Week 10: Chapter 10 Discussion

Chapter 10 of Strategic Management: Creating Competitive Advantages discusses the traditional organizational structures that firms utilize as they grow and develop into larger corporations. Firms will typically start with a simple structure, where the owner or top executive of the firm makes most of the decisions, with all other staff acting as an extension of the top executive. As more employees join the firm, the simple structure transforms into a functional structure, where internal specialists in functional areas make decisions on behalf of the top executive. As the firm grows into a corporation, it begins to adopt the divisional structure, where it is organized around products, projects, or markets. Each division of the structure has its own internal functional specialists that are normally organized into departments. If there are challenges with maintaining the corporation’s strategies with the other organizational structures, a firm might implement the matrix organizational structure, to combine the functional and divisional structures, typically on a project basis. This allows for team members from various functional departments to be combined into one group for the duration of the project. When reviewing Grainger’s organization, it quickly becomes apparent that Grainger utilizes the divisional structure with hierarchical reporting. Grainger’s divisional structure is organized by regional markets, where the functional departments are organized by the regions that they serve. This allows for Grainger to provide comprehensive services and product expertise to all of their customers, including on-site visits, custom product recommendations, and personal recommendations for trusted local service providers. The divisional organization structure enables Grainger to provide operational consistency and reliability across all of their regions.  

Image Courtesy of "Strategic Management: Creating Competitive Advantages" by Gregory Dess: Exhibit 10.3 Divisional Organizational Structure