Read Case on Dow Corning and answer the following: What were the main factors involved in
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Read Case on Dow Corning and answer the following:
• What were the main factors involved in Dow Corning changing from functional structure to a divisional and then to a matrix structure?
• What problems did the company encountered with the matrix structure? How might the problems have been minimized?
• What structure would be most appropriate for the company to aid its recovery?
• What major strategies were they employing during each organizational structure?
• How did/did not the structure support the corporate strategies?
Transcribed Image Text:
Dow Corning was formed in 1942 from Dow Chemical and Corning Glass in the USA. The original focus of the firm was R&D, and it was highly centralized around tech- nology and products. At this stage of its development the products were closely related and the firm operated under a traditional functional management structure. By 1962, changes had taken place. The company had grown, largely through product diversity, and central control of product development was no longer appropri- ate. In addition, there had been a change in top manage- ment and the new chief executive established five product divisions as profit centres, each with its own functional structures. The new structure was seen as suc- cessful in integrating the functions, and a contributory factor in the firm's continued growth and increased profitability. Within a short time, international expansion brought its own problems. There was conflict between the demands of the home and foreign markets, Conflict also arose over the central supply of raw materials and the mechanisms for transfer pricing. An economic recession meant that profit levels fell. These problems were met by a another change in management along with a structural change to a matrix organization. The ensuing matrix comprised two major elements: specialist functions and ten business profit centres created from the existing five divisions. Employees reported to a business centre manager and a functional Problems with the matrix persisted. Area managers were seen to have too much power within the organiza- tion and were accused of empire-building, employees complained of too many bosses; and the matrix created a cumbersome bureaucracy with a great deal of time consumed in meetings. Dow, unlike many other organiza- tions, did not retreat from the matrix in the face of these problems. An expansion into the pharmaceuticals sector through acquisitions meant that some form of flexible, semi-autonomous structure was required. Senior man- agement decided to refocus the evolved matrix structure. A small team of senior executives was given the task of supervising all operations. They also had the responsibil- ity of ensuring that only one of the three elements of func- tion, business and geography took the lead in any venture, thus avoiding conflict and duplication of effort. In addition, considerable attention was paid to employee communication, with the result that the matrix was viewed as a more open, less secretive form of structure. By the end of the 1980s the company operated in 32 countries and was responsible for the manufacture of 1,800 products. The success of its flexible organization structure, particularly the growing interchange of ideas and practices across regions, gave management the confidence to seek out more areas for expansion. More business unit teams were created and were given autonomy to develop new products and encouraged to innovate. Dow Corning was formed in 1942 from Dow Chemical and Corning Glass in the USA. The original focus of the firm was R&D, and it was highly centralized around tech- nology and products. At this stage of its development the products were closely related and the firm operated under a traditional functional management structure. By 1962, changes had taken place. The company had grown, largely through product diversity, and central control of product development was no longer appropri- ate. In addition, there had been a change in top manage- ment and the new chief executive established five product divisions as profit centres, each with its own functional structures. The new structure was seen as suc- cessful in integrating the functions, and a contributory factor in the firm's continued growth and increased profitability. Within a short time, international expansion brought its own problems. There was conflict between the demands of the home and foreign markets, Conflict also arose over the central supply of raw materials and the mechanisms for transfer pricing. An economic recession meant that profit levels fell. These problems were met by a another change in management along with a structural change to a matrix organization. The ensuing matrix comprised two major elements: specialist functions and ten business profit centres created from the existing five divisions. Employees reported to a business centre manager and a functional Problems with the matrix persisted. Area managers were seen to have too much power within the organiza- tion and were accused of empire-building, employees complained of too many bosses; and the matrix created a cumbersome bureaucracy with a great deal of time consumed in meetings. Dow, unlike many other organiza- tions, did not retreat from the matrix in the face of these problems. An expansion into the pharmaceuticals sector through acquisitions meant that some form of flexible, semi-autonomous structure was required. Senior man- agement decided to refocus the evolved matrix structure. A small team of senior executives was given the task of supervising all operations. They also had the responsibil- ity of ensuring that only one of the three elements of func- tion, business and geography took the lead in any venture, thus avoiding conflict and duplication of effort. In addition, considerable attention was paid to employee communication, with the result that the matrix was viewed as a more open, less secretive form of structure. By the end of the 1980s the company operated in 32 countries and was responsible for the manufacture of 1,800 products. The success of its flexible organization structure, particularly the growing interchange of ideas and practices across regions, gave management the confidence to seek out more areas for expansion. More business unit teams were created and were given autonomy to develop new products and encouraged to innovate.
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Factors Involved in Structural Changes Dow Corning underwent several structural changes driven by various factors Growth and Product Diversity 1962 The companys growth and product diversity led to the ... View the full answer
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