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OGANIZATIONALSTRUCTURE part 3

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Horizontal Organization

Vertical organization is concerned withthe location of decision making

responsibilities within an organization.In contrast, horizontal organization is

concerned with how to divide theorganization into sub units.

Horizontal structure has four differenttypes.

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4 Types of Horizontal structure

1. Functional2. Multidivisional3. Geographic4. matrix

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Functional structure

Functional structure is a structure thatfollows the obvious division of labor within the firm, with different functionsfocusing on different tasks.

Most firms begin with no formal structure

and are run by single entrepreneur or small team of individuals.

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As they grow, the demands of management becomes too great for anindividual or small team to handle.

At this point the organization is split intofunctions that typically represent

different aspects of the firm.

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Strengths and Weaknesses of Functional Organization Structure

STRENGTHS: Allows economies of scale within functional

departments Enables in-depth knowledge and skill

development

Enables organization to accomplish functionalgoals Is best with only one or few products

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Strengths and Weaknesses of Functional Organization Structure

WEAKNESSES: Slow response time to environmental

changes May cause decisions to pile on top, hierarchyoverload

Leads to poor horizontal coordination amongdepartments

Involves restricted view of organizationalgoals

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Typical Functional Structure

CEOCEO

Purchasing Production Marketing

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Multidivisional structure

Multidivisional structure is which a firm isdivided into different divisions, each of whichis responsible for a distinct business area.

Each division is set up as a self contained,largely autonomous entity with its ownfunctions.

Responsibility for operating decisions andbusiness strategy is decentralized intodivisions which are held accountable for their performance.

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Strengths and Weaknesses of Divisional Organization Structure

STRENGTHS: Suited to fast change in unstable environment

Leads to client satisfaction because productresponsibility and contact points are clear Involves high coordination across functions Allows units to adapt to differences in

products, regions, clients Best in large organizations with several

products Decentralizes decision-making

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Strengths and Weaknesses of Divisional Organization Structure

WEAKNESSES: Leads to poor coordination across

product lines Eliminates in-depth competence and

technical specialization Makes integration and standardization

across product lines difficult

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DIVISIONAL ORGANIZATIONSTRUCTURE

President

ProductDivision

1

ProductDivision

2

ProductDivision

3

R&D R&DR&D MFG ACCTG g MFG ACCTG MFG ACCTG

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Geographic Structure

Geographic structure a structure inwhich a firm is divided into differentunits on the basis of geography.

Some firms grow expanding into other geographic regions either within their

home countries or other nationalmarkets.

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Geographic Structure

Under this structure, the firm is dividedinto geographic areas. An area maybea country or a group of countries, andeach area division tends to be self contained and autonomous.

Each has its own set of functions (suchas its own production, marketing, R&Dand human resource)

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MATRIX STRUCTURE

Matrix structure an organization withtwo overlapping hierarchies.

In such an organization, an employeemay belong to two subunits within thefirm. For example, a manager might

be a member of both themanufacturing function and a productdevelopment team.

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Strengths and Weaknesses of Matrix Organization Structure

STRENGTHS: Achieves coordination necessary to meet dual

demands from customers Flexible sharing of human resources across products Suited to complex decisions and frequent changes in

unstable environment Provides opportunity for both functional and product

skill development Best in medium-sized organizations with multiple

products

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Strengths and Weaknesses of Matrix Organization Structure

WEAKNESSES: Causes participants to experience dual authority,

which can be frustrating and confusing Means participants need good interpersonal skills and

extensive training Is time consuming; involves frequent meetings and

conflict resolution sessions

Will not work unless participants understand it andadopt collegial rather than vertical-type relationships Requires great effort to maintain power balance