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Miss Essay

2331 words - 10 pages

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Organization architecture and profitability
Totality of a firm’s organization, including structure, control systems, incentives, processes, culture and people. Superior organization profitability requires three conditions:
An organization’s architecture must be internally consistent. Strategy and architecture must be consistent. Strategy, architecture and competitive environments must be consistent.
McGraw-Hill/Irwin International Business, 5/e

Organizational architecture
Fig 13.1

To maximize profitability a firm must achieve consistency between the various components of its architecture
McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill ...view middle of the document...

, All Rights Reserved.

McGraw-Hill/Irwin International Business, 5/e

© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Vertical differentiation
Concerned with where decisions are made
Where is decision making power concentrated?

Key Dimensions of Organizational Structure
Specialization Standardization Centralization

Two Approaches
Centralization Decentralization
McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 5/e

© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Vertical differentiation
Concerned with where decisions are made.

Strategy and organization structure
Major strategic decisions are centralized at the firm’s headquarters while operating decisions are decentralized Global strategy : aim to realize location and experience economies Centralization of some operating decisions Multi-domestic firms: aim for local responsiveness Decentralizing operating decisions to foreign subsidiaries International firms: maintain centralized control over their core competency and decentralize other decision to foreign subsidiaries Transnational firms: aim to realize location and experience curve economies Centralized control over global production centers Need to be locally responsive
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

Centralization:
Facilitates coordination. Ensure decisions consistent with organization’s objectives. Top-level managers have means to bring about organizational change. Avoids duplication of activities.
McGraw-Hill/Irwin International Business, 5/e

Decentralization:
Overburdened top management. Motivational research favors decentralization. Permits greater flexibility. Can result in better decisions. Can increase control.
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 5/e

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Structure of the domestic firm
Concerned with structure design Decisions made on basis of function, type of business or geographical area Structure of domestic firms
Single entrepreneur or small team of individuals therefore a centralized structure With introduction of more product lines, product divisional structure introduced Each division responsible for single product line Self-contained, largely autonomous entities Responsible for operating decisions and performance
McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

The functional structure

Typically, the structure that evolves in a company’s early stages.

Coordination and control rests with top management.

McGraw-Hill/Irwin International Business, 5/e

© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

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A typical functional structure
Fig 13.3

Product division structure

Probable next stage of...

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