Custom Organizational Structures essay paper sample
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There are several organization structures that have been employed by multinational corporations in order to succeed. The structures employed vary but share basic characteristics. Most the modern structures exhibit influences of Weber's views on the need for bureaucracy in management, (Armstrong & Kotler, 2007). The four major structures include strategic business units SBUs, product departmentalization, customer/market departmentalization, geographic departmentalization and functional departmentalization. There are some MNCs that use the matrix organizational structure.
In strategic business units, newer units are set up from the main company that operate as independently taking responsibilities for all loses and glory of profits. Success of every unit adds up to that of the main company. SBUs can be product, market or geographically based. Product departmentalization is the grouping of a company's operation according to the different products it deals in. This is helps companies like Starbucks which deals in many products. In market/customer departmentalization, the company groups and delegates' decision making power to individual diversified markets. A company like Apple International Inc. is best suited for this approach since its market is diversified from entertainment to production technological devices. Geographical departmentalization is for companies that deal in specific goods but across many nations. Nokia perfectly uses this structure. As functional departmentalization, work to be done is grouped according to the skills required and the complexity. As such jobs requiring similar skills and resources are grouped together.
This paper will explore the two main approaches to organizational structure: product departmentalization and strategic business units employed by Starbucks international and Vodafone Inc. respectively. Starbucks is the world's largest coffeehouse company that was started in the late 1980's. It has well over 16,900 stores in 50 countries in the world. This includes over 11,500, 1500 and 800 stores in the United States, Canada and the UK respectively. There are other stores in Arabia, Bulgaria, Israel, Japan Hong Kong and many other parts of the world. The main product dealt in is coffee but through other divisions, the company has been able to structure itself in other products. The company also deals in music products, books and movies. Stocking for this company is locality specific in that each stores stocks what the locals within its area of operation need.
Their brand ice-creams and coffee products are however sold in each and every outlet. The company has adopted a product base departmentalization where divisions have been created according to products. There are stores that deal in coffee products, books, movies and such. In this kind of approach, leadership can not be compromised. The leadership of various product based divisions of Starbucks has to play a key role in the implementation of the strategic direction for the Company. First the management has supported the initiatives by providing the necessary support in terms of money and other non monetary terms. It has given employees necessary time and resource support required in achieving set objectives. This has allowed for learning, innovation, creativity and team work.
Faced with diversity and changing consumer needs and wants, Vodafone found the need to have strategic business units in places like Africa. The idea to have these independent business units was to ensure that branding of products concurred with the culture and customs of the geographic area. In Africa for instance, its units, Safaricom, has commanded the market in telephone communication in the whole of East Africa. These units have registered high profits. The advantage of using strategic business units is that a company cushions itself from adverse loses and other failures to launch characteristic of small scale business. When strategic business units are made geographically, a company has the ability to explore newer professional talents from both its home country and the new one.
While the two organizational structures are rewarding, it is good to state that the product departmentalization approach is more effective and innovative. There are greater chances to exercise meaningful bureaucracy in the product departments than there is to independent strategic business units.