Page 212 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes
Figure 11.2: Functional Structure

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Manufacturing Marketing Finance Human Resources R&D

Example: Small business with one product line could start making the components
it requires for production of its products instead of procuring it from an external
organization. It is not only beneficial for organization but also for employees' faiths.

3. Divisional Structure: Divisional structures are used by diversified organisations. In a
divisional structure, divisions are created as self-contained units with separate functional
departments for each division. A division may be organised around geographic area,
products, customers etc. The head office determines corporate strategy, allocates resources
among divisions and appoints and rewards the heads of these divisions. Each division is
responsible for product, market and financial objectives for the division as well as their
division’s contribution to overall corporate performance.

Figure 11.3: Divisional Structure

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Division 1 Division 2 Division 3

Manufacturing Marketing Finance HR Same as Same as
Division 1 Division 1
Example: Divisions can be categorized from different points of view. One might
make distinctions on a geographical basis (a US division and an EU division, for example)
or on product/service basis (different products for different customers: households or
companies). In another example, an automobile company with a divisional structure
might have one division for SUVs, another division for subcompact cars, and another
division for sedans.
4. Matrix Structure: The matrix structure is, in effect, a combination of functional and divisional
structures. In this structure, there are functional managers and product or project managers.
Employees report to one functional manager and to one or more project managers. For
example, a product group wants to develop a new product. For this project it obtains
personnel from functional departments like Finance, Production, Marketing, HR,
Engineering etc. These personnel work under the product manager for the duration of the
project. Thus, they are responsible for two managers – the product manager and the
manager of their functional area.

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