Output-OrientedDivisionalized Forms

Product Line Departmentalization

Product line structure is a design that groups similar orrelated products together.

President

VP- Soap Products

VP – CleansingProducts

VP – MargarineProducts

VP – RefineryProducts

Insurance Company by Product Lines

Product Line Divisions withCorporate Support Units

President

VP – Canned Soups Division

VP – FrozenVegetables Division

VP – Baked GoodsDivision

VP – Sales andMarketing

VP – Research& Development

VP – MaterialsManagement

VP - Finance

This structure provides centralized supportfunctions/services for the needs of several differentproduct lines.

Levi Strauss – Product Lines with Corporate Support Units

Product Team Structure

CEO

VP – R&DVP – Sales

& MarketingVP - Operations

VP – MaterialsManagement

VP - Finance

● ● ● ●

PTM

● ●● ●

PTM

● ●● ●

PTM

Product Development Teams

Product Division Product Division Product Division

PTM -Product Team Mgr ●-Functional specialists

Product Team Structure

The Product Team structure is a cross between theproduct division structure where support functions arecentralized and the multi-divisional structure where each division has its own support functions.

It is used primarily where the focus of the industry is on product customization. The functional orientation ofspecialists is seen as not in the best interests of theproduct divisions.

Process Departmentalization

President

VP – LatheCutting Division

VP – Treatment ofMaterials Division

VP – PaintingDivision

Process structure is a design that group similarorganizational processes together. These processesare usually technologically-based, but not always.

An Example – Process Departments

President

Heavy CastingDivision

StampingDivision

Screw MachineDivision

Plastic ExtensionDivision

Accounting

A metalworking company

Customer Departmentalization

President

VP – ConsumerGoods Division

VP – IndustrialGoods Division

VP – CustomProducts Division

Customer-based structure is a design that groups similar customer groups together.

Geographic/Territory Departmentalization

President

VP – SouthernRegion

VP – MidwestRegion

VP – West Coast Region

Geographic or territorial structure is a design that groupssimilar/localized regions together.

A Geographical Division Firm

Wal-Mart’s Corporate Structure

CEO

COO

NorthernUS

MaterialsManagement

Sales and Marketing

SouthernUS

EasternUS

WesternUS

InternationalOperations

A geographically-based set of divisions, including international

Advantages of Divisional Forms

• Evaluate departments as autonomous profit centers

• Facilitate coordination between functions for rapid response

• Add flexibility to a firm’s structure

• Focus on client needs

• Develop broadly trained managers

Disadvantages of Divisional Forms

• Increase coordination problems between specialized functional/divisional areas

• Lead to decreased communication between functional specialists across divisions

• Contribute to a lack of clarity of functional area responsibilities and a duplication of services

Strengths of Divisional Forms

• Suited to fast change in unstable environment• Client satisfaction because product

responsibility & contact points are clear• High coordination across functions• Units adapt to differences in

products/processes/territories• Best in large organizations• Best when several product/services are offered

Weaknesses of Divisional Forms

• Lose economies of scale in functional departments

• Poor functional coordination across division lines

• Lose in-depth competence & technical specialization

• Integration & standardization across division lines is difficult

The Conglomerate Design(Multi-Divisional, SBU)

CEO

PeriodicalOperations

PublishingOperations

EntertainmentOperations

InvestmentBanking Operations

Oil ServicesOperations

Fine ChinaOperations

Pearson PLC, a British firm, uses a conglomerate formto manage several unrelated businesses. Conglomerateforms usually result from unrelated diversification, andact as a “holding company.”