Organization Structure vs Design

Structure: How work is divided across the organization; lines of reporting; accountability structures Design: Deeper
than mere structure. Involves putting together the right structure to achieve organizational goals, defining
boundaries, planning and coordinating the right people, technology and infrastructure. explain each points with
examples

Structure: Organization structure refers to how the work is divided, coordinated, and controlled within an
organization. It defines the relationships, roles, and responsibilities of individuals and departments, as well as the
lines of reporting and decision-making. Structure provides a framework for organizing tasks, resources, and
communication channels.

Example: In a hierarchical organizational structure, there is a clear chain of command, with decision-making authority
concentrated at the top. Each employee reports to a specific supervisor, and there are well-defined roles and
responsibilities at each level. This structure ensures clear lines of authority and accountability.

Design: Organization design goes beyond structure and encompasses a broader perspective. It involves intentionally
designing and aligning the various components of an organization to achieve its strategic goals. Design takes into
account not only the structure but also the people, processes, technology, and culture necessary to achieve
organizational success.

Example: When designing an organization, various considerations come into play. For instance, the design may
involve defining the boundaries and scope of the organization's activities, identifying the necessary resources and
infrastructure, planning for effective coordination and communication, and aligning the structure with the overall
strategic direction. It may also involve designing the roles and responsibilities to ensure optimal performance and
efficiency.

The design process requires a comprehensive understanding of the organization's goals, environment, and internal
dynamics. It aims to create a cohesive and integrated system that supports the organization's objectives and enables
effective decision-making, collaboration, and adaptation to change.

In summary, while structure focuses on the division of work and reporting relationships, design takes a more holistic
approach, considering the alignment of various organizational elements to achieve the desired outcomes. Structure is
an essential component of design, but design encompasses a broader perspective that includes strategic planning,
coordination, and optimization of all organizational resources.

Why is Structure Important? Influences how information is shared across the organization and how employees
coordinate across departments. Groups employees using reporting hierarchies, driving work relationships and
interactions. Identifies the number of levels in the hierarchy and span of control. Indicates career progression
opportunities for employees. with an example?

Structure is important for several reasons:

1. Information Sharing and Coordination: The structure of an organization determines how information flows
within the organization. It defines the channels and mechanisms through which information is shared among
employees, departments, and levels of management. A well-designed structure ensures efficient
communication and coordination, enabling employees to work together towards common goals.

Example: In a flat organizational structure, where there are fewer hierarchical levels, information can be easily and
quickly shared among employees. This promotes open communication and collaboration, fostering a more agile and
responsive work environment.

2. Work Relationships and Interactions: Structure determines how employees are grouped and how they
interact with one another. It establishes reporting relationships, clarifies roles and responsibilities, and
defines the authority and decision-making power of different positions. The structure shapes the dynamics
and interactions between employees, departments, and teams.

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Example: In a matrix organizational structure, employees are part of both functional departments and project teams.
This structure encourages cross-functional collaboration and allows employees to work on multiple projects
simultaneously, fostering a culture of teamwork and knowledge sharing.

3. Hierarchy and Span of Control: Structure determines the number of hierarchical levels in the organization
and the span of control at each level. It defines the extent of authority and responsibility that each manager
or supervisor has over a group of employees. The hierarchy and span of control impact the flow of decision-
making, supervision, and control within the organization.

Example: In a tall organizational structure, there are multiple layers of management, with narrow spans of control.
This allows for closer supervision and control but can also result in slower decision-making and communication
processes.

4. Career Progression Opportunities: Structure provides a framework for career progression within the
organization. It outlines the different levels and positions within the hierarchy, allowing employees to
understand their potential career paths and advancement opportunities. Clear career progression paths can
motivate employees and contribute to their job satisfaction and commitment to the organization.

Example: In a hierarchical organizational structure, employees can see a clear path for advancement from entry-level
positions to higher-level managerial roles. This provides employees with a sense of direction and incentivizes them to
develop their skills and knowledge to progress within the organization.

In summary, structure is important because it influences information sharing, work relationships, hierarchy, and
career progression within the organization. A well-designed structure promotes effective communication,
collaboration, and clarity of roles, leading to improved organizational performance and employee satisfaction.

Mechanistic Design:

1. Unlikely to change: Mechanistic designs are suitable for stable and predictable environments where there is
little need for adaptation or flexibility. The contextual factors are typically rigid and resistant to change.

Example: A traditional manufacturing company that produces standardized products using well-defined processes
and procedures. The roles and responsibilities are clearly defined, and decision-making authority rests with a few
top-level managers. The organizational structure follows a strict hierarchy with clear reporting lines.

2. High degree of formalization and rules: Mechanistic designs rely on formalized processes, rules, and
procedures to govern work activities. There is a strong emphasis on following established protocols and
guidelines.

Example: A government organization that follows strict bureaucratic processes and regulations. Each task is
documented and standardized, and employees are expected to adhere to predefined rules and procedures.

3. Centralized authority with a few people: In mechanistic designs, decision-making authority is concentrated at
the top levels of the organization. Key decisions are made by a small group of individuals, and lower-level
employees have limited autonomy.

Example: A military organization where high-ranking officers make important strategic decisions, and lower-ranking
personnel follow orders and instructions.

4. Several specialists: Mechanistic designs often involve specialized roles and functions. Each individual has a
specific area of expertise, and there is a clear division of labor based on specialized skills.

Example: A large law firm where lawyers specialize in different areas of law, such as corporate law, intellectual
property, or litigation. Each lawyer focuses on their respective area of expertise, and there is little overlap in their
responsibilities.

Organic Design:

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 1. Susceptible to change: Organic designs are suitable for dynamic and unpredictable environments where
flexibility and adaptability are crucial. The contextual factors are more open to change and allow for agility.

Example: A technology startup operating in the fast-paced and rapidly evolving tech industry. The company needs to
quickly respond to market trends and customer demands, requiring a flexible and adaptable organizational design.

2. Low degree of formalization, high flexibility: Organic designs have minimal formalization and rely on flexible
processes and procedures. There is an emphasis on autonomy, innovation, and employee empowerment.

Example: A creative advertising agency where employees have the freedom to explore innovative ideas and
approaches. The company encourages experimentation and values individual creativity, allowing for a high degree of
flexibility in work processes.

3. De-centralized authority throughout: In organic designs, decision-making authority is distributed across

various levels of the organization. Decision-making is often pushed down to lower levels, enabling quicker
responses and greater employee involvement.

Example: A decentralized retail chain where store managers have the authority to make decisions regarding inventory
management, pricing, and customer service. This decentralized structure allows for faster decision-making and better
adaptation to local market conditions.

4. Several generalists: Organic designs emphasize a broader skill set and encourage employees to possess a
range of competencies. There is a focus on cross-functional collaboration and teamwork.

Example: A small startup team where employees are expected to contribute to various aspects of the business,
including marketing, product development, and customer support. Each team member is a generalist with a diverse
skill set, enabling them to take on multiple responsibilities.

In summary, mechanistic designs are characterized by stability, formalization, centralized authority, and specialized
roles, while organic designs are associated with flexibility, decentralization, low formalization, and a focus on
generalist skills. The choice between these design approaches depends on the specific contextual factors and the
organization's need for stability or adaptability.

Organization Structure 2: Divisional

Divisional structure is an organizational structure where the organization is divided into separate divisions based on
products, services, markets, or geographic regions. Each division operates as a semi-autonomous unit with its own
functional departments. Here are the key characteristics and examples of a divisional structure:

1. One division per product/service: In a divisional structure, each division is dedicated to a specific product or
service line. This allows for focused management and accountability within each division.

Example: A multinational conglomerate that operates in various industries, such as automotive, electronics, and
healthcare, may have separate divisions for each industry. The automotive division would handle all activities related
to the production, marketing, and sales of automobiles.
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 2. Facilitates interdepartmental collaboration: Divisional structures encourage collaboration and coordination
between different functional departments within each division. Departments within a division work closely
together to achieve divisional goals.

Example: In a divisional structure, the marketing, finance, and operations departments within a specific division
collaborate to develop and execute marketing strategies, allocate financial resources, and ensure smooth operations
specific to the division's product or service line.

3. Easy customization and adaptation to change: Divisional structures allow for customization and adaptation to
specific market needs or changes. Each division can respond independently to market demands and tailor
their products or services accordingly.

Example: A consumer goods company with a divisional structure may have separate divisions for personal care
products, homecare products, and food products. Each division can adapt its product offerings to cater to the specific
needs and preferences of its target market.

4. Decentralized authority and quick problem-solving: Divisional structures decentralize decision-making

authority to divisional managers, enabling quicker problem-solving and decision-making processes at the
divisional level.

Example: In a divisional structure, divisional managers have the authority to make decisions regarding their division's
operations, budgeting, and resource allocation. This decentralization allows for faster response times and more
efficient problem-solving within each division.

5. Less efficient than functional structure: Divisional structures can be less efficient compared to functional
structures, as resources and functions are duplicated across divisions. Each division may have its own support
functions, such as HR or finance, leading to potential inefficiencies.

Example: In a divisional structure, each division may have its own HR department, finance department, and other
support functions, which can result in duplicated efforts and increased costs compared to a centralized functional
structure.

6. Product/service lines may remain unconnected: In some cases, divisional structures may result in limited
coordination or integration across different product or service lines. Each division may focus primarily on its
own goals and operations, potentially resulting in a lack of synergy between divisions.

Example: In a divisional structure, if separate divisions operate in unrelated industries or markets, there may be
minimal interaction or collaboration between divisions. This lack of connection may limit the sharing of knowledge,
resources, or best practices across the organization.

7. Complicates standardization of product/service: Divisional structures can complicate the standardization of

products or services across the organization, as each division may have its own processes and practices.

Example: In a divisional structure, different divisions may develop their own product variations or service delivery
methods, leading to inconsistencies across the organization. Achieving standardized quality or operational
procedures may require additional coordination and effort.

In summary, a divisional structure divides the organization into separate divisions based on products, services, or
other criteria. It promotes interdepartmental collaboration, customization, and quick decision-making but can be less
efficient, may result in disconnected product or service lines, and can complicate standardization efforts.

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Organization Structure 3: Matrix  Combines functional with divisional structure  Centralization of knowledge
(vertical) + Interdepartmental collaboration (horizontal)  Facilitates quick decision making in uncertain
environments  Dual hierarchy can be frustrating  Maintaining power balance maybe an issue. explain with
examples

Organization Structure 3: Matrix

Matrix structure is a hybrid organizational structure that combines elements of both functional and divisional
structures. It aims to leverage the benefits of functional specialization while enabling cross-functional collaboration.
Here are the key characteristics and examples of a matrix structure:

1. Combines functional with divisional structure: In a matrix structure, employees are grouped based on both
functional expertise and specific projects, products, or clients. This dual reporting system creates a matrix-
like structure with vertical and horizontal lines of authority.

Example: A pharmaceutical company may adopt a matrix structure where employees from different functional areas,
such as research and development, manufacturing, and marketing, work together on cross-functional teams
dedicated to specific product lines or projects.

2. Centralization of knowledge (vertical) + Interdepartmental collaboration (horizontal): The matrix structure

allows for vertical knowledge sharing within functional departments and horizontal collaboration across
different functions. This facilitates the integration of diverse expertise and perspectives.

Example: In a matrix structure, a project manager may report to both a functional manager (vertical reporting) for
technical guidance and a project sponsor (horizontal reporting) for project-related decisions and coordination with
other departments. This enables the project manager to tap into functional expertise while collaborating with other
departments.

3. Facilitates quick decision-making in uncertain environments: The matrix structure enables organizations to
respond quickly to changing market conditions or complex projects by bringing together the necessary
expertise and resources. It promotes agility and adaptability in dynamic environments.

Example: In a technology company, a matrix structure can be used for software development projects. Developers
from different functional areas (e.g., programming, user experience design, quality assurance) collaborate on a
project team, allowing for efficient decision-making and faster product development cycles.

4. Dual hierarchy can be frustrating: In a matrix structure, employees often have two reporting lines, which can
lead to conflicts or confusion regarding roles, responsibilities, and authority. Balancing the demands of both
functional and project managers can be challenging.

Example: An employee in a matrix structure may receive conflicting priorities or directions from their functional
manager and project manager. This dual reporting can create tensions and the need for clear communication and
coordination to ensure alignment.

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 5. Maintaining power balance may be an issue: Matrix structures require careful management of power
dynamics to avoid conflicts and ensure a balance of authority between functional and project managers.
Clear governance and decision-making processes are crucial.

Example: In a matrix structure, power struggles or clashes of authority can occur if there is a lack of clarity or
agreement on decision-making processes. Effective communication, collaboration, and negotiation are essential to
maintain a healthy power balance.

In summary, a matrix structure combines functional and divisional elements to promote both functional
specialization and cross-functional collaboration. It enables centralization of knowledge and interdepartmental
collaboration, facilitates quick decision-making in uncertain environments, but can also create challenges related to
dual reporting and power dynamics. Successful implementation of a matrix structure requires effective
communication, coordination, and a clear understanding of roles and responsibilities.

PROs & CONs of divisional organisational structure with examples

Pros of Divisional Organizational Structure:

1. Enhanced Focus: Divisional structure allows for a more focused approach as each division is responsible for a
specific product, service, or market segment. This enables divisions to develop specialized expertise and
cater to the unique needs of their respective areas.

Example: Procter & Gamble (P&G) is a multinational consumer goods company that follows a divisional structure.
P&G has divisions dedicated to different product categories such as beauty, grooming, healthcare, and home care.
Each division has its own teams and resources, allowing them to focus on their specific product category and deliver
tailored solutions to their target consumers.

2. Improved Coordination: Divisional structure promotes interdepartmental collaboration and coordination

within each division. The functional departments within a division work closely together to achieve divisional
goals, leading to better communication, knowledge sharing, and problem-solving.

Example: General Electric (GE) used a divisional structure with divisions like GE Healthcare, GE Aviation, and GE
Power. Each division had its own set of functional departments such as manufacturing, sales, and research and
development. The divisional structure allowed for seamless coordination between these departments, enabling
efficient operations and innovation within each division.

Cons of Divisional Organizational Structure:

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 1. Duplication of Resources: Divisional structure may lead to duplication of resources and functions across
different divisions. Each division may have its own set of supporting departments, such as HR, finance, and IT,
which can result in inefficiencies and increased costs.

Example: A company with multiple divisions operating in different regions may have separate HR departments in
each division. This duplication of HR functions can result in redundant efforts, inconsistent policies, and increased
administrative overhead.

2. Limited Sharing of Resources: Divisional structure can create barriers to resource sharing and collaboration
between divisions. Divisions may prioritize their own goals and interests over the collective interests of the
organization, which can hinder cross-divisional cooperation and hinder the overall performance of the
organization.

Example: An automobile manufacturer with divisions for passenger cars and commercial vehicles may face challenges
in sharing resources such as manufacturing facilities, research and development expertise, and supply chain
capabilities between the divisions. This can limit the organization's ability to leverage synergies and economies of
scale.

3. Potential for Internal Competition: Divisional structure may foster internal competition among divisions,
especially if performance metrics and incentives are focused solely on divisional performance. This can result
in divisions working in silos, competing for resources and market share, rather than collaborating for the
overall success of the organization.

Example: In a retail company with divisional structure, divisions responsible for different product categories may
compete for prime shelf space, marketing budgets, and customer attention, potentially undermining the
organization's overall performance and strategic goals.

It's important to note that the pros and cons of a divisional structure can vary based on the specific context, industry,
and organizational strategy. While the divisional structure offers advantages in terms of focus and coordination, it
also introduces challenges related to duplication, resource sharing, and internal competition that need to be carefully
managed for optimal organizational performance.

PROs & CONs of Functional organizational structure with examples

Pros of Functional Organizational Structure:

1. Specialization and Expertise: Functional structure allows employees to specialize in specific functions or areas
of expertise. This specialization can lead to higher levels of knowledge, skills, and efficiency within each
functional department.

Example: In a software development company, a functional structure can have separate departments for software
engineering, quality assurance, and user experience design. Each department focuses on its specific area of
expertise, allowing employees to develop specialized skills and deliver high-quality output in their respective
domains.

2. Clear Career Paths: Functional structure provides clear career paths within each functional department.
Employees can progress vertically within their area of specialization, acquiring deeper knowledge and taking
on more senior roles.

Example: A consulting firm with a functional structure may have career progression paths for consultants, starting
from junior consultants to senior consultants and then to partners. This allows employees to advance their careers
within their specific areas of expertise.

3. Efficient Resource Allocation: Functional structure enables efficient allocation of resources as each functional
department can allocate its resources based on its specific needs and priorities. This allows for better
resource utilization and cost management.

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Example: A manufacturing company with a functional structure may have separate departments for production,
procurement, and logistics. Each department can allocate resources based on the demands and priorities of their
specific functions, optimizing production processes and supply chain operations.

Cons of Functional Organizational Structure:

1. Lack of Cross-Functional Collaboration: Functional structure may hinder cross-functional collaboration and
communication. The focus on functional silos can lead to limited interaction and coordination between
departments, slowing down decision-making and hindering innovation.

Example: In a functional structure, communication between the marketing and engineering departments of a
technology company may be limited, leading to challenges in aligning product development with market needs and
missed opportunities for collaboration.

2. Slow Response to External Changes: Functional structure can be slow in responding to external changes and
market demands. Decisions and actions may need to go through multiple layers of management within each
functional department, resulting in a slower decision-making process.

Example: A retail company with a functional structure may take longer to adapt to changing consumer trends and
preferences compared to a more agile organization that allows for faster cross-functional collaboration and decision-
making.

3. Potential for Lack of Accountability: Functional structure can create ambiguity in terms of individual
accountability and overall organizational performance. With a focus on functional responsibilities, it may be
challenging to assign clear accountability for outcomes that require cross-functional collaboration.

Example: In a functional structure, it can be difficult to determine who is ultimately responsible for a product's
success or failure as multiple functional departments may be involved in its development and launch.

It's important to note that the suitability of a functional structure depends on various factors such as the
organization's size, industry, and strategic goals. While functional structure offers advantages in terms of
specialization and clear career paths, it also presents challenges related to collaboration, responsiveness, and
accountability that need to be addressed for effective organizational performance.

PROs & CONs of Matrix organizational structure with examples

Pros of Matrix Organizational Structure:

1. Efficient Resource Utilization: Matrix structure allows for optimal utilization of resources as employees are
shared across different projects or functions. This promotes flexibility and efficiency in resource allocation.

Example: In a construction company using a matrix structure, engineers from different disciplines (structural,
electrical, mechanical) can be assigned to different projects based on their expertise and project requirements,
ensuring efficient utilization of engineering resources.

2. Enhanced Cross-Functional Collaboration: Matrix structure promotes collaboration and communication

between different functions or departments. Employees from different areas of expertise work together on
projects, fostering cross-functional collaboration and knowledge sharing.

Example: In a marketing agency with a matrix structure, marketing specialists, designers, and copywriters collaborate
on client projects to create integrated marketing campaigns that leverage their respective expertise.

3. Flexibility and Adaptability: Matrix structure allows organizations to quickly adapt to changes in the external
environment or project requirements. It enables organizations to assemble teams with the right mix of skills
and expertise for specific projects.

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Example: In a software development company utilizing a matrix structure, project teams can be formed by selecting
individuals from different functional departments based on their skills and availability. This flexibility allows the
company to respond to changing client needs and project requirements effectively.

Cons of Matrix Organizational Structure:

1. Dual Authority and Conflicting Priorities: Matrix structure introduces dual authority, where employees report
to both a functional manager and a project or product manager. This can lead to conflicts, power struggles,
and confusion about priorities and decision-making.

Example: In a matrix structure, an employee may receive conflicting instructions or priorities from their functional
manager (e.g., focusing on departmental goals) and their project manager (e.g., meeting project deadlines). This can
create tension and ambiguity for employees.

2. Communication Challenges: Matrix structure relies heavily on effective communication and coordination
between different functions and project teams. If communication channels are not well-established or if
there is a lack of clarity, miscommunication and delays can occur.

Example: In a matrix structure, if project teams and functional departments do not have clear communication
channels or if there is a lack of information sharing, it can result in misunderstandings, delays in decision-making, and
inefficiencies.

3. Complexity and Potential for Role Ambiguity: Matrix structure adds complexity to the organizational
hierarchy and can create role ambiguity or confusion about reporting lines and responsibilities. Employees
may find it challenging to navigate multiple reporting relationships.

Example: In a matrix structure, an employee may have to report to both a functional manager for their functional
performance evaluation and a project manager for their project-related tasks. This can create uncertainty about
performance expectations and accountability.

It's important to note that the success of a matrix structure depends on effective communication, collaboration, and
clarity in roles and responsibilities. Organizations need to establish clear guidelines, communication channels, and
decision-making processes to mitigate the potential drawbacks associated with matrix structure and ensure its
effectiveness in achieving organizational goals.

Why Do Organizations Expand Internationally? Economies of scale: Larger scale of operation decreases cost of
production, reaches new markets Economies of scope: Offer larger number and variety of products and services. Low
cost production factors: Cheaper raw material, labor or infrastructure than in home country. Explain with examples

Organizations expand internationally for several reasons, including:

1. Economies of Scale: By expanding internationally, organizations can achieve economies of scale, which refers
to the cost advantages gained from increased production and distribution. With a larger scale of operation,
organizations can spread their fixed costs over a larger output, reducing the average cost per unit. This allows
them to be more competitive in terms of pricing and profitability.

Example: A clothing manufacturer based in the United States expands its operations to China, where it can benefit
from lower labor costs and larger production facilities. By producing garments at a larger scale in China, the
organization can reduce its production costs and offer competitive prices in the international market.

2. Economies of Scope: International expansion allows organizations to offer a larger number and variety of
products and services to a global customer base. By diversifying their product or service offerings,
organizations can tap into different markets and cater to a wider range of customer preferences and needs.

Example: A multinational consumer goods company expands its product line to include new categories such as
personal care, home appliances, and food products. This expansion enables the organization to leverage its existing
distribution networks and brand recognition to offer a diverse range of products to customers worldwide.

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 3. Low-Cost Production Factors: International expansion can provide access to lower-cost production factors
such as raw materials, labor, or infrastructure compared to the organization's home country. This allows
organizations to reduce production costs and increase their competitiveness in the global market.

Example: An automobile manufacturer establishes production facilities in Mexico to take advantage of lower labor
costs and proximity to key suppliers. By accessing cheaper labor and raw materials, the organization can manufacture
vehicles at a lower cost, making them more affordable for international customers.

It's important to note that international expansion also presents challenges such as cultural differences, legal and
regulatory complexities, and market uncertainties. Organizations need to carefully analyze the potential benefits and
risks associated with international expansion and develop appropriate strategies to navigate the global market
successfully.

How Organizational Structure Evolves Most organizations begin without a formal structure. Growth in business
warrants a structure aligned with the founders’ vision and strategy. Functional structures are usually the first choice
with centralized decision making by top management. Over time, products and services may require diversification.
Organization may be redesigned to a divisional structure with each division for distinct product or service. explain
with P&G example how organisational structure evolves over time with business requirements?

Procter & Gamble (P&G) is a multinational consumer goods company that provides a relevant example of how
organizational structure evolves over time based on business requirements.

1. Initial Stage: Functional Structure In its early years, P&G operated with a functional structure. This structure
grouped employees based on their specific functions or areas of expertise, such as marketing, finance,
operations, and research and development. Decision-making was centralized at the top management level, with
a focus on efficiency and control.

2. Diversification and Market Expansion As P&G expanded its product portfolio and entered new markets, the need
for greater flexibility and responsiveness arose. The company diversified into multiple product categories,
including beauty, health care, home care, and baby care. This diversification required a shift in the organizational
structure to better accommodate the different business units.

3. Transition to a Divisional Structure To effectively manage its diverse product lines, P&G adopted a divisional
structure. Each division operates as a semi-autonomous unit responsible for a specific product category. This
structure allows for decentralized decision-making and greater focus on the unique needs of each division. For
example, P&G established divisions like Beauty, Grooming, Health Care, and Fabric & Home Care, with dedicated
teams and resources for each division.

4. Global Matrix Structure To further support its global operations, P&G implemented a matrix structure. The matrix
structure combines elements of both functional and divisional structures, enabling cross-functional collaboration
and coordination across geographical regions. P&G's matrix structure allows for efficient allocation of resources,
shared expertise, and consistent global standards while also providing flexibility and adaptability to local market
needs.

The evolution of P&G's organizational structure showcases how business requirements drive changes in the
structure. The shift from a functional structure to a divisional and matrix structure aligns with the company's
diversification, expansion into new markets, and the need to balance global standardization with local customization.
By adapting its structure over time, P&G has been able to effectively manage its diverse portfolio of products and
cater to the needs of various markets while maintaining overall strategic direction.

Structure Change with Globalization Stage 1: Setting up an international division Subsequent changes based on
organization’s globalization strategy International Structural Changes Model. Explain with examples

The International Structural Changes Model describes the stages of organizational structure changes that occur as a
company expands its operations globally. Here are the stages of the model along with examples:

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 1. Stage 1: Setting up an International Division At this stage, companies establish a separate division or
department to handle international operations. This division is responsible for coordinating and managing
the company's global activities. It serves as a centralized unit to support international subsidiaries or
branches. The international division is typically characterized by a functional structure, where employees are
grouped based on their specific expertise.

Example: Coca-Cola Coca-Cola established an international division to oversee its global operations. This division is
responsible for developing strategies, coordinating marketing efforts, and managing relationships with international
bottling partners. The international division ensures consistent brand standards and facilitates knowledge sharing
across different markets.

2. Subsequent Changes based on Globalization Strategy As companies further expand their global presence and
face diverse market conditions, they may need to make additional structural changes to effectively manage
their operations. The specific changes depend on the company's globalization strategy, market requirements,
and desired level of coordination and control.

Examples of subsequent changes include:

 Geographic Structure: Companies may adopt a geographic structure where different regions or countries
have their own divisions with decision-making authority. This structure allows for local adaptation and
responsiveness to regional market conditions.

 Product Structure: Companies may shift to a product-based structure where divisions are organized around
specific product lines. This structure enables better focus on product development, customization, and
marketing strategies.

 Matrix Structure: Companies may implement a matrix structure that combines functional and geographic or
product-based divisions. This structure facilitates coordination across different dimensions and allows for a
balance between global standardization and local responsiveness.

Example: Unilever Unilever has undergone structural changes to support its global expansion. The company has
adopted a matrix structure that combines regional divisions with product-based divisions. This allows Unilever to
balance global brand management with local market customization. Each region has its own division responsible for
operations, while product-based divisions focus on specific categories such as personal care, home care, and food
products.

The International Structural Changes Model highlights that as companies expand globally, they often need to adapt
their organizational structures to effectively manage diverse markets, achieve coordination, and balance global and
local needs. The specific structural changes will vary based on the company's globalization strategy, industry
dynamics, and evolving market conditions.

Worldwide Area Structure  Replicates functional structure across different geographic areas  Works for
organizations with low diversification  Prioritizes strategy of local responsiveness. explain each points with
examples

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Worldwide Area Structure is an organizational structure that replicates the functional structure across different
geographic areas or regions where the organization operates. Here are the key points to understand about this
structure:

1. Replicates functional structure across different geographic areas: In this structure, each geographic area or
region has its own functional units or departments that mirror the same functions found in the organization's
headquarters. For example, there might be regional marketing, finance, human resources, and operations
departments that mirror the functional departments at the corporate level.

2. Works for organizations with low diversification: The Worldwide Area Structure is most suitable for
organizations that have a relatively low level of diversification in terms of products or services offered. When
a company's operations are primarily focused on a specific industry or product line, it can effectively replicate
the functional structure across different regions without the need for significant adaptation or customization.

3. Prioritizes strategy of local responsiveness: With the Worldwide Area Structure, the emphasis is on local
responsiveness, meaning that each regional unit has the flexibility to adapt its strategies and operations to
the specific needs and preferences of the local market. This structure allows for quicker decision-making and
tailored approaches to meet local customer demands.

Example: McDonald's McDonald's is an example of a company that adopts the Worldwide Area Structure. It
replicates its functional structure across different geographic areas while prioritizing local responsiveness. Each
region or country has its own functional units, such as marketing, operations, and supply chain, which align with the
overall functional structure at the corporate level. However, these regional units have the autonomy to adapt their
menu offerings, marketing campaigns, and operational processes to cater to local tastes and preferences.

The Worldwide Area Structure allows organizations to achieve a balance between global coordination and local
responsiveness. By replicating the functional structure across geographic areas, companies can benefit from
economies of scale and consistent processes, while also adapting to the specific needs of each market. This structure
is particularly effective when the organization operates in regions with distinct cultural, economic, and regulatory
environments.

Worldwide Product Structure  Allows global coordination of activities for each product/service  Works for
organizations with medium to high diversification  Transfers product expertise seamlessly across geographies.
explain each points with examples

The Worldwide Product Structure is an organizational structure that focuses on global coordination of activities for
each product or service offered by the organization. Here's an explanation of the key points related to this structure:

1. Allows global coordination of activities for each product/service: In this structure, the organization groups its
operations and resources based on the specific products or services it offers. Each product or service has its

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 dedicated global coordination unit that oversees activities related to that particular offering. This structure
enables streamlined communication, coordination, and decision-making processes for each product/service
globally.

2. Works for organizations with medium to high diversification: The Worldwide Product Structure is particularly
suitable for organizations that have a medium to high level of diversification, meaning they offer a wide range
of products or services across different markets. By organizing their structure around products/services,
these organizations can effectively manage and coordinate diverse business lines globally.

3. Transfers product expertise seamlessly across geographies: With the Worldwide Product Structure,
organizations can leverage their expertise and knowledge about specific products/services and transfer them
seamlessly across different geographies. This allows for standardized product development, manufacturing
processes, marketing strategies, and customer service across multiple locations.

Example: Procter & Gamble (P&G) P&G is a multinational consumer goods company that adopts the Worldwide
Product Structure. It organizes its operations based on product categories, such as beauty, grooming, healthcare,
fabric care, and baby care. Each product category has its dedicated global teams responsible for product
development, marketing, and operations. This structure allows P&G to effectively manage its diverse product
portfolio and transfer its expertise and best practices across different markets.

The Worldwide Product Structure enables organizations to achieve global coordination and efficiency by aligning
their operations around specific products or services. It facilitates knowledge sharing, economies of scale, and
consistent branding and quality standards across geographies. This structure is particularly beneficial for
organizations operating in multiple markets with different customer preferences and competitive landscapes.

Worldwide Matrix Structure  Similar to traditional matrix structure, differentiates across products and geographic
areas  Involves dual decision making, could be slow and result in power imbalances. explain each points with
examples

The Worldwide Matrix Structure is an organizational structure that combines elements of both the functional and
divisional structures, with a focus on differentiating across products and geographic areas in a global context. Here's
an explanation of the key points related to this structure:

1. Similar to traditional matrix structure, differentiates across products and geographic areas: The Worldwide
Matrix Structure follows the basic principles of a matrix structure, where employees are grouped based on
both their functional expertise and the specific products or geographic areas they are responsible for. This
structure recognizes the need for differentiation across products/services and geographic regions to
effectively manage global operations.

2. Involves dual decision making, could be slow and result in power imbalances: In a Worldwide Matrix
Structure, employees report to both functional managers (representing their area of expertise) and

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 product/geographic managers (representing their specific product/service or geographic area). This dual
reporting can lead to complex decision-making processes, as employees need to balance the priorities and
directions of multiple managers. This complexity can sometimes result in slower decision-making and
potential power imbalances, as individuals may have to navigate different lines of authority and influence.

Example: IBM (International Business Machines Corporation) IBM is a multinational technology company that has
adopted a Worldwide Matrix Structure. The company operates in various industries and serves clients across
different geographic regions. It organizes its structure based on both functional expertise (e.g., sales, marketing,
research, finance) and product or industry segments (e.g., cloud services, artificial intelligence, cybersecurity,
healthcare). Employees within IBM report to both functional managers (representing their expertise) and product or
industry managers (representing their specific product or industry segment). This structure allows IBM to leverage
both functional specialization and industry knowledge to serve its global clients effectively.

The Worldwide Matrix Structure provides organizations with the flexibility to manage diverse products/services and
geographic operations. It enables effective coordination and integration across different functional areas and
geographic regions. However, the dual decision-making aspect of this structure can sometimes introduce
complexities and challenges related to communication, authority, and power dynamics. Successful implementation of
the Worldwide Matrix Structure requires clear roles, responsibilities, and communication channels to mitigate these
potential issues.

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