Complex forms of organisation
Definition:
The complex forms attempt to overcome the inadequacies of other structures through collaboration
between existing organisations.
Explanation
Why? These pressures are essentially economic and in response to Japanese and Pacific Rim, Chinese and
Indian penetration of Western markets. At the same time globalisation means that scale economies are
necessary to maintain price differentials and so mergers of parts of businesses where there is strategic
fit is becoming commonplace.
How? Increasingly organisations are forming complicated vertical and horizontal relationships through
demergers, downsizing, delayering and margin retreat from product scope and geographical spread.
What? Such organisations would range from co-operatives between organisations and their suppliers, to
all forms of partnerships and alliances in which co-ordination of resources was based on co-operation
between the parties concerned.
Mergers are a form of complex organization often defensive in nature. Mergers are increasingly common –
such as the recent spate of financial institutions’ mergers following the credit crunch of 2007/8.
Joint ventures should mean that each sponsoring organisation has a degree of equity participation, while
partnerships may not, and may or may not share assets.
Consortia are short-term legal entities with sunk costs from each of the partners and which terminate
at the end of the project.
Alliance is a term used for a weaker non-legal-entity kind of operation where firms simply contract to
work together on a gain-share/pain-share basis. Termination clauses would vary with the nature of the
co-operation, as would sharing of facilities and the purchase of equipment.
Example: Various partnerships exist in the automotive industry – Renault engines in Volvo cars.
Networks have been described as a link between supplier and purchaser in the supply chain but a more
accurate and useful division is between different suppliers, imitating the co-ordination methods employed
within the firms.