For many decades steel industry of United States (US steel) was stable and certain. If manufactures produced at reasonable quality and price then buyers were happy to purchase the steel. Then price of steel reached sky high and industry changed due to economic crisis, inflation, low production of autos, and competition. Most importantly, globalization played a key role in this scenario. Many foreign countries, like Germany, France and Japan, jumped into US market to compete for scare resources and market share. This intensive competition induced pressure to share resources, and technical expertise across the globe. The market became complex and environment uncertain. So, US steel industry had to market aggressively, make efficient use of resources and respond to the external environment.
From 150 years, US steel employed 2,400 people, produced 500,000 tons steel and served many products and organizations. Functional structure was working fine for 140 of those years. Since, the environment became turbulent, complex and competitive; managers of US steel realized that they were not keeping up. Almost, sixty percent orders were behind. Production was always in backlog and profits were diminishing due to increase cost of labor, material and energy cost. Market share declined rapidly.
President of US steel was observing this situation with worry and high concern. He called the board of directors’ meeting and offered a unique solution which could solve all the problems. He said, “What we need is to achieve economies of scale and sophisticated technology within functional departments. But only functional departments will not achieve the results, we need more than that, and which is we needed to change our structure. This is the only way out!”
President of US steel was pointing towards which unique structure? Justify your answer with rationale.
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