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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
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