros and Cons of Virtual Structures

Boundaryless Organizations: Making Them Work What are some factors facilitating effective coordination and integration of boundaryless structures?

Other Two contradictory challenges faced by firms -Adaptability -Alignment International Organizations -Strategy -Product Diversity -% Foreign Sales