Organization

Chapter 8 Structure:
Departmentation
 • LO 1 Identify the basic patterns of
traditional departmentation and their
advantages and disadvantages
• LO 2 Analyze matrix organizations
Learning • LO 3 Explain strategic business units
• LO 4 Examine organization structures
Objectives for global enterprises
• LO 5 Understand the virtual and
boundaryless organizations
• LO 6 Recognize that there is no single
best pattern of departmentation
 Departmentation by Enterprise Function

• Departmentation by enterprise function is

grouping of activities according to the
functions of an enterprise, such as production,
sales, and financing.
A functional
organization
grouping (in a
manufacturing
company)
 Departmentation by Territory
or Geography
• Departmentation by territory or geography is
grouping of activities by area or territory is
common in enterprises operating over wide
geographic areas.
• A territorial, or geographic, organization
grouping (in a manufacturing company)
 Departmentation by Customer Group

• Departmentation by customer group is

grouping of activities that reflects a primary
interest in customers.
 Customer departmentation (in a large bank)

• Grouping activities on the basis of products or product

Departmentation by lines have been growing in importance in multiline,
Product large-scale enterprises.
A product organization
grouping (in a manufacturing
company)
 Matrix Organization
• Matrix organization is the combining of
functional and project or product patterns of
departmentation in the same organization
structure.
Matrix organization (in engineering)
 Strategic Business Units
• Strategic business units are distinct businesses
set up as units in a larger company to ensure
that certain products or product lines are
promoted and handled as though each were an
independent business.

• Core competency is the organization’s collective

learning, coordination, and integration of skills
to obtain “streams of technology.”
Typical SBU organization (in a large industrial chemical
company)
 Organization Structures for the Global
Environment
• Organization structures differ greatly for
enterprises operating in the global
environment. The kind of structure depends
on a variety of factors, such as the degree of
international orientation and commitment.
 The Virtual Organization

• The virtual organization is a rather loose

concept of a group of independent firms
or people that are connected through,
usually, information technology.
 The Boundaryless Organization
• Jack Welch, former CEO of General Electric,
stated his vision for the company as a
“boundaryless company.” By this he meant an
“open, anti-parochial environment, friendly
toward the seeking and sharing of new ideas,
regardless of their origin.”*

* “GE’s Two-Decade Transformation: Jack Welch’s Leadership,” Harvard Business School Case 9-399-150, rev. May 3, 2005.
 Choosing the Pattern of
Departmentation
• The Aim: Achieving Objectives

• Mixing Types of Departmentation