Table of Contents

Introduction ............................................................................................................................. 2

Theoretical Review ................................................................................................................. 2

2.1

U-form Structure .............................................................................................................. 2

2.2

Matrix Structure ............................................................................................................... 3

Case study ............................................................................................................................... 5

3.1

Situation ........................................................................................................................... 5

3.2

Critical Analysis and Suggestion ..................................................................................... 8

Conclusion ............................................................................................................................ 10

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 be familiar with their
organizational structure. Organizations have a tendency to follow one of the common structures
for management purposes, depending on the nature of the business and organizational values.
There can be in exceptional cases whereby departments and teams following some other
organizational structure, although the organization keeps to a certain structure. In most of the
cases, a combination of the following organizational structures may be applicable for some
organizations as well.
2
2.1

Theoretical Review
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, to pay for
advertising, marketing needs products to sell from production, and funds from finance.
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
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promotes a functional, rather than an organizational, focuses and tends to promote centralization.
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 Uform structure design.

In order to obtain economics of scale, specialized units are coordinated and centralized by
top managers.

Disadvantages:

Decision making process will be delayed by U-form design. It is challenging for the
organization to monitor the functioning of individual managers in the functional areas,
and unit employees may be unable to follow overall organizational goals.

The result of a lack of incentive to be successful economically at the regional and local
level

U-form is more inflexible, if there are some changes happening in a widespread way.
This inflexibility tends to be harmful for reform or innovation.

2.2

Matrix Structure

The matrix design, another common approach to organization design is based on two overlapping bases of departmentalization. A set of departments or product groups overlay across the
functional departments. A set of functional departments is the foundation of a matrix. Employees
in a matrix are members of a project team and at the same time of a functional department.
At the top of the organization are vice presidents of marketing, finance, production and
engineering who lead functional units. Each of those managers has several subordinates. A
number of positions called project manager are positioned along the side of time organization. A
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project group led by each project manager from each project group is composed of workers or
representatives from the functional department. A multiple-command structure, which is any
given individual reports to both a functional superior and one or more project managers, is
reflected by a matrix structure.
Designated programs are assigned for the project teams or groups. For instance, the company
might be developing a new product. At any given time, a person may be a member of a function
group as well as a member of several teams. Each functional area chooses some representatives
to work as a team on the new product, who also keep membership in the original functional
group.
Advantage:

Both product and functional departmentalization can benefit from the organization as it
capitalizes.

Can improve interaction across the entire organization and help to destroy traditional
department barriers.

Staff can use their respective skills within different contexts

For improving coordination and reducing costs and matrix structure avoid the need for
several departments to meet regularly

It is possible to bring about greater inspiration amongst the team members

Supports exchange of ideas across departments, for example, helps to share good ideas
and practices

By making a project more cost-effective, it is a good way to exchange resources across

departments.

Drawbacks:

A clear chain of command is what the organization short of. Project groups may take
longer time and more efforts to finish work. Therefore, to coordinate, the organization
has to allocate more resources.

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As they report to two line managers, members of project teams may have divided
loyalties. Similarly, when under a lot of pressure of work, this scenario can happen
sometimes.

Given the complex nature of matrix structures, there may not be a clear line of
responsibility for project teams

Hard to coordinate

For matrix team members to get used to working in this kind of structure, it is very timeconsuming.

3
3.1

Functional responsibilities may be neglected by team members

Case study
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 is the worlds largest producer of appliances for cleaning, outdoor uses
and kitchen, such as washing machines, chainsaws, refrigerators, cookers, lawn-mowers and
garden tractors, with sales of 124 billion SEK in 2000. The group sells to consumers in more
than 150 countries with more than 55 million products every year. Products are sold under
famous brand names such as Frigidaire, Eureka and AEG. The complexity and size of the
company today is shown by the companys development on how they have developed over a
centurys period from being a single products manufacturer to multifunctional company.
With the aim of improving profitability, in 1997, the group began a two-year restructuring
programme, leading to the industrial products sector and the production of sewing machines,
interior decoration equipment and agricultural implements, followed in 1998 by operations in
bathroom cabinets and recycling kitchen, heavy-duty laundry equipment and professional
cleaning equipment. A new brand policy was taken up to focus resources on a smaller number of
large and well-defined brands. The core business is now consisting of outdoor products,
professional appliances and household appliances.
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Electrolux Group is the worlds largest producer of appliances. They are the third largest
producer in the USA, and second largest in Brazil and the market leader in Europe, 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, lightduty chainsaws, and garden equipment. 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. 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. As its nature, their solution was quite strategic yet simple. As
result from its acquisitions, they have introduced a functional structure to replace the
geographical structure all over Europe, which had four functions/departments.
1. Purchasing, Production and Product Development
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
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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 is consisting of operations of distribution, inventory
management and. material management. All materials flow and aspects are embraced by material
management from determination of requirements and capacity planning through scheduling
source search and purchasing. 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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EHP EUROPE

Purchasing,
Production and
Product
Development

Supply Chain
Management and
Logistics

Product Businesses,
Brand Management
and Key Account
Management

Sales clusters

A greater operational control at a senior level with clear definition of roles and tasks are
generally achieved by functional structures. For organizations producing identical goods and
services at large volumes and reduced cost, this structure is the best among the rest structures.
EHP could make its operation more efficient where its staff became experts within their own
areas by this functional structure. To meet the tougher challenges of the market-place, the
reassignment also assist in making profits as the organization introduce more uniformity and
clarity into business by giving more concentration on areas where increased effort is required.
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
Product Development, Production and Purchasing; Logistics and Supply Chain Management;

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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
face greater tiers of inspiration and commitment to the objectives of the divisions which they are
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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

In a U-form firm, the firm is organized centrally as a single unit and in terms of functions, even
though the firm may sell a wide variety of products in many different markets. In contrast, the
matrix structured firm is organized in terms of product groups. Within each division there will
usually be production, sales, and other departments. There are some functions which are retained
at the centre and not decentralized to the divisions, and the most usual central function is the
allocation of finance and thereby control over investment allocation. It might also be expected
that those functions which are subject to economies of scale over the range of interest to the firm
would be centrally organized to reap the benefits of such economies. For large firms, the matrix
form will be superior to the U-form. S such it would be predicted that firms with M-form
structure would be more profitable than those with U-form. Further, large firms would gradually
adopt the matrix form structure.
The matrix structure is required given the complication of project management, when the
organization normally used where the need for strong technical assistance across many areas. In
the real business world, it is still particularly popular in the aerospace, construction industries
and large-scale consulting. In this EHP case study, the organization managers provided training
within the company and improved polices implemented tools, in order to emphasize on the
various issues experienced.
5

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integration of matrix organization and project management, Journal of Management, 18,
267294.
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