The use of Functional Structures in bringing clarity into business

The management spending thousands of dollars on business assets is not a smart move if they fail to manage the most important asset – their workforce. Understanding the structure of the organization is important, understanding the roles people play, how they interact through formal and informal processes and the relationships they build are crucial to the success of any strategy.

Electrolux Home Products (EHP) as you may know is a global leader in household appliances. They are manufacturers of refrigerators, dishwashers, washing machines, vacuum cleaners, cookers and air-conditioners. It’s a Swedish multinational company that has grown through acquisitions to become a dominant player in Europe. But the European market is highly competitive and the company had to find ways to cut down on costs and improve product standards to stay ahead of fierce competition. So Electrolux Home Products Europe adapted a functional organizational structure to compete in the European market. They introduced a Europe-wide functional structure to replace the geographical structure (resulting from its acquisitions).

The new organizational structure had four functions/departments.Org chart below will help you visualize the breakdown of EHP’s company structure.

 

1. Purchasing, Production and Product Development – This department/function was important as it ensured a seamless flow from supplies to finished products.

2. Supply Chain Management and Logistics – This function was responsible for getting the products to the customer and created the association between sales forecasts and factory production.

3. Product Businesses, Brand Management and Key Account Management – This function was involved in all the marketing activities to support products and brands. Also included key account management, service and spare parts functions.

4. Sales clusters – The different sales divisions grouped geographically.

Functional structures always allow for greater operational control at a senior level with clear definition of roles and tasks. This structure is best suited for organizations producing standardized goods and services at large volumes and low cost. Having introduced functional structures, EHP was able to improve operational efficiencies where employees became specialists within their own realm of expertise. The realignment was also helped to ensure profitable growth as the organization brought in more clarity and uniformity into business by creating more focus on areas where increased effort is required to meet the tougher challenges of the market-place.

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