A basic dilemma that corporations face is whether to organize authority centrally, so that it operates as a vast interlocking system that achieves a synergy, or whether to decentralize authority, so that local managers can make the necessary decisions in order to meet the demands of the local market. The early 20th century has already shown that for large companies a flat organization with decentralized decision structures is inevitable for further growth, because it allows faster decisions, higher entrepreneurial creativity of employees and better managing of ideas1[19]. According to the findings of modern organizational theory, successful corporations, as they are growing, tend to follow a pattern of structural development that leads from a centralized to a decentralized internal structure. Initially, an entrepreneur who founds a company tends to make all the important decisions personally and is involved in every detail of the organization. Next, the entrepreneur is replaced by a team of managers who have functional specifications, i.e., the company becomes functionally structured. In the following stage, the expanding company adapts a divisional structure characterized by a central headquarters and several operating departments, where each department is a functionally organized unit. It decentralizes the decision-making authority. Such divisions evolve into Strategic Business Unit (SBUs) that better reflect the product-market considerations. The headquarters attempt to coordinate the activities of the SBUs through performance- and results-oriented control and reporting systems, as well as by stressing corporate planning techniques. As such, the units are not tightly controlled, yet are held responsible for their own performance results [115]. The matrix structures and the network structures are developed in the next stage of corporate evolution. In these structures horizontal over vertical connections between people and groups are emphasized and work is organized around temporary projects in which sophisticated information systems support collaborative activities. According to [82], the evolution of organizational forms, which focus more and more on their core competences, is leading in the end to a cellular form. A cellular organization is composed of cells (self-managing teams, autonomous business units, etc.) that can operate alone, yet interact with other cells to produce a more potent and competent business mechanism. Each cell has an entrepreneurial responsibility to the larger organization [2]. Table 1.1 depicts some of the characteristics for the structural changes in modern corporations.


European Union Gross Domestic Product Core Competence Road Transport Freight Transport 
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© Betriebswirtschaftlicher Verlag Dr. Th. Gabler | GWV Fachverlage GmbH, Wiesbaden 2008

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