ORGANISATION ORGANISATION ORGANISATION ORGANISATION

STRUCTURE STRUCTURE
O i ti l d i O i ti l d i Organizational design Organizational design
May be defined as total pattern of org. y p g
structural elements and patterns used to
manage overall org.
1. Bureaucratic Model-
Max weber gave this concept bureaucracy
is defined as an o g fo nded on a is defined as an org. founded on a
legitimate and formal system of authority.
Five characteristics Five characteristics
Each org. should have clear divison of g
labour and staff.
Hierarchy of position or scalar command.
Rules & procedures to ensure task
accomplishment.
P li i f l ti d j b Policies of personnel , promotion and job
security.
Managers should conduct business in an Managers should conduct business in an
impersonal manner.
Behavioural model Behavioural model
1. Socio Technical system theory-
Within an org there are 2 systems g y
A) social system
B)Technical system
The managers must deal effectively with
social needs of the system otherwise the
t h i l t ill t f ti technical system will not function
effectively & efficiently.
2. Likerts System 4 organisations
Relationship between org design & p g g
effectiveness.
His research dealt with 8 characteristics of
org.
Emphasised on supporting relationship,
group decision making and high group decision making and high
performance goals.
As bureaucratic model treated employees as As bureaucratic model treated employees as
if they were impersonal and relatively
unimportant he emphasizes on unique value p p q
of each & every member in org.
There is no best way but one best way to
design an org.
INTERNATIONAL DIVISION INTERNATIONAL DIVISION
STRUCTURE STRUCTURE
CEO
MARKETING PRODUCTION FINANCE HR MARKETING
VP-INTL
PRODUCTION FINANCE HR
VP-INTL.
OPERATIONS
FRANCE CHINA
ITALY
Th h d f di i i di t f The head of division coordinates for
activities.
CEO has been relieved of extra burden CEO has been relieved of extra burden.
HOD reports directly to CEO.
Companies at initial / developmental phase Companies at initial / developmental phase
adopt this pattern.
Even firms with small int. sales, limited Even firms with small int. sales, limited
geography, or few executives with int.
expertise use this pattern.
Ex Pepsico , BPL, Titan etc
Advantages
Grouping of all activities under one . p g
International focus receives top attention.
A unified approach.
A cadre is established.
Disadvantages
Two different camp with divergent
objectives.
All ti f h fi i Allocation of resources when firm grows is
difficult.
R&D is domestically oriented hence R&D is domestically oriented hence
product/process in international markets
are given low priority. a g o p o y
Global structural Global structural
arrangements arrangements arrangements arrangements
MNC turn to global structural when they MNC turn to global structural when they
begin acquiring and allocating resource
based on international SWOT analysis. This y
is resorted when strategy changes and
there is a need for structural change.
It i i 3 t It is in 3 types-
Product.
Area Area
Function
Global Product Division Global Product Division
A global product division is a structural
arrangement in which domestic divisions are arrangement in which domestic divisions are
given worldwide responsibility for product
groups. groups.
INTERNATIONAL PRODUCT INTERNATIONAL PRODUCT
STRUCTURE STRUCTURE
CEO
HOME HOME
OFFICE
MARKETING
PRODUCT C
PRODUCT B
OPERATING
PRODUCT A
PRODUCTION FINANCE HR
PRODUCT C
PRODUCT B
DIVISION
PRODUCT A
FRANCE CHINA
ITALY
It operates as a profit centre.
The products are in growth stage The products are in growth stage .
The marketing and promotion has to be
done carefully. do a u y
The manger of division has full autonomy
in decision making.
Advantages,
Polycentric orientation is possible.
All traditional function can be coordinated
on a product by product basis.
Firm use this strategy when a product has
reached maturity stage in home country
but is in growth stage in others.
Disadvantages
l d Duplicating resources across divisions.
Second that product managers may
emphasize certain geographic locations for emphasize certain geographic locations for
short term profit and may ignore long
term opportunities term opportunities.
Divisional ,managers may be busy in
tapping local markets then international pp g
as it more convenient and they may have
experience in that only.
Global area division Global area division
This structure is resorted when firms
focus on domestic and international
market with equality.
The global division managers are
responsible for all business operation in
their geographic areas their geographic areas.
The top mgt. formulates strategy to
ensure harmony across global operation ensure harmony across global operation.
GLOBAL AREA DIVISION GLOBAL AREA DIVISION
CEO
HOME
MARKETING
PRODUCTION
FINANCE HR
OFFICE
MARKETING
PRODUCTION
FINANCE HR
FRANCE
CHINA
ITALY
OPERATING
DIVISI
ON
It i ll d b th t i It is normally used by org, that are in
mature stage & have narrow product line.
These product lines are differentiated These product lines are differentiated
across geographical areas.
They believe in economies of scale in They believe in economies of scale in
production, marketing, purchase
integration etc.
Thus by manufacturing in this region rather
then by bringing product from somewhere
l h bl d d ll else the co. is able to produce and sell at
lower per unit cost.
Advantages Advantages
Cater to local market taste.
Make decisions according to circumstances. Make decisions according to circumstances.
Customize the products ex Spicy, sugar in cold
drinks, ,
Disadvantage.-Lack of centralised control.
Increased cost & duplication of resources on a
regional basis.
R&D efforts are ignored by divisions as they are
i t it t in maturity stage.
Their focus is not on latest technological
products but on proven winners products but on proven winners.
GLOBAL FUNCTIONAL DIVISION
A global functional division organizes g g
world operations based primarily on
functions and secondarily on products.
This approach is widely used by extractive
co.
Advantages Advantages
Functional expertise
Tight centralized decision making Tight centralized decision making.
Lean staff.
GLOBAL FUNCTIONAL DIVISION GLOBAL FUNCTIONAL DIVISION
CEO
MANUFACTURI
NG
FINANCE MARKETING
NG
PLANT A
GERMANY
PLANT B
CHINA
UK US
Disadvantages sad a ag s
Coordination is difficult.
Managing multiple products can be g g p p
difficult becoz of separation of production
& marketing.
Only CEO is responsible.
Mixed Structure Mixed Structure
A Mixed structure is a hybrid design that
combines structural arrangement in a way
that best suits the enterprise.
At times an organization may primarily be
f ti l b t d t itt b functional but product committees may be
coordinating across certain functions.
Or and org may be geographic in Or and org. may be geographic in
structure but functional managers
committee may be there to provide committee may be there to provide
assistance and support.
Many organisations use this structure y g
across the globe.
Advantages-
It allows the firm to create the specific It allows the firm to create the specific
type of design which satisfies its need .
There is more need for coordination and There is more need for coordination and
problem of communication, chain of
command etc may arise, leading to a y , g
confusion among employees.
Matrix Structure Matrix Structure
The Global matrix design is created by
superimposing a project structures on top superimposing a project structures on top
of a functional structure.
Members of each project teams are p j
assigned / selected from functional
departments.
Multiple command structure.
Typically in a multinational firm the
project is for a new product or group of project is for a new product, or group of
products or all the products.
He matrix structure is found to be
s ccessf l nde 3 majo sit ations successful under 3 major situations.
1
st
when org. has few resources.
2
nd
there is a need to integrate and share 2
nd
there is a need to integrate and share
vast amount of information.
1
st
strong environmental pressures 1 strong environmental pressures ,
competition may require aggressive
marketing efforts but diversity of firms g y
products calls for uniquely individualized
program me.
Advantages- d a ag s
Mgt. has flexibility.
Interpersonal leadership skill is fostered. p p
Specialised skills are utilised.
Individual commitment is improved.
Technical and market expertise are
combined.
Strength of functional and divisional
structures are combined.
Disadvantages- sad a ag s
Decisions are difficult to make.
Communication channels are complicated. p
Accountability is difficult to pin point.
Power struggle between project &
functional managers.
Employees may be frustrated.
Group meetings tend to be time & cost
consuming.
Global Network structure Global Network structure Global Network structure Global Network structure
It is another org. design which has emerged
recently to take advantage of global recently to take advantage of global
economies of scale while also being
responsive to local customer demand. responsive to local customer demand.
This structure combines the elements of
product, functional, geographic designs while
relying on a network arrangement to link the
subsidiaries.
Diff d hi f i l i Different product, geographic functional units
have different structure depending upon
what is best for them what is best for them.
Dispersed units- subsidiaries located sp s d u s subs d a s o a d
anywhere which can benefit org.
Either low cost advantage, new
technology information, new consumer
trends.
S i li d O ti ti iti i Specialised Operations- activities carries
out by subunits focusing on particular
product line marketing areas R&D product line, marketing areas, R&D.
Interdependent Relationships-used to
share the information and resources share the information and resources
throughout he dispersed units &
specialised subunits.