18/ Control systems
Mechanistic vs. Organic Structures
Span of control, centralisation, and formalisation sometimes grouped into two distinct forms
Mechanistic
Narrow span of control
High formalisation
High centralisation
Organic
Wide span of control
Little formalisation
Decentralised decisions
20/ Departmentalisation
Specifies how employees and activities are grouped together -- reflected in organisational chart
Establishes work teams and supervision structure
Creates common resources, measures of performance, etc .
Encourages coordination through informal communication
21/ Contingency theory
Contingency theory suggests that organisational performance depends on management taking actions consistent with the situations in which the firm finds itself.
It is now widely accepted that there is no single best way to organise, structure or manage the firm.
Contingency theory, in the context of organisational structure argues that to be effective, an organisation must adjust its design/structure in a manner consistent with its environment, technology and other contextual factors.
The contingency approach is defined as identifying and developing functional relationships between environmental variables, management variables and performance variables.
22/ Contingency theory.
23/ Designing the best structure
The best organizational structure depends on the firm’s size, technology, and environment.
Generally, larger organizations are decentralised and more formalised, with greater job specialisation and elaborate coordinating mechanisms.
The work unit's technology---including variety of work and analysability of problems---influences whether to adopt an organic or mechanistic structure.
We also need to consider whether the external environment is dynamic, complex, diverse, and hostile.
24/ External Environment & Structure
Dynamic
• High rate of change
• Use team-based, network, or other organic structure
Stable
• Steady conditions, predictable change
• Use mechanistic structure
Complex
• Many elements (such as stakeholders)
• Decentralise
Simple
• Few environmental elements
• Less need to decentralise
25/ External Environment & Structure (con’t)
Diverse
• Variety of products, clients, regions
• Divisional form aligned with the diversity
Integrated
• Single product, client, place
• Use functional structure, or geographic division if global
Hostile
• Competition and resource scarcity
• Use organic structure for responsiveness
Munificent
• Plenty of resources and product demand
• Less need for organic structure
26/ Refresher on MNE structures
A Divisional structure is formed when an organisation is split into a number of self‐contained business units, each of which operates as a profit centre.
In addition to global product, area and functional designs, the international organisation may choose a customer, network or matrix design. Each of the main designs emphasise a particular type of knowledge.
Companies must capture simultaneously a global‐scale efficiency, respond to national markets (I/R Framework), and cultivate a worldwide learning capability for driving continuous innovation across borders (Transnational).
There are several classic international structures: international, multi-domestic, global, the transnational.
27/ Four strategies and structures emerging from the Integration Responsiveness framework
28/ Stages 1 and 2: little or no formal organisation
In the early stages of global involvement, domestic operations assume responsibility for international activities. Transactions are conducted on a case-by-case basis, either by the resident expert or with the help of facilitating agents, such as freight forwarders.
29/ Stage 3: the international division
Centralises responsibility for global activities. Aims to eliminate a possible bias against global operations that may exist if domestic divisions are allowed to serve international customers independently. Concentrates international expertise, information flows concerning foreign market opportunities and authority over international activities.
30/ Stage 4: the global organisation
Types of global organisation structures:
Product
Area
Functional
Customer
Mixed or hybrid
31/ The global product structure
Product divisions are responsible for all global activity
32/ The global area structure
geographic divisions are responsible for all global activity
33/ The global functional structure
departments are formed on the basis of functional areas, such as production, marketing and finance.
34/ The global customer structure
An organisational structure in which divisions are formed on the basis of customer groups or perhaps even very large individual multinational customers
Catering to such diverse groups may require concentrating specialists in particular divisions.
The product may be the same but the buying processes of the various customer groups may differ.
35/ Mixed structure or hybrid structure
An organisational structure that combines two or more organisational dimensions; for example, products, areas or functions.
Naturally, organisational structures are never clear-cut and simple as presented.
Whatever the basic format; product, functional and area inputs are needed.
36/ Matrix structure
An organisational structure that uses functional and divisional structures simultaneously.
Matrices vary in number of dimensions.
A significant problem may arise with the matrix structure due to management units having a multidimensional reporting relationship which may cross functional, regional or operational lines.
18/ Control systems
Mechanistic vs. Organic Structures
Span of control, centralisation, and formalisation sometimes grouped into two distinct forms
Mechanistic
Narrow span of control
High formalisation
High centralisation
Organic
Wide span of control
Little formalisation
Decentralised decisions
20/ Departmentalisation
Specifies how employees and activities are grouped together -- reflected in organisational chart
Establishes work teams and supervision structure
Creates common resources, measures of performance, etc .
Encourages coordination through informal communication
21/ Contingency theory
Contingency theory suggests that organisational performance depends on management taking actions consistent with the situations in which the firm finds itself.
It is now widely accepted that there is no single best way to organise, structure or manage the firm.
Contingency theory, in the context of organisational structure argues that to be effective, an organisation must adjust its design/structure in a manner consistent with its environment, technology and other contextual factors.
The contingency approach is defined as identifying and developing functional relationships between environmental variables, management variables and performance variables.
22/ Contingency theory.
23/ Designing the best structure
The best organizational structure depends on the firm’s size, technology, and environment.
Generally, larger organizations are decentralised and more formalised, with greater job specialisation and elaborate coordinating mechanisms.
The work unit's technology---including variety of work and analysability of problems---influences whether to adopt an organic or mechanistic structure.
We also need to consider whether the external environment is dynamic, complex, diverse, and hostile.
24/ External Environment & Structure
Dynamic
• High rate of change
• Use team-based, network, or other organic structure
Stable
• Steady conditions, predictable change
• Use mechanistic structure
Complex
• Many elements (such as stakeholders)
• Decentralise
Simple
• Few environmental elements
• Less need to decentralise
25/ External Environment & Structure (con’t)
Diverse
• Variety of products, clients, regions
• Divisional form aligned with the diversity
Integrated
• Single product, client, place
• Use functional structure, or geographic division if global
Hostile
• Competition and resource scarcity
• Use organic structure for responsiveness
Munificent
• Plenty of resources and product demand
• Less need for organic structure
26/ Refresher on MNE structures
A Divisional structure is formed when an organisation is split into a number of self‐contained business units, each of which operates as a profit centre.
In addition to global product, area and functional designs, the international organisation may choose a customer, network or matrix design. Each of the main designs emphasise a particular type of knowledge.
Companies must capture simultaneously a global‐scale efficiency, respond to national markets (I/R Framework), and cultivate a worldwide learning capability for driving continuous innovation across borders (Transnational).
There are several classic international structures: international, multi-domestic, global, the transnational.
27/ Four strategies and structures emerging from the Integration Responsiveness framework
28/ Stages 1 and 2: little or no formal organisation
In the early stages of global involvement, domestic operations assume responsibility for international activities. Transactions are conducted on a case-by-case basis, either by the resident expert or with the help of facilitating agents, such as freight forwarders.
29/ Stage 3: the international division
Centralises responsibility for global activities. Aims to eliminate a possible bias against global operations that may exist if domestic divisions are allowed to serve international customers independently. Concentrates international expertise, information flows concerning foreign market opportunities and authority over international activities.
30/ Stage 4: the global organisation
Types of global organisation structures:
Product
Area
Functional
Customer
Mixed or hybrid
31/ The global product structure
Product divisions are responsible for all global activity
32/ The global area structure
geographic divisions are responsible for all global activity
33/ The global functional structure
departments are formed on the basis of functional areas, such as production, marketing and finance.
34/ The global customer structure
An organisational structure in which divisions are formed on the basis of customer groups or perhaps even very large individual multinational customers
Catering to such diverse groups may require concentrating specialists in particular divisions.
The product may be the same but the buying processes of the various customer groups may differ.
35/ Mixed structure or hybrid structure
An organisational structure that combines two or more organisational dimensions; for example, products, areas or functions.
Naturally, organisational structures are never clear-cut and simple as presented.
Whatever the basic format; product, functional and area inputs are needed.
36/ Matrix structure
An organisational structure that uses functional and divisional structures simultaneously.
Matrices vary in number of dimensions.
A significant problem may arise with the matrix structure due to management units having a multidimensional reporting relationship which may cross functional, regional or operational lines.
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