Kraft had been maintaining a functional structure as it was growing until it reached a point of stagnation. Management realized that in order to overcome that point change in organizational strategy is required and a corresponding change in organizational structure. In this integrative essay we will describe Kraft's change in strategy and the corresponding changes in organizational structure associated the strategy shift. In addition, we will describe the implications of Kraft's international operations on structural change. Finally, we will describe the associated modifications to strategic control system elements: culture, reward and incentives, and boundaries.
Prior to management initiatives to pursue Organization for Growth (OFG) strategy, Kraft had a functional structure where major functions of the organization are grouped internally. This structure facilitated integration and tight control of major departments maximizing efficiencies by decreasing costs associated. It provided high degree of coordination and efficient use of managerial and technical talent. It was sufficient for achieving overall growth and market penetration strategic objectives. However, as Kraft's diversification in related products increased, the functional structure made corporate executives distant from business units impeding communication and coordination. Conflict aroused among different departments. While R & D, manufacturing, and procurement departments had goals of cost reduction, this did not help drive growth. Operations managers were incented for efficiency while business managers had to achieve revenue goals. The centralized decision making of functional structure slowed reactions to competition and general environment, and negatively affected bottom line. Evidently, Kraft was not able to accomplish desired targets. Change, moving decision making closer to consumers and markets, was mandatory to restore Kraft to a sustainable long-term growth organization.
