Ch. 10: Creating Effective Organizational Designs

Organizational structures have a direct impact on how effectively companies may operate within their industry. Kraft Heinz Company (KHC) operates under a divisional organizational structure, which is an organizational form where products, projects, or product markets are grouped internally.  In KHC's case, product markets drive the divisional organizational structure.

The CEO oversees functional departments for domestic operations, some of which include Foodservice; Operations; HR, Performance & IT; Corporate & Government; and US Commercial. The CEO also oversees divisions for Latin America, Canada, Europe, and AMEA (Asia, the Middle East, and Africa). Each domestic department is broken down further into more specific areas. For example, the US Commercial department oversees Kraft Foods and Oscar Mayer, Beverages and Snack Nuts, US Meals and Sauces, US Sales, as well as US Meat and Dairy to name a few. By structuring the organization based on geographic location, Kraft Heinz Company may obtain competitive advantages through their in depth knowledge of each geographic business segment as they are better equipped to provide products tailored to cultural preferences. Kraft Heinz Company is also able to respond quickly to environmental changes.

Additional advantages the divisional structure provides KHC include the ability to increase/maintain strategic and operational control, allowing corporate-level executives to address strategic issues as they arise. With a central decision maker on the top, this serves as a competitive advantage in that there is no confusion on who has authority and decisions can be made in a more timely manner. Additionally, the divisional structure minimizes problems associated with sharing resources across functional areas and facilitates the development of general managers. For example, the divisional structure requires multiple controllers and corporate managers to oversee both functional areas and geographic reasons. As a result, there would be a broader pool of qualified applicants should an upper level executive position open up - a competitive advantage for the company.

In short, KHC is the fifth largest food and beverage company in the world and so it is no surprise the company is present in multiple geographic areas. Combined with a strong domestic presence, a divisional organizational structure is the most logical and efficient structure for operational and decision making purposes.