The history of P&G is a vivid story of organization strategy as it goes through the entrepreneurial, collectivity, formalization, and elaboration stages. It evolves from a domestic company to multination, global, international, and finally transnational company. The organization structure keeps evolving correspondingly in its life cycle. As it becomes a globalized company, it is weighed down by the bureaucracy and hierarchy. Finding a fit organization structure and executing the transition smoothly becomes critical to its future growth.
Domestic - Entrepreneurial Stage: at its inception, P&G established centralized functional structure and focused on product innovation. The centralized R&D structure enabled in-depth knowledge and skill development and increased the efficiency of innovation. The creativity truly differentiated itself from other competitors in the early stage. The Profit-sharing program also boosted the morale which is very important to the startup.
Domestic - Collectivity Stage: from 1920s, P&G had expanded into many different product lines. The old functional structure is no longer efficient to adapt to differences in products and clients. It has slow response time to the client and market change. P&G quickly transformed into product-category division structure. Brand managers were encouraged to be entrepreneurial to manage brands as individual companies. This design helped P&G to make quicker and more customer-focused decision. The delegation of control helped P&G transition into collectivity stage and provided clear direction.
International - Formalization Stage: after World War II, P&G started to build its presence in West Europe. U.S. was still the primary market while Europe was expanding. P&G managed these two markets separately and set up geographical structure of U.S. and West Europe. In U.S., it improved the division structure by adding one more level of brand managers. In... [continues]
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