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Fundamentals of Organizational Structure
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Organization Structure
Three Components Formal reporting relationships Grouping of people and departments Design of systems to ensure effective communication, coordination, and integration
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Linkages Vertical Control Centralized decision-making How achieved:
Hierarchical referral Rules and plans Vertical Information Systems
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Linkages Horizontal Learning Decentralized decision-making
How achieved: Information systems Direct contact Task forces Integrator Teams
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Organizational Structure
Required Work Activities Reporting Relationships Departmental Grouping Options Functional Divisional Multifocused Horizontal Modular
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Functional Structure CEO Finance Marketing Engineering
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Divisional Structure AKA Product Structure
Decentralized decision-making Strengths Weaknesses
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Divisional Structure CEO Product One Product Two Product Three
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Divisional Structure CEO Soft Drinks Aquafina Gatorade
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Geographical Structure
Designed according to where product will be offered
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Geographic Structure CEO United States Asia Europe
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Matrix Structure Combines functional and divisional structure
Conditions Need to share scarce resources Two critical outputs: In-depth knowledge and new products Complex and uncertain domain Who’s in charge? Strengths Weaknesses
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Horizontal Structure Reengineering
Faster and better service for customers Organized around processes and teams Strengths Weaknesses
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Modular Structure Subcontracts processes
Manages them from a central hub Business focuses only on core competency Strengths Weaknesses
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Hybrid Structure Centralized functional structure for stable products; other products may have self-contained departments Certain departments work through entire organization (functional), but processes are focused in other areas (horizontal).
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Applications Have scarce resources and need efficiency?
Need inter-functional coordination, innovation, and learning?
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What Causes Problems? Decision-making is delayed
Non-responsiveness to environmental changes Too much conflict/ “Turf wars”
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