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Product structure

11 May, 2016 - 11:43

A global product structure is often chosen in companies with an array of diverse product lines. Each product line is assigned to its own organization unit so that decision-making is focused on the product characteristic and the customers who will be targeted. In many cases, the product unit will have its own functional organization—in essence, operating as a stand alone business in the context of the larger organization. In many cases, a product unit will be managed with full profit and loss responsibility.

Advantages: The main advantage of a product structure is that it focuses attention and resources toward a single product and the customers toward which that product is targeted. Decisions are optimized for the success of the product and distractions are minimized.

Disadvantages: Redundancies often exist across product organizations as functional responsibilities are duplicated under each product organization. Economies of scale and scope are more difficult to achieve as this organization structure encourages less cooperation and coordination across the product units.

Figure 14.10 A product structure