Case: Procter & Gamble: Organization 2005
1.Why did the US organizational structure shift from product grouping in the 1950s to a matrix in the 1980s? Why did the European organizational structure shift from geographic grouping in the 1950s to category management in the 1980s? Why were the two structures integrated into a global cube in the 1990s?
As mentioned in the article, the US market is a large homogenous one, which is characterized by buyers with similar needs and wants.
P&G originally operated in the US in the form of product division management in order to facilitate nationwide brands.
This management technique of individual operating divisions grouped employees around a certain product or a product line and gave managers more autonomy to work as separate “units” within the corporation, thus creating a competitive brand management system.
By the 1980’s, product categories changed, and required more differentiated functional activity; brands could no longer be “ran” as differentiated units but as “bigger categories”. P&G adapted and upgraded its organizational structure in a way that optimizes the use of resources and expertise of the organizations manpower.
This meant that middle class managers reported both to their functional leaders as well as to their business leaders.
Europe, on the other hand, was a heterogeneous market, comprised of different nations, cultures and consumer preferences. P&G established the geographic management model in order to accommodate the company’s products to every local demand. Every European country had a daughter company who altered P&G’s products to suit the local market. In addition, a European R&D center was launched to cater the local market. In the early 1980’s it was evident that the geographic management system, P&G was using in Europe wasn’t working. Revenues were low, manufacturing operations were expensive and unreliable the “daughter companies” (functional...
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