Four traditional forms of organization design

The four traditional forms of organization design are functional, geographic, product, and network design. Organizations with a product design usually begin with a functional design and then add some place design features as they begin to serve new geographic markets. Eventually, serving multiple customers creates management problems that can't be effectively dealt with by a functional or geographic design alone. The addition of new product lines, diverse customers, and technological advances also increases the complexity and uncertainty of the organization's business environment. 

 

When changing to a product design, companies may incorporate features of the functional and geographic designs into the organization of each product division. This may culminate in the network design, in which tasks are organized by division on the basis of the product or geographic markets in which the goods or services are sold, and division managers are given primary responsibility for overseeing day-to-day operations so that corporate managers can concentrate on strategic issues.

Geographic design saves on costs by having facilities for production and distribution in one place, developing expertise in solving location specific issues, close access to customer, production is closer to suppliers. Some of the potential pitfalls of geographic design are issues coordinating the goals of the entire organization with the goals of a particular location, duplication of functions at different locations, additional levels of management stratification and a highly rule based management style.