Bob’s Appliances sells and services household appliances such as washing machines, dishwashers, ranges, and refrigerators. Over the years, the company has developed a good reputation for the quality of its customer service, and many local builders patronize the store. However, large retailers such as Best Buy, Walmart, and Costco are also providing an increasing range of appliances. Moreover, to attract more customers these stores also carry a complete range of consumer electronics products—LCD TVs, computers, and digital devices. Bob Lange, the owner of Bob’s Appliances, has decided that if he is to stay in business, he must widen his product range and compete directly with the chains.

In 2007 he decided to build a 20,000-square-foot store and service center, and he is now hiring new employees to sell and service the new line of consumer electronics. Because of his company’s increased size, Lange is not sure of the best way to organize the employees. Currently he uses a functional structure; employees are divided into sales, purchasing and accounting, and repair. Bob is wondering whether selling and servicing consumer electronics is so different from selling and servicing appliances that he should move to a product structure (see the accompanying figure) and create separate sets of functions for each of his two lines of business.

You are a team of local consultants whom Bob has called in to advise him as he makes this crucial choice. Which structure do you recommend? Why?

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Sales Appliances Purchasing and accounting FUNCTIONAL STRUCTURE Sales Bob Lange Purchasing and accounting PRODUCT STRUCTURE Repair Bob Lange Sales Repair Consumer electronics Purchasing and accounting Repair