Summary Organizational Structure: - H5, H6
Organizational Structure (EBP670C05)
Rijksuniversiteit Groningen
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Summary chapter 5 and 6
Group 4.
Isabelle Smeekes Mariek Szymanski Job van Eijk
Chapter 5 – Strategy
Define organization strategy According to Alfred Chandler organization strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
Compare business-level with corporate-level strategy A corporate-level strategy seeks to answer the question in what set of businesses the firm is. On the other hand a business-level strategy provides an answer to the question: how to compete in those businesses the firm choses to be a part of?
Chandler’s ‘structure follows strategy’ Chandler concluded that for an organization with a single-product strategy the efficient structure is very simple: high centralization, low formalization and low complexity. Furthermore, if an organization like that would change to a multiproduct strategy, the efficient structure would be a divisionalized structure.
Miles and Snow’s four strategic types Defenders – producing only a few types of products for a narrow segment of the total market they could produce for. Prospectors – opposite of the defenders, always searching for new market opportunities. Sometimes innovation is more important than making good profit. Analyzers – Like the old Dutch saying: ‘Cheating is allowed’. They don’t take any risk by copying innovations after they have been proven by others. Reactors – they represent the residual strategy, they respond inappropriately and perform poorly and they don’t want to make a clear strategy for the future.
Porter’s competitive strategies Cost-leaderships strategy: Want to have the lowest within the industry. For example, Aldi supermarket. Differentiation strategy: aims to achieve a unique position in an industry in ways that are widely valued by buyers. For example, Mercedes-Benz (status). Focus strategy: aims at cost advantage or differentiation advantage in a narrow segment. Stuck in the middle: Organizations that are unable to gain a competitive advantage through one of various strategies.
Globalization lead to different structures Due to globalization a firm can be in different countries, which means different time zones, different cultures, different legal systems etc. Those different aspects require a different structure.
Industry-structure relationships Unique characteristics of an industry in which an organization operates determines the structure. For example if an organization needs many resources they would most likely come to the decision to decentralize.
Strategy of networks A network is not able to run in a operational sense without a strategy. Therefore, a strategy is crucial for any firm and or network of firms in order to function smoothly.
Chapter 6 – Organization size
Organizational size The total number of employees in the organization.
Problems of defining organizational size Is a firm counting just the full-time working employees or all of the employees? Often when observing a firms the part-time workers are not taken into account, this may be a difficulty considering that some large companies have a great percentage of part-time workers. Yet another main problem is seasonal business, or seasonal employment. Indeed, number of employees often fluctuates. In addition, the total number of employees does not distinguish among different types of industry.
The effect of size upon organizations: To begin, an increase in organization size affects the differentiation at a decreasing rate. Peter Blau stated that “size is the most important condition affecting the structure of organizations.” After conducting research, the University of Aston in England found that size was a major determinant of structure. Eventually leading to the conclusion, ‘an increased scale of operation increases the frequency of recurrent events and the repetition of decisions’ and ultimately makes standardization preferable. Overall, researchers found that once an organization becomes large in size it develops a higher complexity it tends to be high in formalization and decentralized. Furthermore, it increases in the number of employees and have no noticeable further influence on the structure.
Downsizing: the planned elimination of positions of jobs. - It is often used to describe layoffs arising from technological change. - Everybody can lose their job through downsizing, even the most senior of managers.
Reasons leading to downsizing: - Increased competition - Computerization and automation - Technological obsolescence - Declining profitability - Changing roles of middle management - Limitation of size advantages - Changes in strategy - Changes in structure - Rise of outsourcing
Resulting benefits of downsizing: - Lowered overheads - Less bureaucracy - Faster decision making - Smoother communications - Greater entrepreneurship - Increased productivity
Downsizing rarely achieves the benefits attributed to it, but it also has a bad workout on the survived employees. There is a lowering of commitment and moral (survivor’s syndrome).
Food for thought chapter 5: This image displayed to the right is a clear representation of organizational strategy. As stated before, organization strategy is the determination of the basic long- term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. As the employees and workers of the firm are putting the pieces of the puzzle together they are clearly using some sort of strategy in order to achieve their goal in creating a puzzle. One may suggest this goal is to create a firm, one may also suggest this image represents the achieving of one and or multiple goals within this company. Clearly, without this organization the achieving of goals, both short and long term, would not be possible. Indeed, the employees in this image are all contributing as they are also carrying important resources (resources being the puzzle pieces) to reach an end point of success. It might also be interesting to consider the fact that they are standing on something which looks similar to the pattern of the earth, also including the prominent colors blue and green. This platform which appears to look similar to the earth may also highlight the international aspect which is important for many businesses today.
Food for thought chapter 6: The picture depicted to the right is an appropriate exemplification of how a firm operates with regard to size. The size of an organization or firm has a great effect on how it operates. Often there is one CEO of a firm and many other positions which often decrease in authority as the quantity increases. Indeed, the image to the right demonstrations some sort of organizations containing one head and other employees which work together to form a functioning firm. Some believe a large firm is a good thing, however sometimes this is not the case. There are many reasons discussed in the summary of chapter 6 as to why a large amount employees may have negative effects on the functioning firm. One problem which can also be seen above, is the management of all of the employees in a firm. With such a large firm the management can be difficult, and miscommunication and disorganization can occur quite easily. The image above could thus be considered an illustration of centralization. Centralization being the unrealistic control of organizations from the top. This problem is quite prominent in today’s business world and therefore it is interesting to consider how this image may represent such a concept.
Summary Organizational Structure: - H5, H6
Vak: Organizational Structure (EBP670C05)
Universiteit: Rijksuniversiteit Groningen
