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II. Organization Theory Divisional Structure by Product

II. Organization Theory Divisional Structure by Product

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Autonomous Business

Each autonomous business is free to do

its

own things: sales and marketing,

productions, purchasing…

The head of the autonomous is the

president

of the autonomous business – now we

usually Strategic Business Unit (SBU)



Strategic Business Unit

The design principle is that each

autonomous business:

1.must have a well defined area of

business, and

2.must be able to contribute a profit to the

corporation.

Otherwise, it is not a genuine divisional

structure



Top

Management

General

Motors

(CEO)



Oldsmobile



Chevrolet



Pontiac



Saturn



Top Management at

Headquarters controls

1. Corporate Policy – Vision, Mission, Value

2.Corporate Finance

3.Appointment of Key Personnel

(especially the President of SBU)

Others

4. Price range (e.g. GM)

5. Purchasing (e.g. WalMart)

6. Products…(e.g. Mark and Spencer)



Corporate Finance

This is a function that does not delegated to

The autonomous business unit, so that it is

big enough in

Corporate Finance:

1. Issuing of shares

2. Loan from banks

3. Issuing of bonds.



SBU



Activities in an SBU may be organized in Functional. Team is not precluded.



Chevroet

President



Purchasing



Marketing



President or Vice President of an SBU

has decision making authority



Production



Finance



Or any other structure suitable for the business of the SBU



Divisional Structure May Be

Organized by Location

DELL



USA and

Canada



Asia



EMEA



America excl.

USA and

Canada



Europe, Middle East and Africa

Page 68 – Geographic organization



Advantages of Divisional

Structure

Division structure allows, at least the top management in the

SBU, to

understand the whole business



1. Better communication and decision

2. Result orientated



3. Management Development



Disadvantages

Increasingly, not all businesses can be

organized as pure divisional structure.



Stimulated Decentralized /

Stimulated

Divisional (next lecture)



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II. Organization Theory Divisional Structure by Product

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