Summary of Organisation Theory

Chapter 5

Micheal Porter of the HSB argues that no firm can “successfully perform at an above-average level by trying to be all things to all people.” Accordingly, a company must select one from three strategies that give the organization a competitive advantage: - Cost leadership aims to be the lowest cost producer in its industry. - Differentiation strategy aims to achieve a unique image or position of what is valued by buyers. - Focus strategy aims at both cost and differentiation advantage in a narrow market segment. - Stuck in the middle organisations that are unable to gain a competitive advantage through one of various strategies.

Barlett and Ghoshal proposed a theory claiming that enterprises must adopt a certain strategy when going abroad. - International strategy to transfer valuable skills and product knowledge to overseas markets. - Multidomestic strategy aims to achieve maximum local adaption with products customized to meet local conditions. - Global strategy aims to sell a product in most markets with little modification. - Transnational Strategy attempts to achieve maximum local responsiveness while achieving worldwide economies of scale.

Networks are groups of companies that pool their resources in various ways. Normally, these are pooled from interlinked suppliers, which each are specialised in a particular component. These networks can be divided into three forms: - A dominant company that clearly leads subcontractors. - Clusters: an industry where there is no dominant company since the manufacturing is so complex. - Strategic alliance is a management term for companies that cooperate and contributing their distinctive skills while maintaining independence.

Downsizing is eliminating positions and jobs, not only in times of company and economic crises but also in prosper times. The following factors are the cause of downsizing: - Increased competition

Computerisation and automation

Technological obsolescence

declining profitability

changing roles of middle management

Limitation of size advantages

Changes in strategy

Changes in structure

Rise of outsourcing

And the following are the benefits that can lead out of downsizing:

Lowered overheads

Less bureaucracy
Faster decision making
Smoother communications
Greater entrepreneurship
Increased productivity

The effects of downsizing are financial disappointing, job insecurity, the lost of skills from the ex-employees and the lack of replacement.

Source: referenceforbusiness/management/De-Ele/Downsizing-and- Rightsizing

Summary of Organisation Theory

Chapter 5

Summary Organizational Structure Chapter 5 and Chapter 6

Organizational Structure (EBP670C05)

Rijksuniversiteit Groningen

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Summary of Organisation Theory