Date: 4 May 2021
SIMULATION TITLE: Organizational Structure
SIMULATION DESCRIPTION: Holden Evan, Inc. is a global powerhouse in branded
consumer packaged goods. The company has a divisional structure with three distinct SBUs:
Beauty, Health, and Home and Family. Last year the company's Health SBU generated
negative press for its disastrous entry into China when sales flopped. The same year, each of
Holden Evan's SBUs was caught off guard by dramatic increases in the costs of several
manufacturing inputs. The CEO tasks you, the newly-hired SVP of Worldwide Operations,
with making a thorough study as to what caused the disasters last year, and with providing
thoughtful recommendations.
You earned 100 percent.
Background
Holden Evan, Inc. is a global powerhouse in branded consumer packaged goods. The
company is organized into three distinct Strategic Business Units (SBUs): Beauty, Health,
and Home and Family. Holden Evan's corporate strategy is built around its leading market
brands. Products of all SBUs are marketed to consumers and sold (with few exceptions) to
the same retailers in all markets. The company's growth is driven by ongoing marketing and
brand management. Each of the SBUs has limited autonomy and is responsible for its own
marketing, expansion of product lines, and performance. The parent company is the ultimate
overseer and handles legal and financial functions.
Background
Last year the company's Health SBU generated negative press for its disastrous entry into
China. For years, the SBU had performed its own research and analysis of the Chinese
market from its U.S. headquarters. When the SBU finally introduced its products into China,
4. The marketing team will be responsible for managing each brand on an ongoing basis. How is
this organizational structure the best choice for brand management?
OPTION 1. Entering new markets is what marketers prefer to do; this structure will force the team
to take on the unpleasant task of brand management.
OPTION 2. This structure is the only one that allows for employees to work on brands, rather than
projects.
[OPTION 3.] A consolidated marketing group will allow individual brand managers to use the
resources of the entire marketing organization rather than just the resources of their SBU.
5. The company's next big push is introducing the products of the Health SBU into India. How will
the matrix structure avoid the problems encountered in China last year?
OPTION 1. The matrix organization will eliminate all competition between functional groups,
because they will now work together.
[OPTION 2.] The matrix organization will allow employees from different specialties to work
together as a group, share information, and respond quickly to problems.
OPTION 3. Functional specialists will benefit from having a single reporting relationship with the
project manager.
6. Marketing employees will need to manage the company's brands in the India market on an
ongoing basis. How will the matrix organization facilitate this?
OPTION 1. There will be no ongoing brand management once the company has switched to the
matrix organization, since all projects must have a beginning and an end.
[OPTION 2.] New project teams will be created periodically to manage the brands.
OPTION 3. Since the matrix team does not directly provide for brand management, you will
need to modify the structure somewhat.
7. What action will you take to more effectively manage commodity costs?
OPTION 1. Consolidate your three SBU procurement teams into one. This will reduce costs by
eliminating duplicate positions and capitalizing on the company's purchasing power. The cost
savings will provide the means for you to develop an in-house commodity price hedging team.
OPTION 2. Historically, Holden Evan's three procurement teams have done a good job of
keeping commodity costs down. You should keep these teams in place and engage a large
financial firm to sell your teams hedging against future commodity price spikes.
[OPTION 3.] Consolidate your three SBU procurement teams into one. Enter into agreements with
suppliers of energy, raw grains, and chemicals, to utilize their hedging expertise to protect
Holden Evan against price spikes and earn fees based on the savings they generate for your
company.