A LITERATURE REVIEW OF THE ORGANIZATIONAL STRUCTURE
BASIC CHALLENGES OF ORGANIZATIONAL DESIGN
To ensure ongoing effectiveness amid environmental changes, organizations must have managers who continuously assess their design, including the division of work among individuals and departments, as well as the management of human, financial, and physical resources Effective organization design requires making challenging decisions about task coordination and motivation strategies to enhance the organization's capacity to create value.
1.1.1 Four basic organizational design challenges confronting managers and consultants
In organizations, the lack of clarity regarding roles and responsibilities often leads to confusion about who is accountable for specific tasks and reporting structures This ambiguity hampers effective communication and coordination among team members, making it challenging to identify the right person to approach when issues arise and to ensure collaborative teamwork.
As organizations expand, managers face the critical task of controlling and coordinating activities essential for value creation A key design challenge lies in effectively managing differentiation to meet organizational goals Differentiation involves strategically allocating personnel and resources to enhance efficiency and productivity within the organization.
1 Whirlpool, 2002 www.whirlpool.com resources to organizational task and establishes the task and authority relationships that allow the organization to achieve its goals
Organizations develop five functions to accomplish their goals and objectives 2 : support, production, maintenance, adaptive and managerial
- Support function: Functions which facilitate an organization’s control of its relations with its environment and its stakeholders Support function includes purchasing, sales and marketing, public relations and legal affairs
The production function is essential for enhancing an organization's efficiency in its conversion processes, ultimately leading to increased value creation This function encompasses key areas such as production operations, production control, and quality control, all of which work together to optimize productivity and ensure high standards.
- Maintenance function: Function which enable an organization to keep its departments in operation Maintenance functions include personnel, engineering and janitorial services
- Adaptive function: Functions which allow an organization to adjust to changes in the environment Adaptive functions include research and development, market research and long-range planning
- Managerial function: Function which facilitate the control and coordination of activities within and among department
An organizational role is a set of task-related behaviors required of an employee
An organization consists of interconnected roles defined by specific task responsibilities and authority levels This differentiation occurs in two dimensions: vertical and horizontal Vertical differentiation pertains to the structure of authority within the organization, while horizontal differentiation involves the grouping of roles into various subunits, such as functions and divisions.
Managers confront four design challenges as they coordinate organizational activities The choices they make are interrelated and collectively determine how effectively an organization operates
2 Ron Ashkenas, Dave Ulrich, Todd Jick and Steve Kerr, 1998 The Boundaryless Organization: Breaking the
In addressing the chains of organizational structure, four key challenges emerge: first, selecting the optimal levels of vertical and horizontal integration; second, achieving a balance between differentiation and integration while employing suitable integrating mechanisms; third, finding the right equilibrium between centralization and decentralization of decision-making authority; and fourth, balancing standardization with mutual adjustment through the appropriate use of formalization and socialization.
Differentiation is the process by which organization evolve into complex systems as they allocate people and resources to organizational task and assign people different levels of authority
Organizational structures significantly influence individual behavior, with mechanistic structures fostering predictable actions and organic structures encouraging flexibility and rapid adaptation to change To achieve success, organizations must find the right balance between these two structural approaches.
1.1.2 Using contingency theory to design a structure that fits an organization’s environment
The contingency approach to management emphasizes that an organization's structure should be specifically designed to address the uncertainties it faces According to contingency theory, effective management requires aligning an organization's design and control systems with the environmental conditions in which it operates.
According to this theory, in order to manage its environment effectively, an organization should design its structure to fit with the environment in which the
3 J Pfeffer, 1997 Organizations and Organizational Theory organization operates In other words, an organization must design its internal structure to control the external environment.
AUTHORITY AND CONTROL IN DESIGNING ORGANIZATIONAL STRUCTURE 9
A fundamental design challenge in organizations is determining the balance between centralized authority at the top and decentralized authority at lower levels The structure of an organization’s hierarchy, including the number of authority levels and span of control, significantly impacts decision-making and communication effectiveness Decisions regarding the hierarchy's shape and the balance of centralized versus decentralized decision-making influence the degree of vertical differentiation within the organization.
Achieving stakeholder goals and objectives requires effective organizational skills and capabilities, which are governed by a well-defined organizational structure Without such a structure, the activities of members can become chaotic, making it essential to assign roles and direct functions Organizations must establish a clear hierarchy of authority and select control systems that foster an effective structure The design of this hierarchy influences decision-making processes and impacts employee motivation towards achieving organizational goals, making it a crucial responsibility for management.
1.2.1 The height of an organization’s structure is a function of the number of levels in the hierarchy, the span of control at each level, and the balance between centralization and decentralization of authority
A tall organization features a multi-layered hierarchy, resulting in numerous levels of management relative to its size In contrast, a flat organization operates with a streamlined structure, characterized by fewer hierarchical levels in relation to its overall size.
4 W Baker, 2001 The Network Organization in Theory and Practice Harvard Business Review
Figure 2.1 Flat and tall organization
As an organization grows, the increase in the size of the managerial component is less than proportional to the increase in the size of the organization
1.2.2 Problems with tall hierarchies include communication, motivation, and bureaucratic costs 5
Excessive hierarchical levels can obstruct effective communication within an organization As the chain of command becomes longer, the time it takes for information to flow between upper management and lower-level employees increases This delay in communication slows down decision-making processes, negatively impacting the organization's ability to respond swiftly to customer needs and competitive actions.
In organizations with multiple hierarchical levels, the authority and responsibility of managers tend to diminish as one moves up the hierarchy In contrast, flat organizations feature fewer levels and managers, which results in their managers having greater authority and responsibility compared to those in taller organizations.
Motivation in an organization with a flat structure may be stronger than motivation in a tall organization
5 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
Managers cost money The greater number if managers and hierarchy levels, the greater of bureaucratic cost
1.2.3 According to the principle of minimum chain of command, an organization should choose the minimum number if hierarchical levels consistent with the contingencies it faces
To optimize organizational efficiency, it is essential to maintain a flat structure, minimizing the number of managers while evaluating their effectiveness in overseeing activities A flat organization typically encounters fewer issues related to communication, motivation, and costs compared to a tall structure The primary justification for adopting a tall organizational structure is the necessity for heightened direct control or personal supervision over employees.
1.2.4 The span of control is the number of subordinates a manager directly manages
Organizations that grow must manage the activities of new hires to avoid becoming overly hierarchical One effective strategy is to expand managers' span of control By increasing the number of employees each manager oversees, organizations can prevent a proportional rise in the number of managers and hierarchical levels, thus maintaining a more efficient structure.
The illustration presents two distinct spans of control within organizations In the first scenario, a CEO oversees five managers, each responsible for supervising two employees, resulting in a total of ten employees Conversely, the second scenario features a CEO managing two managers, with one manager supervising two employees while the other oversees the remaining eight employees.
B supervises eight people The reason is the ability of manager
The two main factors that affect the span of control are task complexity and task interrelatedness
1.2.5 The shape of hierarchy and the way it works are also affected by choices concerning horizontal differentiation, centralization versus decentralization, differentiation versus integration, standardization versus mutual adjustment, and the influence of the informal organization
When there are limits on the usefulness of direct personnel supervisor by managers, organizations have to find other ways to control their activities
Typically, organizations first increase the level of horizontal differentiation and then decide in their responses to the design challenges
Horizontal differentiation leads to emergence of specialized subunits – functions or divisions
1.2.6 The six principles of bureaucratic theory specify the most effective way to design the hierarchy of authority in an organization
- A bureaucracy is founded on the concept of rational-legal authority
- Organizational roles are held on the basic of technical competence not because of social status, kinship or heredity
- A role’s task responsibility and decision-making authority and its relationship to other roles in the organization should be clearly specified
- The organization of roles in a bureaucracy is such that each lower office in the hierarchy is under the control and supervision of higher office
- Rules, standard operating procedures and norms should be used to control the behavior and relationships among roles in an organization
- Administrative acts, decisions and rules should be formulated and put in writing
Bureaucracy has several advantages It is fair and equitable, and it can promote organization effectiveness by improving organizational effectiveness by improving organizational design
1.2.7 Managers need to recognize how the informal organization affects the way the formal hierarchy of authority works and make sure the two fit to enhance organizational performance
The management's hierarchy of authority serves as a blueprint for task allocation and roles within an organization However, decision-making and coordination often occur informally, as employees interact beyond the established channels Many rules and norms guiding employee performance arise from these informal interactions rather than the formal guidelines set by management Consequently, while managers create a formal structure of roles, they simultaneously foster an informal social structure that can unintentionally influence behavior.
1.2.8 To keep their organizations as flat as possible managers are increasingly making use of IT and creating self-managed work teams of empowered worker and/or turning to contingent workers.
DESIGNING ORGANIZATIONAL STRUCTURE
Designing an effective organizational structure is a complex challenge for managers, who must navigate both vertical and horizontal dimensions while determining the right distribution of authority and responsibilities As organizations expand and evolve, it becomes crucial to adapt their structures to meet changing needs and contingencies.
Designing an organizational structure that meets a company's specific needs presents a significant challenge Each structure comes with its own set of advantages and disadvantages, requiring managers to be prepared to redesign their organization to leverage benefits while mitigating potential issues A company that effectively manages its structure gains a crucial competitive edge over those that do not.
Many organizations overlook the coordination challenges that arise during the organizing process, often waiting until they face significant decline to address issues related to coordination and motivation The characteristics of the top management team play a crucial role in this context, as they influence decision-making and shape how top managers recognize and respond to the problems facing the organization.
1.3.1 A functional structure is a design that groups people because they have similar skills or use the same resources Functional groups include finance, R&D, marketing, and engineering All organizations begin as functional structures 6
Figure 2.3 A sample of functional structure
This model fosters specialization and productivity by enabling individuals to learn from one another When skilled individuals collaborate in a functional group, they can share effective problem-solving strategies and optimize task performance through collective knowledge.
A key benefit of a functional structure is that individuals with similar skills can oversee and regulate each other's actions Additionally, prolonged collaboration within a function fosters the development of shared norms and values, enhancing overall effectiveness in their roles.
1.3.2 An organization need to adopt a more complex structure when it starts to produce many products or when it confronts special needs, such as the need to produce new products quickly, to deal with different customer groups, or to handle growth into new regions 7
1.3.3 The move to a new complex structure is based on three design choices: increasing vertical differentiation, increasing horizontal differentiation, and increasing integration 8
6 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004, p.160
7 J Child, 1977 Organization: A Guide for Managers and Administrators New York: Harper and Row
8 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
1.3.3.1 Increasing vertical differentiation: To regain control in a vertical direction, the organization needs to increase vertical differentiation This typically involves:
- Increasing the number of levels in the hierarchy
- Deciding how much decision-making authority to centralize at the top of the organization
- Deciding how much to use rules, SOPs, and norms to standardize behaviors and hence exert control over low-level employees
1.3.3.2 Increasing horizontal differentiation: To regain control in a horizontal direction, the organization needs to increase horizontal differentiation This involves overlaying a functional grouping with some other kind of submit grouping – most often, self-contained product terms or product divisions that process all the function resource they need to meet their goals
Figure 2.4 Vertical and horizontal differentiation
1.3.3.3 Increasing integration: To regain control in both vertically and horizontally, the organization needs to increase integration between subunits The higher the level of differentiation, the more complex the integrating mechanisms that an organization needs in order to control its activities
1.3.4 Most organizations move from a functional structure to some kind of divisional structure: a product structure, a geographic structure, or a market structure 9
9 H Mintberg, 1987 The Structuring of Organizational Structures New Jersey: Prentice Hall
Organizations often utilize a divisional structure to address control challenges arising from the production of diverse products across various locations for different clients This structure organizes functions based on the unique requirements of products, markets, or customers, aiming to establish smaller, more manageable units within the organization The choice of divisional structure is influenced by the specific control issues that need to be resolved.
If the control problem is due to the number and complexity of products, the organization will divide its activities by product and use a product structure
To address control challenges arising from multiple locations where an organization produces and sells its products, it is effective to implement a geographic structure by dividing activities by region.
To effectively address control challenges arising from servicing diverse customer groups, organizations can segment their operations based on these groups and adopt a market-oriented structure.
1.3.5 There are three kinds of product structure: product division structure, multidivisional structure, and product team structure 10
1.3.5.1 Product division structure is used when an organization produces broadly similar products that use the same set of support functions
10 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
1.3.5.2 Multidivisional structures are available to organizations that are growing rapidly and producing a wide variety of products or are entering totally different kinds of industries
Senior Vice President Research & Development
Senior Vice President Materials Corporate Headquarters Staff
Support functions Support functions Support functions Support functions
Each division operates independently with its own support functions, while the corporate headquarters staff supervises divisional managers across three management levels: corporate, divisional, and functional This structure allows each division to adopt the operating framework that best meets its specific needs The central headquarters staff plays a crucial role in coordinating divisional activities within the organization In cases where extensive coordination between divisions is necessary, a multidivisional matrix structure may be implemented.
Figure 2.7 A Multidivisional structure in which division has a different structure
Senior Vice President Research & Development
Senior Vice President Materials Corporate Headquarters Staff
Functional Structure Product Division Structure
Advantages of the multidivisional structures:
Internal labor market Disadvantages of the multidivisional structures:
Managing the corporate divisional relationship
1.3.5.3 Product team structure put the focus on the product being the produced Teams of functional specialists are organized around the product to speed product development
Senior Vice President Research & Development
Each product team manager (PTM) supervises the activities associated with developing and manufacturing a product
1.3.6 Geographic structures are used the organizations expand into new areas or begin to manufacture in many different locations 11
The multidivisional structure is commonly utilized by large organizations, as it offers essential control for managing a diverse range of complex products or services and navigating new industries with varying stakeholders and competitive dynamics However, when control issues arise due to geographical factors, a geographic division structure becomes more effective, organizing divisions based on the specific needs of the different locations where the organization operates.
11 Richard H Hall, and Pamela S Tolbert, 1999 Organizations: Structures, Processes, and Outcomes (4th Edition), Prentice Hall Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004 available
1.3.7 Market structures are used when organizations wish to group activities to focus on the need of distinct customer groups 12
Different customer groups require tailored marketing strategies, with each group responsible for creating products that meet the unique needs of their specific clientele Additionally, all groups benefit from centralized support functions to enhance their operations.
12 Richard H Hall, and Pamela S Tolbert, 1999 Organizations: Structures, Processes, and Outcomes (4th Edition), Prentice Hall Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
ORGANIZATIONAL STRUCTURE IN ADVERTISING INDUSTRY
OVERVIEW OF ADVERTISING INDUSTRY
Advertising is the strategic promotion of goods, services, companies, and ideas by a recognized sponsor Marketers consider advertising a key element of a broader promotional strategy, which also encompasses publicity, public relations, personal selling, and sales promotions.
In ancient times, 'word of mouth' was the primary advertising method, but evidence of commercial messages and election campaign displays has been discovered in the ruins of Pompeii The Egyptians utilized papyrus for sales messages and wall posters, while lost-and-found advertisements were prevalent in Greece and Rome The advent of printing in the 15th and 16th centuries marked a significant expansion in advertising practices.
14 William D Wells, Sandra Moriarty and John Burnett, 2000 Advertising : Principles and Practice (3rd Edition) New Jersey: Prentice Hall
15 Adarco Limited, 2000 The authority on Asia’s advertising and marketing services industry handbills In the 17th century advertisements started to appear in weekly newspapers
Early print advertisements primarily focused on promoting affordable books and much-needed medicines during a time when disease was rampant in Europe and Britain The rise of deceptive "quack" ads led to the establishment of regulations governing advertising content.
During the 19th century, the expanding economy significantly increased the demand for advertising, particularly through the rise of classified ads in American newspapers This format's success paved the way for mail-order advertising, and in 1843, Volney Palmer established the first advertising agency in Philadelphia Initially serving as brokers for newspaper ad space, these agencies evolved by the 20th century to take on the responsibility of creating advertising content as well.
In the 1960s, advertising evolved into a modern and scientific discipline, allowing creativity to flourish and resulting in captivating messages The Volkswagen ad campaign, with memorable slogans like "Think Small" and "Lemon," marked the beginning of contemporary advertising by emphasizing a unique selling proposition that connected each brand to a specific concept in the audience's mind.
Advertising is rapidly evolving with innovative "guerrilla" promotions that utilize unconventional tactics, including staged public encounters, branded product giveaways like cars, and interactive advertising that invites viewer participation to become part of the message.
Commercial advertising encompasses a variety of media, including billboards, street furniture, printed flyers, and ads across radio, cinema, and television It also extends to digital formats like web banners and popups, as well as unconventional methods such as skywriting, bus stop benches, and stickers on supermarket items Essentially, any medium where a recognized sponsor pays to convey their message qualifies as advertising Additionally, product placement refers to covert advertising integrated into entertainment content.
Television commercials are widely regarded as the most effective form of mass-market advertising, evidenced by the substantial fees networks demand for airtime during major events The Super Bowl, a prominent annual football game in the United States, is famous not only for the sporting event but also for its high-profile advertisements, with the average cost of a thirty-second commercial spot soaring to $2.3 million as of 2004.
Web-based advertising is a relatively new development, with pricing for ad space influenced by the relevance of adjacent content and the volume of traffic a website attracts.
E-mail advertising is another recent phenomenon Unsolicited bulk E-mail advertising is known as "spam" A message is spam only when it is unsolicited and in bulk
Some companies have proposed to place messages or corporate logos on the side of
Subliminal advertising, often debated for its effectiveness, raises concerns about mind control and the widespread influence of mass messaging, akin to propaganda This topic is explored in-depth in the work of William D Wells, Sandra Moriarty, and John Burnett in their 2000 publication, "Advertising: Principles and Practice" (3rd Edition).
Unpaid advertising, often referred to as word-of-mouth advertising, offers significant exposure at a low cost Personal endorsements, such as "bring a friend" or "sell it by zealot," can generate buzz and enhance brand recognition Achieving the status of a brand becoming synonymous with a common noun, like "Hoover" for vacuum cleaners or "Kleenex" for tissues, is a dream scenario for any advertising budget holder.
The impact of mass media advertising is commonly measured using rating points (rp) and target rating points (trp) While rp indicates the percentage of the entire audience, trp focuses on specific segments, making it crucial for targeted advertising For instance, an ad campaign aimed at women aged 25 to 45 may find that a TV show has a high overall rating but only generates 2.5 trps for that demographic This disparity highlights the importance of evaluating both measures to ensure effective ad placement for reaching the desired audience.
Marketing focuses on identifying target markets for products or ideas and facilitating purchases, while advertising involves paid communication to convey information about these products or ideas to potential consumers.
Advertising serves to inform consumers about the availability of products, services, or ideas, stimulating demand as one of its primary goals The three main objectives of advertising include communicating essential information about a product or brand, persuading consumers to make a purchase, and maintaining the organization's visibility through institutional advertising New products typically utilize informative and persuasive ads, while established products often rely on reminder and institutional ads Persuasive techniques, both logical and emotional, are frequently employed, sometimes overshadowing product details Additional specific objectives encompass increasing short- and long-term sales, enhancing market share and brand awareness, encouraging product trials, improving brand recall, and refining organizational image.
Examples of the ideas, informative or otherwise, that advertising tries to communicate are product details, benefits and brand information Advertising
In "Truth, Lies and Advertising: The Art of Account Planning," Jon Steel (1998) emphasizes the importance of identifying a unique selling proposition (USP) for products, which can manifest as a unique feature or perceived benefit As competition intensifies and substitutes proliferate, branding becomes increasingly vital in advertising, fostering a distinct personality or reputation for each brand, known as brand equity This concept measures the volume and consistency of both positive and negative associations, as well as individual and cultural perceptions linked to the product, setting it apart from competitors.
O RGANIZATION STRUCTURE OF W ORLD ADVERTISING INDUSTRY
Ad agencies vary significantly in size, from small teams of one or two to large firms with over 1,000 employees, leading to diverse services and functions This section explores the various types of agencies, the specific services they provide to clients, and their organizational structures.
Many businesses utilize full-service agencies that provide comprehensive marketing, communication, and promotional services These agencies handle everything from advertising planning and production to research and media selection Additionally, they may offer non-advertising services such as strategic market planning, sales promotions, direct marketing, interactive solutions, package design, and public relations.
The full-service agency is made up of departments that provide the activities needed
18 William D Wells, Sandra Moriarty and John Burnett, 2000 Advertising : Principles and Practice (3rd Edition) to perform the various advertising functions and serve the client, as shown in Figure 2.1
Figure 2.1 Full-service agency organizational chart
Account management serves as the vital connection between advertising agencies and their clients, with one or more account executives acting as liaisons based on the client's size and budget These executives are tasked with comprehending the client's marketing and promotional requirements, effectively communicating them to the agency team They play a crucial role in coordinating the planning, creation, and production of advertisements, while also presenting agency recommendations and securing client approvals.
The account executive serves as the central link in agency-client relationships, requiring a deep understanding of the client's business to effectively relay this information to the agency specialists involved in the account.
In the last twenty years, the demand for marketing services has surged, particularly in research, as agencies recognize the importance of understanding their clients' target audiences for effective communication The advertising planning process initiates with an in-depth situation analysis grounded in research and insights about the target audience.
Full-service agencies typically have a dedicated research department responsible for gathering, analyzing, and interpreting valuable information for client advertising development This research can involve primary studies conducted by the department or secondary data from previously published sources Additionally, agencies may utilize studies from independent research firms, with the research staff interpreting these findings for other team members The department also designs and conducts pretesting research, such as copy testing, to evaluate how potential advertising messages will be received by the target audience.
The media department of an agency plays a crucial role in analyzing, selecting, and contracting media space or time to effectively deliver the client’s advertising message It is responsible for creating a media plan that targets the right audience while ensuring the message is communicated effectively Given that a significant portion of the client’s advertising budget is allocated to media, the department must focus on developing a cost-effective strategy that reaches the intended market efficiently.
Media specialists need to understand the audience demographics, media rates, and alignment with the client’s target market The media department analyzes data on magazine and newspaper readership, radio listenership, and TV viewing habits to create an effective media strategy The media buyer then executes this plan by purchasing the necessary advertising time and space.
The media department is increasingly vital to agency operations, with effective negotiation and utilization of diverse media channels becoming as crucial as ad creation Major agencies have established independent media services to enhance client support; for instance, Leo Burnett created Starcom, McCann Erickson formed Universal McCann, and Foote Cone and Belding launched Horizon.FCB These media firms primarily cater to their agency's clients but also provide services to others Large advertisers, such as General Motors and Nestlé, have consolidated their media buying with these firms to reduce costs and enhance media efficiency, exemplified by GM's $3.6 billion partnership with Starcom and Universal McCann managing nearly $1 billion of Nestlé's global media.
Research and media departments are essential for full-service agencies, as they handle key functions necessary for planning and executing effective advertising programs Additionally, some agencies enhance their offerings by providing extra marketing services to support clients in various promotional areas.
An agency often includes specialized departments such as sales promotion, merchandising, direct marketing, and public relations, focusing on creating contests, promotions, and point-of-sale materials Additionally, many agencies have established interactive media divisions to design websites for clients, reflecting the increasing demand for integrated marketing communications This trend has led full-service agencies to expand their offerings across various promotional areas, enhancing their overall capabilities.
The creative services department specializes in developing and implementing advertisements, with copywriters playing a crucial role in generating ideas and crafting compelling headlines, subheads, and body copy These professionals help define the central theme or appeal of the ad campaign and often create initial visual layouts for print ads or television commercials.
Copywriters focus on crafting the message of an advertisement, while the art department, including art directors and graphic designers, is tasked with its visual presentation In print advertising, they create layouts that illustrate the ad's appearance, serving as a blueprint for the final artwork For television commercials, this visual plan is referred to as a storyboard, consisting of a series of frames or panels that represent the commercial in a static format.
The creative department collaborates to craft advertisements that effectively convey the essential elements of the client's product or service strategy Under the guidance of the agency's creative director, writers and artists work together to produce cohesive and impactful advertising materials.
The director sets the creative philosophy of the department and may even become directly involved in creating ads for the agency’s largest clients
After the copy, layout, illustrations, and specifications are finalized and approved, the ad is handed over to the production department, which typically does not produce the ads in-house but collaborates with external printers, engravers, photographers, and typographers For broadcast ads, the approved storyboard is transformed into a commercial, with the production department overseeing casting, scene settings, and selecting independent production studios Often, they may hire outside directors, such as Spike Lee for Nike and Kmart or John Glen for Airwalk shoes, to bring creative concepts to life Production decisions involve collaboration among copywriters, art directors, account managers, and client representatives, especially for high-budget projects.
T HE ADVERTISING INDUSTRY IN V IETNAM
2.3.1 A Decade of Change for Advertising in Vietnam
The advertising industry in Vietnam has rapidly evolved over the past fifteen years, transitioning from a focus on trade fairs and outdoor signage to a more dynamic landscape Following the lifting of the ban on television commercials in 1991, the sector has experienced significant growth and diversification, paving the way for innovative marketing strategies and increased brand visibility.
The Vietnamese advertising industry, rapidly evolving to leverage new media opportunities, has experienced significant growth, as reported by the Vietnam Advertising Association and various news outlets Despite facing challenges related to foreign cultural influences and urban transformation, advertising has become an integral part of daily life for consumers Spanning billboards, television, print, radio, and the Internet, this sector is recognized by the Vietnamese Government for its growth potential With increasing foreign investment and rising consumerism, the industry is eager to advance and align itself with its Asian counterparts.
The Vietnamese advertising industry has evolved from simple sign-making to a dynamic landscape of multimedia agencies offering comprehensive media and creative services Local agencies have rapidly adapted to new media, mastering skills such as TV campaign planning and website development that were previously unfamiliar International agency networks are establishing offices in Vietnam and collaborating with local firms to enhance expertise in modern advertising processes While the market's growth presents numerous opportunities, it also introduces challenges as local businesses navigate free competition and international firms adjust to a new market environment.
2.3.2 Foreign Advertising Agencies in Vietnam
Vietnam is home to approximately 34 foreign agency networks, including prominent names such as Lowe Lintas, Asatsu-DK, Asian Advertisers Inc., BBDO Asia Pacific, Bates Worldwide, Chuo Senko, Daiko Advertising, and Dentsu Inc These agencies play a significant role in the country's advertising landscape, contributing to its dynamic marketing industry.
Young & Rubicam, Hakuhodo Inc, J Walter Thompson, Leo Burnett, McCann- Erickson, Ogilvy & Mather, Prakit & FCB Pcl and Saatchi & Saatchi Advertising, etc
Most advertising agencies in Vietnam operate under a representative office license, limiting their ability to conduct direct business Currently, only Leo Burnett has a Business Cooperation Contract, enabling them to collaborate with local agencies for media purchases and client billing in local currency Recently, Saatchi & Saatchi secured the first five-year joint venture license with Venus Advertising, allowing them to function as a full-service agency Additionally, DY&R is reportedly progressing towards obtaining a joint venture license, highlighting a shift towards more comprehensive operational capabilities for foreign agencies in Vietnam.
The advertising industry increasingly agrees that fostering collaboration between local and international agencies can enhance business opportunities and benefit the sector overall.
2.3.3 Local Advertising Agencies in Vietnam
Vietnam boasts approximately 20 local agencies among its 3,000 advertising companies, offering comprehensive advertising services Notable agencies include A Chau Advertising, An Tiem Advertising, Do-Ad Group, Goldsun Advertising, and Saigon Advertising, along with others such as Hanoi Marketing Design, KCD Advertising, and Vinexad These firms contribute to a vibrant advertising landscape, catering to diverse marketing needs across the country.
The Vietnamese advertising industry is in its early development stages, facing a shortage of local professionals with over 5-8 years of experience As a result, talent is often sourced from other sectors like law, trading services, and architecture Those with advertising experience typically come from state-owned or international agencies operating in Vietnam, where they continue to learn industry skills and concepts After five years of challenging growth, the industry is now witnessing the rise of innovative, young agencies formed by dynamic teams with a blend of entrepreneurial spirit and local agency experience, positioning them as the future pioneers of Vietnamese advertising.
Vietnam's advertising landscape is dominated by approximately 3,000 local companies, yet foreign firms capture 77% of the advertising revenue despite only having around 30 representatives in the market Local businesses benefit from significant government support in terms of tax incentives and regulatory assistance, while foreign advertising agencies are required to partner with local firms to secure contracts with television networks.
2.3.4 Future of advertising industry in Vietnam
Vietnam's Consumer Price Index (CPI) is projected to increase by approximately 7% in 2000, driven by a resurgence in domestic consumer spending By 2005, the CPI is expected to rise further to around 8% This upward trend is partly attributed to rising prices stemming from food shortages exacerbated by severe flooding in the previous year.
In 1999, advertising expenditure rose by 6% compared to 1998, reflecting a growing trend in the industry By 2004, Vietnam's advertising spending reached approximately $350 million, aligning closely with the country's GDP growth This figure represents a remarkable twentyfold increase since 1994 Notably, foreign companies like Unilever and Coca-Cola have significantly boosted their advertising budgets to capture larger market shares in this expanding market.
O RGANIZATIONAL STRUCTURE IN V IETNAM ADVERTISING COMPANY
In Vietnam, advertising companies work in all fields of advertising industry Following are some of them:
- Full-Service Agencies: Admaker, Dat Viet, Goldsun
- Marketing Services: T&A, VMC, Vietnam Marcom
- Creative Services: NVV, Stormeye, Crea TV
- Media Buying Services: Mindshare, TVplus, Vietba Media
- Sales Promotion Agencies: Maketeers, Nhat Khang,
- Public Relations Firms: Max Communication, AVC, Venus
- Marketing Research Companies: Taylor Nelson, ACNielson
- Agency Organization and Structure Organizational structure in all these companies still follows the standard model (see figure 3.1 Full-service agency organizational chart)
With each company, base on their own condition, they will expanse or reduce number of their department In the case of Goldsun Groups, they break their firm into
5 sub-companies These companies work together as the following model
Figure 3.4 The divisional structure model
Senior Vice President Research & Development
Senior Vice President Materials Corporate Headquarters Staff
Functional Structure Product Division Structure
Advertising is the strategic promotion of goods, services, companies, and ideas by a recognized sponsor It plays a crucial role in a comprehensive promotional strategy, which also encompasses publicity, public relations, personal selling, and sales promotions.
This chapter already examined the different types of agencies, the services they perform for their clients, and how they are organized Following are some main types of advertising agency:
The advertising industry in Vietnam has rapidly evolved over the past fifteen years, transitioning from a focus on trade fairs and outdoor signage to a vibrant sector with approximately 3,000 interactive agencies These firms play a crucial role in the country's development, engaging in various fields within the industry and significantly contributing to Vietnam's economic growth.
Despite entering the market later and lacking competitive advantages compared to foreign firms, local companies have established a significant presence With limited capital and experience, they concentrate on sectors where foreign firms face restrictions or collaborate with them Additionally, these organizations adopt international business models while customizing them to meet the specific conditions of the Vietnamese market.
After exploring theoretical frameworks and gaining insights into the advertising industry, we now possess a foundational understanding of organizational structure models, including their specific characteristics and historical context In the upcoming chapters, we will delve deeper into these topics.
- Study FPT; FPT Media and identify organization structure in this corporation and also have SWOT analysis their current situation
- After that, merging general theory with industry’s characteristics and company’s situation, we will choose the best organization structure model for FPT Media.
FPT CORPORATION AND FPT MEDIA INTRODUCTION
FPT M EDIA INTRODUCTION
FPT has established FPT Media, a specialized division focused on TV program production, distribution, and sponsorship, following its successful collaboration with Vietnamese National Television (VTV) since 1997 This initiative aligns with FPT's Digital Conversion Strategy and marks a significant step into the television industry as part of the Corporation's ongoing development.
After 12 months as a small project of FPT Technology Development Center, August,
2005, FPT Media center was established as a officer center of FPT corporation
FPT entered television content since 1997 as the co-founder of ―The Future
Choice‖, the first and still the No1 ICT television program which is weekly broadcasted on VTV1 (Vietnam National Television 1)
Since 2000, FPT was the founder and has been the co-organizer of ―Vietnamese
Intelligence, Vietnam's premier software competition, showcases the innovative and practical software solutions of local IT talents Broadcasted year-round on VTV1, the program culminates in Live Awarding Ceremonies attended by high-ranking government officials, highlighting it as one of the top ten significant events in Vietnam each year.
Since its inception in 2003, the "Lighting Young Business Talents" program, initiated by FPT in collaboration with VTV, the Vietnam Young Business Association (VBA), and the Hanoi School of Business (HSB), has aimed to discover and nurture young business talents across Vietnam Supported by the Vietnamese Government and major enterprises, this annual nationwide initiative requires candidates to undergo various preliminary assessments, including IQ tests, GMAT, TOEFL, entrepreneur aptitude evaluations, and business planning presentations The top ten candidates then compete in a live final round on VTV, vying for prestigious awards and scholarships Notably, the 2004 Final Round featured Vice Prime Minister Nguyen Tan Dung, marking a significant moment in the program's history.
Building up a new TV channel targeted to mid-class homes and enterprises
TV programs Distribution to and from Vietnam
Event and TV program Marketing and Sponsorship
At this time, FPT Media is working as a content provider in Hanoi and Hochiminh City
- Youth: They have just establish FPT Media and still have principle enthusiasm to build a new advertising and media firm
- Creative: it’s go along with youth and intelligent
- Solid foundation and fully support from mother company
- Exiting customer relationships Their weakness:
- A dynamic and developing market: not only Vietnam market but also Vietnam advertising market
- Protected rule from government with domestic advertising firm
- There are about 3000 advertising companies (competitor) in the market with high level of experience
- Integration and market open process of Vietnam market
- Corruption in advertising and television industry
At this time, there are 16 people in FPT Media (10 in Hanoi and 6 in Ho Chi Minh City)
Figure 4.4 Current organizational structure of FPT Media
This current structure was designed base on the original model of FPT Corporation
It is product division structure This model is successful applying in FPT Corporation and all its sub-company
Figure 4.5 Product division structure model
FPT Media's team members may be perceived as unprofessional due to their small size and limited experience The organization lacks clear assignments for each member, instead managing tasks and projects collectively Each project is led by a designated leader who is fully accountable for the project's outcomes This management approach offers certain advantages, such as streamlined decision-making and accountability.
- No conflict or miss- understanding
But it’s also creating some big disadvantage:
- No opportunity to share working experience or working result
- No backup human resource and project: if project leader resign his job, project may be damage
- No clear function or assignment and responsibility
- Work overload and not efficiency
The existing organizational structure of FPT Media is only effective during the startup phase, which focuses on market discovery However, as the company transitions into its development period and the workforce expands, this structure becomes inadequate Employees are experiencing increased workloads, leading to decreased efficiency and a slowdown in productivity Signs of decline in performance have emerged, highlighting the need for a reevaluation of the organizational framework to better support growth.
The pressing demands of FPT Media are:
- New way to organize their organization
FPT Corporation, established in 1988, has evolved into Vietnam's largest Information Communication Technology (ICT) company, renowned for its significant growth and strong reputation in the IT sector The company operates across various domains, showcasing its diverse capabilities and expertise in the technology landscape.
Software production (meeting domestic market and for export)
Supplying solutions, telecommunication and Internet services
Training international programmers and multimedia art specialists/experts
Informatics and telecommunication equipment guarantee and maintenance
And the newest service: Advertising in FPT Media
FPT Media specializes in the production, distribution, and sponsorship of television programs Its organizational structure is based on the successful product division model of FPT Corporation, which has been effectively implemented across all its subsidiaries.
This model has its own advantage in mother firm – FPT Corporation But in FPT Media, it has some big disadvantages.
SITUATION ANALYSIS AND RECOMMENDATION
S ITUATION A NALYSIS
4.1.1 Current organizational structure in advertising industry
A review of organizational structure models reveals various types, each with distinct advantages and disadvantages suited for specific situations Start-up companies typically begin with a functional structure, but as they grow or expand globally, they often transition to a divisional structure, which may be based on products, geography, or market segments.
Small advertising companies typically adopt a functional structure model to manage their operations effectively within a single country As these firms grow larger, they may transition to a geographic or market structure to accommodate a broader scope However, even within these expanded frameworks, they often maintain a functional structure at smaller operational levels.
4.1.2 Current structure model of FPT Media
FPT Media opted for a divisional organizational structure due to its unique business characteristics and relatively small size, reflecting their desire for a more tailored approach to management.
The current structure of FPT Media is based on the successful product division model of FPT Corporation While this model has proven effective for FPT Corporation and its subsidiaries, it is important to note that the other members of FPT Corporation do not operate within the advertising sector.
Current businesses in the technology sector, such as software, internet services, computers, and mobile phones, primarily focus on retail sales directly to consumers However, there is a noticeable lack of strong professional connections between different divisions within these companies For instance, in FPT Mobile, which distributes mobile phones and laptops, the mobile phone division operates independently from the laptop division, despite having similar sales approaches.
They are totally different with the advertising For example: Advertising firm serves
To effectively manage relationships with a limited number of loyal customers, an account manager should oversee all interactions, including media booking and TV production requests Utilizing a divisional structure could lead to customers receiving multiple requests in a single day, causing confusion and negatively impacting business outcomes Therefore, a centralized approach is essential for maintaining clarity and enhancing customer satisfaction.
S UITABLE TIME FOR CHOOSING NEW ORGANIZATIONAL STRUCTURE
4.2.1 Suitable moment for selecting new model of organizational structure
FPT Media members currently lack valuable experience, leading to an inefficient organizational structure that hinders opportunities for collaboration and specialization As a result, their productivity and overall work outcomes are limited.
- FPT Media is in the expanse period: increase number of departments and employees; increase number of jobs and customers
- After the trial time with not much public image, at this time, their competitors appeared and have some attack actions
- Current organizational structure with its own weakness is the virtual barricade for a new development period of firm
4.2.2 FPT Media concentrates on some specific fields of advertising market:
These services belong to creative service, account service and marketing service They are also need financial and human resource function inside their company also
FPT Media offers a range of similar products that rely on essential support functions, including copywriting, TV show production, media booking, and financial services To enhance efficiency and meet its specific needs, FPT Media should consider adapting its organizational structure to better align with these demands.
4.2.3 Choosing a suitable structure model for FPT Media
To determine the most appropriate structure for FPT Media, we will analyze various theoretical models After selecting the most relevant options, we will evaluate the current state of the advertising industry both globally and in Vietnam This comprehensive assessment will enable us to identify the optimal model for FPT Media at this time.
Functional structure organizes individuals based on similar skills and resource usage, making it a prevalent model in advertising firms globally, including Vietnam Startups often adopt this functional structure initially, but as they grow and expand internationally, they typically transition to a divisional structure, which may be product-based, geographic, or market-oriented.
This model is suitable with FPT Media: a starting up business and also an adverting firm
The product division structure is implemented by organizations that produce similar products utilizing the same support functions Currently, FPT Media is adopting this model in both Hanoi and Ho Chi Minh City; however, it has proven to be unsuitable and inefficient for their needs.
Multidivisional structures are ideal for rapidly growing organizations that produce diverse products or enter different industries Each division operates independently with its own support functions, while corporate headquarters manages divisional activities This structure features three management levels: corporate, divisional, and functional.
FPT Media operates in both Hanoi and Ho Chi Minh City, functioning as divisions within the larger FPT Corporation However, this multidivisional structure is not ideal for FPT Media, as each division is relatively small and offers a limited range of services.
The product team structure emphasizes the importance of the product being developed by organizing teams of functional specialists around it to enhance the speed of product development Each Product Team Manager (PTM) oversees the activities related to the product's development and manufacturing However, since FPT Media focuses on a single product type, this model is not necessary for their operations.
Geographic structures enable organizations to expand into new regions and establish manufacturing in various locations For instance, FPT Media operates in both Hanoi and Ho Chi Minh City, with each city functioning as a regional organization within FPT Corporation's geographic framework However, implementing this model in just one city may not be effective due to the limited size and singular service offering in that area.
Market structures help organizations categorize activities to address the unique needs of various customer segments, each requiring a tailored marketing approach and product development However, FPT Media operates with a singular customer type and marketing strategy, rendering this model unnecessary for their operations.
Matrix structures organize activities by both function and product, making them ideal for organizations facing new or complex products in fast-paced markets.
FPT Media, operating in both Hanoi and Ho Chi Minh City, does not require a matrix structure, as their singular goal allows for a more streamlined organizational approach This structure, characterized by its differentiation into various functions to meet specific objectives, is unnecessary for FPT Media given their focused mission.
Network structures are formed when an organization forms agreements or contracts with other organizations to perform specific functional value creation activities This structure is totally not suitable
The following is the summarizing:
1 Functional structure A design for groups people because they have similar skills or use the same resources
2 Product division structure Use when an organization produces broadly similar products that use the same set of support functions
3 Multidivisional structure Multidivisional structures are available to organizations that are growing rapidly and producing a wide variety of products or are entering totally different kinds of industries
Not suitable at this time
The product team structure emphasizes the importance of the product being developed, organizing teams of functional specialists around it to enhance the speed of product development Each Product Team Manager (PTM) oversees the associated activities, ensuring efficient collaboration and progress.
Not suitable at this time developing and manufacturing a product
5 Geographic structure Geographic structures are used the organizations expand into new areas or begin to manufacture in many different locations
Not suitable at this time
Market structures are essential for organizations aiming to categorize their activities to address the needs of distinct customer segments Each segment requires a unique marketing approach, and it is the responsibility of each group to create products tailored to the specific preferences of its target customers.
Not suitable at this time
Matrix structures organize activities by both function and product, making them ideal for organizations facing the challenges of new or technically advanced products in fast-paced markets This unique organizational framework enables companies to respond effectively to dynamic market demands.
Not suitable at this time
8 Network structures Network structures are formed Not suitable at when an organization forms agreements or contracts with other organizations to perform specific functional value creation activities this time
N EW ORGANIZATIONAL STRUCTURE ’ S SWOT ANALYST
- This structure fits the real working area and working situation of FPT Media
The new model at FPT Media enhances specialization by allowing each department to focus on a specific area of the business This approach enables employees to concentrate on their strengths, fostering opportunities for study, contribution, and creativity without the distraction of unrelated tasks For instance, editors can dedicate their efforts solely to developing TV show content, free from the pressures of sales or marketing activities.
TV show to be more enjoyable and meet all customers’ requirements
This structure fosters a collaborative environment where individuals can learn from each other, enhancing specialization and productivity It allows top-performing employees to mentor new hires, while also creating pathways for skilled individuals to advance into managerial roles.
Fostering internal motivation is crucial as it allows employees to concentrate on their individual roles, leading to enhanced creativity and discovery This internal drive is rooted in the employees' creativity and the collaborative relationships they build with one another.
This structure enhances managers' control and effectiveness by providing clear insights into departmental performance and employee contributions Once each department completes its tasks, managers can accurately assess results, identify errors and their sources, and determine effective solutions for improvement.
The final outcome of a project will be a collective achievement, reflecting the contributions of all departments within the company This shift emphasizes teamwork over individual efforts, highlighting the importance of collaboration in driving success.
- This structure will decrease the ability to communicate between every member People in two different departments may have opportunity to meet the other only in the meeting room
- The ability to coordinate between departments will reduce People will tend to protect their working result and against the requirements or critics from other departments
- This model also increase the working expense: number of people, transferring price between each department, bureaucratic costs, etc
Effective management skills are essential for managers, particularly top-level executives who oversee the overall operations of an organization Their ability to delegate control is crucial; trusting the wrong individuals can lead to significant issues within the company Recognizing and seizing opportunities is vital for sustained success.
Even this structure is not perfectly but it has some outstanding advantage From the real situation of FPT Media, we can also find some opportunity for this:
The advertising industry in Vietnam is experiencing significant growth, presenting a valuable opportunity for FPT Media to gain insights and experience from the market To capitalize on this potential, FPT Media plans to expand by increasing the number of projects, employees, customers, and competitors However, without adapting their current structure, they risk internal conflicts that could adversely affect their performance and outcomes.
- This structure is not unique in the market It was customized from some other company’s structure in the world and Vietnam also It’s not backward d Thread:
FPT Media's transition to a new organizational structure positions the company at a pivotal juncture Success in the market will validate this change, enhancing operational efficiency, while failure could necessitate a reevaluation of their strategy.
- They are too young and don’t have much experience so their competitors may attach
One key reason for transitioning to a new organizational structure is market development; however, if the market is unstable or impaired, adopting this model could lead to significant costs.
I MPLEMENTATION P LAN
The new model for FPT Media is more advanced than the current one; however, it requires time for analysis and implementation To facilitate this transition, we must design a scenario for effectively restructuring the organization.
4.4.1 When will we move to functional organizational structure?
Transitioning from the current business structure to a new one requires careful consideration to avoid disrupting existing workflows and creating significant issues It is essential to assess various factors, including the number of employees, to determine the right timing for this change.
Turn back to the theory and compare with most of other firms in the advertising industry, functional organizational structure model will be more effective when:
- Capacity of each function can server all other departments’ requirement
- Interests and responsibility of each department, each member must be clarify and evident
The most crucial factor in distinguishing between a functional organizational structure and a product division structure is the number of employees When the workforce is limited, the differences between these structures may not be evident However, the advantages of a functional structure become apparent when a company has more than 40 employees, with a minimum of four individuals in each functional department.
Thus, in the employees’ number side, we will move back to the functional organizational structure when it’s over 40 people b) Number of project
With a team of over 40 individuals, the division structure model is effective when managing one to four projects FPT Media facilitates seamless communication among team members, allowing collaboration across different groups while efficiently handling multiple projects.
When it’s to be more than five projects we will move to the functional organizational structure model
4.4.2 Which model will be choosing to implement at this time?
Now 1 year later 2 year later
Transitioning back to a functional organizational structure requires time and various related factors, with the conversion period being crucial for this process During this period, essential adjustments and strategies will be implemented to ensure a smooth shift.
- Identify the potential leader for each functional department
- Establish the conversion period work flow inside FPT Media and FPT Media with FPT - Mother Company
The company is implementing a divisional structure where experts can collaborate across multiple divisions For instance, a sales executive may primarily focus on the North division while also contributing to the Center division This approach allows a sales executive to take the lead on project A while providing support for additional projects such as B and C, fostering a cooperative environment that enhances productivity and resource sharing.
Improve the standard of manager and leaders: training course, v.v
- Establish the future work flow in a functional structure inside FPT Media and FPT Media with FPT - Mother Company
Figure 5.2: Suggestion model for FPT Media in the conversion period
This model allows some members still undertake their job in the conversion period
Individuals may contribute to multiple projects simultaneously, often performing similar tasks across these initiatives Over time, these individuals with comparable roles will form functional groups, which serve as the foundation for establishing functional departments in the future.
Various organizational structure models exist based on factors such as employee count, business scale, and product range Each model offers distinct advantages and disadvantages tailored to different company needs.
The functional organizational structure is the most common model in the advertising industry, grouping individuals based on shared expertise and experience This approach fosters collaboration and specialization, enabling team members to learn from each other, enhance productivity, and effectively oversee one another's work outcomes.
FPT Media is a newly established small firm with significant growth potential in the market Backed by strong support from its parent company, FPT Media is strategically leveraging this advantage The company operates under a product-based organizational structure, which is a type of divisional structure that facilitates its expansion efforts.
Because FPT Media has just established and still a very small firm so their current organizational structure is not suitable
To achieve growth, FPT Media must implement changes to its organizational structure, adopting a functional model This approach will enhance collaboration among employees, providing them with opportunities to learn from and supervise each other, ultimately leading to improved outcomes in their work.
FPT Media, a division of FPT Corporation, features a distinct organizational structure that presents new challenges As they look to the future, there is a need to develop a more suitable structure Further analysis on this topic is anticipated in the near future.
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APPENDIX Appendix A: What is advertising?
Franklin D Roosevelt once expressed that if he could start his life anew, he would choose a career in advertising over any other field He believed that the significant improvement in modern civilization's standards over the last fifty years could not have been achieved without advertising's role in disseminating knowledge of these higher standards to diverse groups of people.
In recent decades, advertising and public relations have gained a glamorous reputation, drawing many marketing students to these dynamic fields However, a career in advertising is not suitable for everyone, as it is a highly competitive industry that requires significant dedication and hard work, often leading to pressure-filled days and nights To succeed in this challenging environment, possessing a degree alone is not enough; a strong commitment and resilience are essential.
You need a sense of creativity, a sense of humor, a sense of curiosity, a sense of adventure
You should have an understanding of people and what motivates them an understanding of the marketplace
You'd better have a lot of enthusiasm and a lot of common sense
You should be willing to work hard and learn constantly
You've got to be intelligent
Flexibility is crucial in advertising, as the industry is dynamic and unpredictable Unlike a traditional 9-to-5 job, advertising requires adaptability to shifting deadlines and evolving strategies Embracing change is essential for success in this fast-paced environment.