2. Organizational Structure 2 Effective structures provide: Stability Flexibility Structural stability provides: The capacity required to consistently and predictably manage daily work routines Structural flexibility provides for: The opportunity to explore competitive possibilities The allocation of resources to activities that shape needed competitive advantages

3. Functional organizational structure Employees are grouped together according to their similar tasks, skills or activities. Functional structures are suitable for SMEs with high level of specialization. The decision making is centralized at the top of the organization.

5. Benefits of functional organizational structure

6. Disadvantages od functional design

7. Divisional organizational structure It is suitable for medium sized to big companies, Expanding geographically or on customer base. A Divisional design means that all activities needed to produce a good or service are grouped into an anonymous unit.

8. Differences between functional and divisional design Functional designs are based on groupings by input; Each department is not an independent profit center; Divisional design considers output such as product, customer or location. Each division is independent profit center;

9. Forms of divisional responsible design

10. Strengths of divisional design:

11. Weaknesses of divisional design

12. Hybrid design Hybrid design is one that has divisional units but also have functional departments specialized and centralized in the headquarter.

13. Matrix design It implements functional and divisional structures simultaneously in each department. The worker in each department is being supervised by two bosses at the same time.

15. Strengths of matrix design

16. Weaknesses of Matrix Design

17. Group task Give example of organizations having functional, divisional design. For which industry is functional design more appropriate and when divisional is suitable?

18. Hierarchical Functional Matrix Product Ringed- Fence (Virgin) Keiretsu Book Additional

19. Zaibatsu

20. Rich Merchants in Edo Period (Gosho) MITSUI -17c From Matsuzaka -Kimono trade & money exchange in Edo, Kyoto, Osaka – huge success <Transition to Meiji> Manager: Rizaemon Minomura -Cope with bakufu policy to protect Mitsui business -Support and work with new government -Internal reform: from gosho to zaibatsu -1876 Establish Mitsui Bank & Mitsui Trading Company Sumitomo -16c Adopt Western copper refining, copper trade (Kyoto)-17c Move to Osaka -Besshi Copper Mine (under Bakufu’s commission) <Transition to Meiji> Manager: Saihei Hirose -Avoiding gov’t confiscation-Introducing Western mining technology to renovate Besshi -Business diversification

21. Yataro Iwasaki(1835-85) Seisho (政商) from Tosa, founder of Mitsubishi Zaibatsu Shipping company--grew fast with government support (receiving gov’t ships, contract for military transport) Established Nippon Yusen (NYK Line), fierce battle with Kyodo Unyu (anti-Mitsubushi company), 1883-85 Expanded to many areas: trade, banking, shipbuilding, coal, mining (later, more)

22. Keiretsu

23. DKB Asahi Mutual Life Insurance (DKB) The Dai-ichi Mutual Life Insurance Company (DKB) Daiichi Sankyo Dentsu (DKB) Fujitsu (Furukawa) Hitachi (Hitachi) Ishikawajima-Harima Heavy Industries (IHI) Isuzu (IHI) ITOCHU (DKB) JFE Holdings (Kawasaki) Kawasaki Heavy Industries (Kawasaki) Kao (DKB) K Line (Kawasaki) Kobe Steel (Suzuki) Meiji Seika (DKB) Mizuho (Mizuho Financial Group) Seibu Department Stores (DKB) Sojitz (Suzuki) Sompo Japan Insurance (DKB) Taiheiyo Cement (Asano) Tokyo Dome (DKB) The Tokyo Electric Power Company (DKB) Tokyo FM (DKB) Yokohama Rubber Company (Furukawa)

24. DKB Asahi Mutual Life Insurance (DKB) The Dai-ichi Mutual Life Insurance Company (DKB) Daiichi Sankyo Dentsu (DKB) Fujitsu (Furukawa) Hitachi (Hitachi) Ishikawajima-Harima Heavy Industries (IHI) Isuzu (IHI) ITOCHU (DKB) JFE Holdings (Kawasaki) Kawasaki Heavy Industries (Kawasaki) Kao (DKB) K Line (Kawasaki) Kobe Steel (Suzuki) Meiji Seika (DKB) Mizuho (Mizuho Financial Group) Seibu Department Stores (DKB) Sojitz (Suzuki) Sompo Japan Insurance (DKB) Taiheiyo Cement (Asano) Tokyo Dome (DKB) The Tokyo Electric Power Company (DKB) Tokyo FM (DKB) Yokohama Rubber Company (Furukawa)

25. Keiretsu Structure

26. Horizontal keiretsu (kinyû keiretsu) Affiliated `brother and sister` companies spanning different industries

27. Horizontal Keiretsus Typical of a Japanese horizontal keiretsu is Mitsubishi where the Bank of Tokyo-Mitsubishi sits at the top of the keiretsu. Also part of the core group is Mitsubishi Motors and Mitsubishi Trust and Banking followed by Meiji Mutual Life Insurance Company which provides insurance to all members of the keiretsu. Mitsubishi Shoji is the trading company for the Mitsubishi keiretsu.

28. Vertical Keretsu

29. Vertical Keiretsu Group of companies within the horizontal keiretsu such as Toyota. Toyota's success is dependent on suppliers and manufacturers for parts, employees for production, real estate for dealerships, steel, plastics and electronics suppliers for cars as well as wholesalers. All ancillary companies operate within the vertical keiretsu of Toyota but are members of the larger horizontal keiretsu, although much lower on the organizational chart.

30. Vertical Integration