OGANIZATIONAL STRUCTURE part 3

Horizontal Organization
Vertical organization is concerned with the location of decision making responsibilities within an organization. In contrast, horizontal organization is concerned with how to divide the organization into sub units. Horizontal structure has four different types.

4 Types of Horizontal structure

1. 2. 3. 4.

Functional Multidivisional Geographic matrix

Functional structure
Functional structure is a structure that follows the obvious division of labor within the firm, with different functions focusing on different tasks. Most firms begin with no formal structure and are run by single entrepreneur or small team of individuals.

As they grow, the demands of management becomes too great for an individual or small team to handle. At this point the organization is split into functions that typically represent different aspects of the firm.

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 functional goals Is best with only one or few products

Strengths and Weaknesses of Functional Organization Structure

WEAKNESSES: Slow response time to environmental changes May cause decisions to pile on top, hierarchy overload Leads to poor horizontal coordination among departments Involves restricted view of organizational goals

Typical Functional Structure

CEO

CEO

Purchasing

Production

Marketing

Multidivisional structure
Multidivisional structure is which a firm is divided into different divisions, each of which is responsible for a distinct business area. Each division is set up as a self contained, largely autonomous entity with its own functions. Responsibility for operating decisions and business strategy is decentralized into divisions which are held accountable for their performance.

Strengths and Weaknesses of Divisional Organization Structure

STRENGTHS: Suited to fast change in unstable environment Leads to client satisfaction because product responsibility 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

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

DIVISIONAL ORGANIZATION STRUCTURE

President

Product
Division 1

Product Division 2

Product Division 3

R&D

MFG

ACCTGg

R&D

MFG

ACCTG

R&D

MFG

ACCTG

Geographic Structure
Geographic structure a structure in which a firm is divided into different units on the basis of geography. Some firms grow expanding into other geographic regions either within their home countries or other national markets.

Geographic Structure

Under this structure, the firm is divided into geographic areas. An area maybe a country or a group of countries, and each area division tends to be self contained and autonomous. Each has its own set of functions (such as its own production, marketing, R&D and human resource)

MATRIX STRUCTURE
Matrix structure an organization with two overlapping hierarchies. In such an organization, an employee may belong to two subunits within the firm. For example, a manager might be a member of both the manufacturing function and a product development team.

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

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 and adopt collegial rather than vertical-type relationships Requires great effort to maintain power balance