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Table of Contents
1 Introduction ............................................................................................................................. 2
2 Theoretical Review .................................................................................................................. 2
2.1 U-form Structure .............................................................................................................. 2
2.2 Matrix Structure ............................................................................................................... 3
3 Case study ................................................................................................................................ 5
3.1 Situation ........................................................................................................................... 5
3.2 Critical Analysis ............................................................................................................... 8
3.2.1 Functional Matrix..................................................... Error! Bookmark not defined.
3.2.2 Balanced Matrix ....................................................... Error! Bookmark not defined.
3.2.3 Project Matrix .......................................................... Error! Bookmark not defined.
3.3 Suggestion ........................................................................................................................ 8
4 Conclusion ............................................................................................................................ 10
5 References ............................................................................................................................. 10



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Critically analyze an example of a company that exhibits a U-form structure. Advise on the
advantages and disadvantages of moving it to a matrix structure
1 Introduction
This study has first introduced the general theories of corporate structure focusing on the U-form
structure and matrix structure. In order to demonstrate the advantages and disadvantages of these
types of corporate structure, a case study has been provided at first employing U-form structure
and then, suggestion has been made of changing to matrix structure.
To operate efficiently, any organization should have its own structure which is a hierarchy of
people and their respective functions. The organizational structure defines the values it believes
in and the character of an organization. As a result, when getting into a new job in an
organization or do business with an organization, it is always essential to understand their
organizational structure. For management purposes, depending on the organizational values and
the nature of the business, organizations have a tendency to follow one of the common structures.
Although the organization follows a particular structure, there can be in exceptional cases
whereby departments and teams following some other organizational structure. In most of the
cases, some firms may follow a combination of the following organizational structures as well.
2 Theoretical Review
2.1 U-form Structure
A U-form structure design is an arrangement to departmentalize an organization. The units and
members are grouped into functional departments in the organization such as production and
marketing under the U-forms arrangement. There must be considerable coordination across
departments for the organization to operate efficiently in this design. This integration and
coordination are most common responsibility of senior management staff and the CEO. None of
the functional areas can survive alone in a U-form organization. For example, marketing needs
products from production to sell, and funds from finance to pay for advertising.
Generally, this approach provides the basic benefits and drawbacks of functional
departmentalization. Thus it allows the organization to assign staff in all important positions with
integration and coordination of its functional facilitates and experts. Alternatively, it also
promotes a functional, rather than an organizational, focuses and tends to promote centralization.
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Functionally based designs are most commonly used in small organizations because an
individual CEO can easily coordinate and oversee the entire organization. As an organization
grows, the CEO finds more and more difficult to stay on top of all functional areas.
Advantages:
Its ability to take advantage of increasing returns to size or scale.
U-form design allows the CEO to centralize authority and facilitates wide spans of
management.
With other configurations The cost of staffing each unit with experts is higher than U-
form structure design.
Coordination of specialized units is centralized by top managers so that economies of
scale are obtained,
Local managers can solve attribute compatibility more easily. Moreover, because the top
manager centralizes coordination in attribute matching, economies of scale are obtained.
Disadvantages:
U-form design delays decision making process. Unit employees may lose sight of overall
organizational goals, and it is challenging for the organization to monitor the
performance of individual managers in the functional areas.
The result of a lack of incentive to be successful economically at the regional and local
level
as a result of the top managers having to rely on imperfect information about attribute
shocks transmitted by local managers, the coordination problem is harder to solve,
More rigid, and if a change occurs, it happens in a comprehensive way. This rigidity
tends to be deleterious for innovation or reform.
2.2 Matrix Structure
The matrix design, another common approach to organization design, is based on two over-
lapping bases of departmentalization. The foundation of a matrix is a set of functional
departments. A set of product groups, or temporary departments, is then superimposed across the
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functional departments. Employees in a matrix are simultaneously members of a functional
department (such as engineering) and of a project team.
At the top of the organization are functional units headed by vice presidents of marketing,
finance, production and engineering. Each of those managers has several subordinates. Along the
side of time organization are a number of positions called project manager. Each project manager
heads a project group composed of representatives or workers from the functional departments.
A matrix reflects a multiple-command structure any given individual reports to both a
functional superior and one or more project managers.
The project teams or groups are assigned to designated programs. For example, the company
might be developing a new product. Each functional area chooses some representatives to work
as a team on the new product. They also retain membership in the original functional group. At
any given time, a person may be a member of several teams as well as a member of a function
group.
Advantage:
The organization is able to capitalize on the advantages of both product and functional
departmentalization.
Can help to break down traditional department barriers, improving communication across
the entire organization
Can allow individuals to use particular skills within a variety of contexts
Avoid the need for several departments to meet regularly, so reducing costs and
improving coordination
Likely to result in greater motivation amongst the team members
Encourages cross-fertilization of ideas across departments e.g. helping to share good
practice and ideas
A good way of sharing resources across departments which can make a project more
cost-effective
Drawbacks:
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The organization lacks a clear chain of command. Project groups may take longer to be
prone to conflict and finish work. The organization has to devote more resources to
coordination.
Members of project teams may have divided loyalties as they report to two line managers.
Equally, this scenario can put project team members under a heavy pressure of work.
There may not be a clear line of accountability for project teams given the complex
nature of matrix structures.
Difficult to co-ordinate
It takes time for matrix team members to get used to working in this kind of structure
Team members may neglect their functional responsibilities
3 Case study
3.1 Situation
Most companies today spend large amount of money on business solutions in order to manage
their business assets, but they sometimes fail to deal with the most crucial asset the workforce.
It is essential to the success of any strategy to understand the structure, how they interact through
informal and formal processes, the roles people play, and the relationships they build.
The Electrolux Group, with sales of 124 billion SEK in 2000, is the worlds largest producer of
appliances for kitchen, cleaning and outdoor use, such as refrigerators, cookers, washing
machines, chainsaws, lawn- mowers and garden tractors. Each year, the Group sells more than
55 million products to consumers in more than 150 countries. Products are sold under famous
brand names such as AEG, Frigidaire, and Eureka. A brief history of the companys
development shows how the size and complexity of the company today have developed over a
one hundred-year period from being a manufacturer of a single product.
In 1997, the Group began a two-year restructuring programme with the aim of improving
profitability. Streamlining led to the divestment of the industrial products sector and the
production of sewing machines, agricultural implements and interior decoration equipment,
followed in 1998 by operations in recycling kitchen and bathroom cabinets, professional
cleaning equipment and heavy-duty laundry equipment. A new brand policy was adopted to
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focus resources on a smaller number of large and well-defined brands. The core business now
comprised household appliances, professional appliances and outdoor products.
In 2000, the three core business areas were further redefined as just two areas: consumer
durables (indoor and outdoor) and professional products (indoor and outdoor). Consumer
durables account for approximately 75 per cent of Group turnover, and include white goods,
floor-care products, garden equipment and light-duty chainsaws. Professional products include
food-service, laundry equipment and landscape maintenance equipment. Consumer durable
products are mainly white goods such as refrigerators, freezers, cookers, washing machines and
room air conditioners. In 2000, they accounted for 79.l per cent of Group sales. Electrolux Group
is the worlds largest producer of appliances, the market leader in Europe, the third largest
producer in the USA, and second largest in Brazil.
There are five group staff units that support all business sectors: human resources, organizational
development finance, communications, legal affairs, and branding. A multinational organization
was established in 2009 with responsibility for manufacturing, purchasing and product
development within major appliances, to fully take advantage of the groups economies of scale
and global presence. The group has a decentralized corporate structure in which the overall
management of operational activities is largely performed by sector boards.
In Europe
Electrolux Home Products (EHP) is one of the global leading manufacturers in household
appliances, such as air-conditioners, dishwashers, refrigerators, vacuum cleaners, washing
machines and cookers. Being a Swedish multinational company, EHP has grown through
acquisitions to become a dominant player in Europe. However, in a highly competitive European
market, the company had to find ways to improve product standards and cut down on costs to
stay ahead of fierce competition. Their solution was quite simple yet strategic in nature. They
introduced a Europe-wide functional structure to replace the geographical structure (resulting
from its acquisitions). The new organizational structure had four functions/departments.
1. Purchasing, Production and Product Development
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Purchasing plays a basic role in the connection between external and internal interfaces. The
purchasing function is more and more a cross-border organ between internal and external
organizations, attempting to render the companys needs compatible in terms of volumes,
facilities, time and resources. Product development is a process characterized by uncertainty, by
continuous problem solving, by new marketing findings, which may also be introduced by
suppliers.
2. Supply Chain Management and Logistics
Supply chain management and logistics involves operations of material management, inventory
management and distribution. Material management embraces all aspects and materials flow
from determination of requirements and capacity planning through purchasing, source search,
and scheduling. Inventory management is responsible for determination of stocking policy to
ensure continuity of supplier with minimum investment costs. Distribution includes warehousing
and both inbound and outbound transportation and strongly influenced by demands for higher
levels of customer services.
3. Product Businesses, Brand Management and Key Account Management
Brand management has been about exclusivity where products are developed for specific set of
people who can afford to pay a premium. Nowadays, brand management stimulates new growth
opportunities in the available profitable markets, optimized profitability, and have been able to
leverage economics of scope. Most companies which focus on key accounts assign equal or
greater status to key account managers as compares to product or band managers, while some
buying companies appreciate strong branding and merchandising in business-to-business
marketing.
4. Sales clusters
Sales clusters is defined as the convergence of distinct activities within an industrial cluster, with
the view to achieve, as a whole, organizational objectives by participating more effectively in the
competitive market process and the larger macro-environment, ensuring competitive advantage
through better efficiencies and innovation.
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Functional structures always allow for greater operational control at a senior level with clear
definition of roles and tasks. This structure is best suited for organizations producing
standardized goods and services at large volumes and low cost. Having introduced functional
structures, EHP was able to improve operational efficiencies where employees became
specialists within their own realm of expertise. The realignment was also helped to ensure
profitable growth as the organization brought in more clarity and uniformity into business by
creating more focus on areas where increased effort is required to meet the tougher challenges of
the market-place.
3.2 Critical Analysis and Suggestion
There are three main possible targets for EHP to accomplish if it were to establish an
organization with new provisions in.
(1) To move the management supervision from the head quarter to its overseas affiliates and
departments.
(2) To provide more obvious job descriptions by restructuring of its business units.
(3) To empowering of lower level managers so that they could take more responsibility and to
flatten the organization, so that top management would give sufficient time and efforts for
strategy planning.
To follow these targets, EHP should decide on a relatively diverse matrix structure. An umbrella
organization named EHP Europe should be established from the main business activities with six
divisions, in different categories of its product groups. Similarly, each of its executive and
service functions gets reformed under EHP Europe into one of some purposes, for example
EHP EUROPE
Purchasing,
Production and
Product
Development
Supply Chain
Management and
Logistics
Product Businesses,
Brand Management
and Key Account
Management
Sales clusters
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Product Development, Production and Purchasing; Logistics and Supply Chain Management;
Account Management Sales & Marketing, Brand Management, and Product Businesses. In
addition, top management has the power over different area globally to officially run functional
groups, which are also intertwined with and aided by different categories of products.
The scalability happens to be the greatest advantage of using such matrix organization for EHP
Europe. It would be possible for supervision interacting with function, country lines, as well as
product and market. Under this allocation there happens to be characteristically a global product
manager, a regional or global functional manager, and a national particular manager; nonetheless,
there occurs the existence of a great deal of changes of the global matrix. The concern of the
product manager is in general about product-particular matters which violate international or
national frontiers. Subject to the kind of function and the EHPs preference, the functional
manager might concentrate on global mattes (e.g., global finance) or regional issues (e.g.,
national finance). Ultimately, the country manager is involved in the whole indications product
as well as function of manufacture and/or marketing the goods in a specific premise.
On the other hand, such matrix formats happen to be smoother and more reactive than U-form
format since it allows more productive information interactions inside EHP. Since persons from
various divisions are having such close cooperation, they become willing to share information
which aids their achievement of shared objectives. Fundamentally, the whole firm turns out to be
a data web; the channeling of information is performed in vertical as well as horizontal way due
to the exchange of technical data, marketing data, product initiatives, financial information for
decision making. Beside fastness and elasticity, matrix organization might lead to a more
productive usage of resources than other administrative formats. This happens due to sharing of
exceedingly specialized staffs and equipment among departments. For instance, in case the
expert of a computer programmer is necessary in another division, there can be the movement of
him or her to that division to fix the issues, instead of wasting time on functions of low
importance as may occur in a non-matrix background. There are as well other advantages of
matrix control including progressed inspiration and more skilful supervisors. Progressed
inspiration stems from determination-making inside EHP Europe become more autonomous and
participating since every member provides particular information to the table and due to the
fact that staffs get a straightforward influence on daily determinations, they are more probable to
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face greater tiers of inspiration and commitment to the objectives of the divisions which they are
a part of. More skilful supervision is the outcome of top decision makers turning out to be more
concerned in, and therefore more superiorly updated about, the daily performances of the
entrepreneur. This contribution might as well result in progressed long-term organization at EHP
Europe.
4 Conclusion
When compared with other organizational forms, a matrix organization is a mixed form in which
traditional hierarchy is overlaid by some form of lateral authority, influence, or communication.
Given the complexity of project management in the actual business world, the matrix structure is
often used where the need for strong technical assistance across many areas is required. It is still
particularly popular in the large-scale consulting, aerospace, and construction industries. To
address the difficulties experienced in the case study organization, the organization leaders
developed polices implemented tools, and conducted training within the organization.
This study has found that despite these implementation problems, the performance of the
organization while operating under a matrix structure has improved. Additional research should
attempt to identify whether any of the processes used within this case study implementation were
used, or could be used, in other implementations (matrix or otherwise), and how the
effectiveness of the tools varied from implementation to implementation. Additional research
should also be conducted with respect to matrix performance. This work has focused on
implementation. Enhanced performance as a result of the implementation appears to be taking
place, but additional performance measures (new/established and quantitative/qualitative) need
to be monitored and reported through research publications for many years to come.
5 References
1. N. Anand, Richard L. Daft (2007). What is the right organization design? Organizational
Dynamics, Page 329344
2. Csaszar, F. A. (2012). An Efficient Frontier in Organization Design: Organizational
Structure as a Determinant of Exploration and Exploitation, Organization Science.
3. Ford, R. C., & Randolph, W. A. (1992), Cross-functional structures: A review and
integration of matrix organization and project management, Journal of Management, 18,
267294.
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4. Frings, C. S. (2002). Management Q & A: Answering your questions on multiple bosses
and not following standard operating procedure. Medical Laboratory Observer, 34 (8),
2425
5. Han, Y., Lee, J. J. (2012). Strategic Actions, Structural Choices, and Performance
Implications, Journal of Global Business Management, 8(1)