Horizontal differentiation

Describing a company

I. Skim the text to grasp the general idea.

Reading

II.Work in groups. Choose one of these companies.

BMW Coca-Cola Nike Levi Strauss & Co Microsoft Walt Disney

Write what you know about:

1. what each company produces or provides

2. where the company started

3. where the company operates

4. who its main competitors are

There are many forms of business organization. Some businesses consist of just one person, while others employ thousands of people. Some businesses make products, while others are involved in providing services.

All business organizations:

- consist of a group of people who form a structure;

- have a structure with rules and authority;

- follow a set of objectives;

- use economic resources.

There are several ways in which a company can choose to organize itself, and we are going to look at the most important of these. We will take an imaginary company, Computercorp, and examine how it could organize its operations. The company produces computer hardware and software, and sells its products around the world. Its customers are business users and consumers.

Organizing the company:

The term refers to the way in which a company’s activities are divided into distinct units. The most popular forms of horizontal differentiation are shown below.

Organization by function.

The top management of Computercorp might decide that the company should be structured according to the functions it performs. The main function of the company are research and development, manufacturing, marketing, and finance. If the company chooses a functional structure, the result will look like this:

Organization by product

Computercorp makes two kinds of products, hardware and software. Top management may think that these products are so different to each other that it is better to organize the company on the basis of the different products it makes. If the company chooses a product structure, the result will look like this:

Organization by location

A third alternative is to structure the company on the basis of location. Computercorp’s headquarters are in London, but it has offices around the world. If the company chooses a location structure, the result will look like this:

Organization by customer

Another way to structure the company is by reference to the kind of customer that it serves. Computercorp sells its products to business users and consumers, so this kind of organizational structure will look like this:

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