Strategic Management: Formulation and Implementation

Assessment Of Organizational Structure

There are no hard and fast rules for evaluating the appropriateness of an organization's structure. However, the extent to which a structure is effective in helping the organization implement its strategy can be at least partially assessed by answering the following questions:

Is The Structure Compatible With The Corporate Profile And The Corporate Strategy?

A firm may be in one business, several related businesses, or several unrelated businesses. However, an organization's structure should be compatible with its corporate profile. For example, although the one business company may effectively adopt the functional structure, that option may be less viable for organizations that are in several related or unrelated businesses. The functional structure promotes specialization of functional activities.

Thus, this form of specialization is beneficial for a business that primarily produces and markets a singleproduct line such as home furniture or semiconductors, but it may be inappropriate for one in multiple businesses. A product divisional or multidivisional structure can more appropriately emphasize the company's products and services rather then its corporate functions.

An organization structure should also be compatible with corporatelevel strategy. For example, if the corporation intends to grow continuously, it may find its growth eventually stymied by a product divisional or geographic divisional structure. It is not humanly possible to keep up with activities of all the firm's product or geographic divisions.