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Management

1. The divisional structure enables firms to pursue complex corporate diversification strategies by delegating different management responsibilities to different individuals and groups within a firm. Will there come a time when a firm becomes too large and too complex to be managed even through a divisional structure? In other words, is there a natural limit to the efficient size of a diversified firm?

2. Consider a firm whose competitive advantage is built almost entirely on its ability to achieve economies of scale in producing small electric motors that are used by the firm to make hair dryers, fans, vacuum cleaners, and food processors. Should this firm be organized on a divisional basis by product (hair dryer division, food processor division, etc.) or should it be organized functionally (marketing, manufacturing, finance, etc.)?

3. Matrix organizations first sprang up in businesses that worked on scientific and engineering projects for narrow customer groups. Examples include Fluor, which built oil refineries in Saudi Arabia, and TRW, which supplied aerospace equipment to NASA. What do you suppose the dimensions of the matrix would be in such firms?

4. Many of the most pressing organizational issues attracting public attention seem to concern government agencies, especially those with responsibilities for preventing man-made disasters and attacks or responding to natural ones, such as hurricanes. How do the organizational design issues facing large firms compare those facing rapid response public agencies such as FEMA or the EPA?

5. The "#1 or #2; Fix, Sell, or Close" rule was one of the most memorable aspects of Jack Welch's corporate strategy at GE. (Business units needed to achieve a #1 or #2 market share; if not, they had to fix, sell or close the unit). In the 1990's however, this rule was changed to focus on smaller (10% -- 15%) market share requirements but a requirement that business unit managers demonstrate significant growth potential. What impact did this change in corporate strategy have on the organization design of business units?

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1. The divisional structure enables firms to pursue complex corporate diversification strategies by delegating different management responsibilities to different individuals and groups within a firm. Will there come a time when a firm becomes too large and too complex to be managed even through a divisional structure? In other words, is there a natural limit to the efficient size of a diversified firm?
Yes, there will come a time when the firm becomes too large and too complex to be management even through a divisional structure. This will happens when some of the divisions operate in industries that are not very attractive. Moreover, the organization will become too large to manage when some of the divisions enter industries where the cost of entry is so high that all future profits are capitalized. Most importantly, the organization becomes too large to manage when the new divisions are not better off because of the linkages with the main organization. Similarly, the firm may not be better off because of its linkages with each division. Typically, these natural limits are reached because of an excess of duplication of activities and resources. Increased divisionalization also means that the firm loses its competitive advantage because it loss it efficiency and economies of scale. The efficient size of the firm is crossed when different divisions of the ...

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