Dow

Chemic
al
Team 2

 1. Concept Explanation
Contents 2. Case Analysis

3. Discussion Questions
1.Concept Explanation
 1. Concept Explanation

Organization Architecture
Organization Structure
- Vertical Differentiation
Location of decision-making
responsibilities(centralized or
decentralized)

- Horizontal Differentiation
Division of the organization into
subunits

- Integrating Mechanism
Establishment of integrating
mechanisms
 1. Concept Explanation
Structure
 1. Concept Explanation

Functional Structure
Functional activity

Centralized to CEO, Single

business

Business

 1. Concept Explanation

Multidivisional Structure
Product division
Division functional unit

CEO(Businessional manager)
, Self-contained,
Business

economy scope
decrease(inefficient)

Hybrid structure-Production
R&D
 1. Concept Explanation

Geographic structure
functional unit

Labor cost

EX) , , ,

Hybrid Geographic-Functional
Structure- Marketing
, efficiency

 1. Concept Explanation

Matrix Structure
Organization with two
overlapping hierarchies

product

2. Case Analysis: Dow Chemical
 2. Case Analysis:
Dow Chemical

197
0
In 1970s, the barrier to free
flow of chemical product
between countries largely
disappeared.
 2. Case Analysis:
Dow Chemical

PRICE
COMPETI
TION
In 1980s, chemical
companies suffered intense
price competition.
 2. Case Analysis: Dow Chemical

Dows
organizational
matrix had 3

Matrix
interacting
components.
They are:

Functions
Businesses
Geography
PROBL 2. Case Analysis:
Dow Chemical

EMS
Matrix system was not that promising at first...
PROBL 2. Case Analysis:
Dow Chemical

EMS
Functional Business Local
Boss
V Boss
V Boss

One employee had to report to S S

3 BOSSES!

There were overlap of

responsibilities between bosses.

It was ambiguous whom to

punish or reward.

One employee
 2. Case Analysis:
Dow Chemical

SO?
Dow Chemical decided to improve on matrix structure,

rather than abandoning it

 2. Case Analysis:
Dow Chemical

Econom
ies of
Scale
Cost leadership

=> Large plant

 2. Case Analysis: Dow Chemical

Howe
ver,
pharmaceuticals industry

Pharmaceuticals Business Bulk Chemical Business

Cost leadership Local needs

 2. Case Analysis:
Dow Chemical

Function Business Geographi

c Area
Flexible
matrix
Matrix flexibility rather than abandoning matrix

Matrix 3
function, business, geographic area 1
Business sector
Result of
2. Case Analysis:
Dow Chemical

Flexible Matrix
flexibility
matrix

matrix .

This flexible system worked well and credited much of its

success to the quality of the decisions it facilitated.
Change in 2. Case Analysis:
Dow Chemical

Organizing
1995 MMD +

Dow 1
Change in 2. Case Analysis:
Dow Chemical

Organizing
1995 dow matrix

Global divisional structure

low cost producer

Bulk chemistry

Matrix
.

.
 2. Case Analysis:
Dow Chemical

12 6

Global
product division
3. Discussion Questions
Question 1
Why did Dow Chemical first adopt a matrix structure?
What benefits did it hope to derive from this structure?
Question 2
What problems emerged with this structure(Matrix)?
How did Dow try to deal with them?
In retrospect, do you think those solutions were effective?
Question 3
Why did Dow change its structure again in the mid-1990s?
What was Dow trying to achieve this time?
Do you think the current structure makes sense given the industry in
which Dow operates and the strategy of the firm? Why?
Thank you!