Submitted by: Nishant Singh (E058)

P&G
US Organisational Structure change from 1950s to 1980s
1950
US Divisional Structure in 1950s
P&G created individual operating divisions to better manage growing lines of products
Each operating division has its own line and staff organisations
Organisation developed along Functions and Brands
Brand managers are responsible for profitability and focus on matching company strategy
with product category dynamics
Brand managers in the same product division competed in market place
Best practices and talent across brands are shared by divisional functions
1980
US Matrix Category/Function Business Unit Structure, 1980s
Historic shift from competitive brand management system
Brands are managed as component of category portfolios by category general managers
Product categories require more differentiated functional activities
39 US business categories were created
Each category is run by a general manager to whom both brand and dedicated functional
manager would report
Each category business unit had its own sales, product development, manufacturing and
finance functions
Functional leaders report to both business leadership and functional leadership
European structure from 1950s to 1980s:
Original Structure:
Company created mini-U.S.es in each country
Developed along three dimensions- country, function, and brand
Portfolio of self-sufficient subsidiaries led by country general managers (GMs)
Adapted P&G technology and marketing expertise to local markets
New product technologies were sourced from U.S. R&D labs
Was inaugurated to house a European corporate R&D and process-engineering function.
Developed products & manufacturing processes that Country Managers could choose to
adapt to & launch in their own countries
Need of a new model
Unstandardized and subscale manufacturing operations in each country were expensive
and unreliable.
Products were tweaked unnecessarily leading to pack-size and formulation variations that
added no value for the consumer but significant cost and complexity to the supply
chain.
Country R&D labs were expensive to maintain and reinvented the wheel with each new
product initiative
Responsibility of profit and market strategy lay with Country Managers instead of Brand
Managers
Innovation and Brands took years to globalize(Pampers)
Complete disconnect from US operations, worked in Silos
Focus was fragmented by Countries, leading to region wide strategies
Difficult to attain economies of scale
New Model(1980s)
Regional committees composed of large-country managers & corporate functional leaders

Product-category division VP positions were established Full P&L Responsibility on them

Submitted by: Nishant Singh (E058)

Country GMs were replaced with multiple-country product-category GMs who reported to
the division VPs

Europe was split into three sub regions where the leaders were given secondary product
responsibility
Advantages:
Shift from COUNTRY MANAGEMENT to PRODUCT CATEGORY MANAGEMENT
Facilitating cross border cooperation
Eliminated needless product variations, coordinated marketing communications, prioritized
product launches and orchestrated competitive responses across the region
Fit Between Strategy and Structure:
1950s Structure Requirement according to Strategy :
US Market Homogenous and European Markets Heterogeneous(Decentralized Model)
Individual product lines structure - > quicker and more consumer focussed business
decisions ->
brand managers bore responsibility for profitability and can run that brand as individual
company
1980s Structure Requirement according to Strategy :
Expanding Horizons
Lack of control of country functional activities to corporate functions
Product Categories required differential functional activities
Coexistence of functions and products
Why P&G adopted Matrix Structure
In late 1980s, expansion opportunities in Japan and other parts of world led P&G to
develop globalization model.
Corporate functions in Brussels still lacked direct control of country functional activities.
Shift from early functional organization into multidivisional product organization
Balance required between products and functions
How did the New Matrix Structure Worked?
In global matrix structure, country functions were consolidated into continental functions
reporting through functional leadership and direct reporting through the regional business
manager.
All country category GMs had reporting to their global category president.
The global category presidents and R&D VPs developed product category platform
technologies that could be applied to global branding strategies.

In 1995 this structure was extended to rest of the world through creation of four regions
North America , Latin America , Europe /Middle East/Africa and Asia.
Pros and Cons of Global Matrix Structure
Pros
creation of powerful and independent global functions promoted the pooling of knowledge,
transfer of best practices, elimination of intraregional redundancies, and standardization of
activities.
Allowed for manufacturing, purchasing, engineering, and distribution to be integrated
Standardization of activities.Regionally managed product supply groups could extract
massive savings by consolidating country manufacturing plants and distribution centers
into high scale regional facilities.
Cons
Most functions nominally had straight line reporting through regional management and
also reporting through functional management, the function retained a high degree of defacto control.
They develop their own strategic agenda, maximize power, do not coordinate with other
functions and business units.
As regional managers were responsible for profit and loss they were hesitate to launch
new product.
What are the key distinguishing features of Organisation 2005?

Submitted by: Nishant Singh (E058)

Change of control hierarchy from Geographical, Product, Function to product , geography

and managed functional services
Shift from matrix organization to interdependent organizations:
Global Business Units
Market Development
Global Business Services
Primary profit responsibility shifted from 4 regional organizations to 7 global business units
President led the GBU with functional VPs reporting to him.
Eliminated 6 management layers , reducing the total from 13 to 7
Focus on new product development than process improvements
No approvals required from the regional manager
Faster rollouts of innovations and new brands