Study Guide
In 1987, P&G US made a drastic shift away from the brand-management structure to a Matrix structure in which brands managed as an element of category portfolios by category general managers. The decision to switch to the US Matrix structure was because product categories were beginning to require more differentiated functional activities but simultaneously, P&G US needed to retain its functional strengths.
In the Matrix system, functional leaders reported directly to their business leadership and had a dotted line reporting relationship to their functional leadership. Global technical centers were created in different regions, each with a core competency in a specific product category. 39 US category business units were created, and every category business unit had its own product development, manufacturing, sales and finance functions.
This structure enabled top as well as bottom line improvements. The advantages were varied- pooling of knowledge and resources, elimination of intraregional redundancies, transfer of best practices, standardization of activities. This led to the functions of manufacturing, purchasing, engineering and distribution to be integrated- many unnecessary business plants were eliminated, saving costs and increasing the efficiency of the entire business process. Also, the customer business development system, a part of the Matrix structure success to create business relationships with giant customers. P&G adopted electronic integration and developed a standardized global IT infrastructure by the 1990s.
As an off-shoot of the increased focus on product categories at P&G, the company’s beauty-care division grew to a highly profitable $7 billion business.
However by the mid 1990s, problems started cropping up. The Matrix structure led to a more complex structure by affecting the ‘unity of command’ and in turn started causing problems in coordination. Since the structure was not symmetrical, each function started developing its own
In the Matrix system, functional leaders reported directly to their business leadership and had a dotted line reporting relationship to their functional leadership. Global technical centers were created in different regions, each with a core competency in a specific product category. 39 US category business units were created, and every category business unit had its own product development, manufacturing, sales and finance functions.
This structure enabled top as well as bottom line improvements. The advantages were varied- pooling of knowledge and resources, elimination of intraregional redundancies, transfer of best practices, standardization of activities. This led to the functions of manufacturing, purchasing, engineering and distribution to be integrated- many unnecessary business plants were eliminated, saving costs and increasing the efficiency of the entire business process. Also, the customer business development system, a part of the Matrix structure success to create business relationships with giant customers. P&G adopted electronic integration and developed a standardized global IT infrastructure by the 1990s.
As an off-shoot of the increased focus on product categories at P&G, the company’s beauty-care division grew to a highly profitable $7 billion business.
However by the mid 1990s, problems started cropping up. The Matrix structure led to a more complex structure by affecting the ‘unity of command’ and in turn started causing problems in coordination. Since the structure was not symmetrical, each function started developing its own