Specialization and Coordination Functional Structure Divisional Structure Matrix Structure Network Structure

Functional Structure the bedrock of horizontal differentiation often an organization’s first structure Research and Development Sales and Marketing Manufacturing Materials Management Finance CEO

Functional Structure STRENGTHS Allows economies of scale with functional departments Enables in-depth skill development Enables organizations to accomplish functional goals Is best when only one or a few products WEAKNESSES Has slow response time to environmental changes May cause decisions to pile on top, create hierarchy overload Leads to poor horizontal coordination among departments Results in less innovation Restricts view of organizational goals

Divisional Structure adopted to solve the control problems of functional structures (many kinds of products, many different locations, many types of clients)

Product (Divisional) Structure STRENGTHS Suited to fast change in unstable environment Product responsibility and contact points are clear High coordination across functions Allows adaptation to differences in regions, clients Decentralizes decision making WEAKNESSES Eliminates economies of scale in functional departments Inhibits coordination across product lines Eliminates in-depth technical specialization Integration or standardization across product lines is difficult

Product Team Structure divisional structure in which specialists from the support functions are combined into product development teams used in technologically complex or rapidly changing environments

Product Team Structure. FIGURE 4.9 Product Team Structure. Product Division CEO Functions Development Teams V ice President Research and Sales and Marketing Manufacturing Finance Functional specialist Materials Management PTM Product Team Manager 4-29 Copyright 2001 Prentice Hall

Matrix Structure a rectangular grid that shows a vertical flow of functional responsibility and a horizontal flow of product responsibility two-boss employees report to product manager and functional manager

FIGURE 4.12 Matrix Structure 4-36 Copyright 2001 Prentice Hall CEO V ice President Engineering Finance Purchasing Sales and Marketing Research and Development Product A Manager Product B Product C Product D Product Team Two-boss employee 4-36 Copyright 2001 Prentice Hall

Matrix Structure STRENGTHS Cross-functional teams Increase communication across functions Skilled professionals move from product to product as needed Promote concern for both functional and product issues. WEAKNESSES Role ambiguity Lack of defined authority

Network Structures A cluster of different organizations whose actions are coordinated by contracts and agreements rather than through a formal hierarchy STRENGTHS Reduce production costs Reduce bureaucratic costs associated with complex structures Flexibility WEAKNESSES May limit internal learning processes Assumes that other organizations can be trusted with proprietary information.