Lecture No. -7
Topic- Organizational structures for IB
Meaning, Factors influencing organization structure, options of designing of organizations, types of basic organization structure, choosing a best suitable structure, related issues in choosing
Organizational structures for IB
Organizational structures ( often called organization charts) is its basic vehicle through which strategy is implemented & through which the work of the organization is actually implemented. In fact, strategy, determines the structures needed for implementation.through its design, the firm shall:
-Allocate organizational resources
-assign tasks to its employees
-instruct employees about the firm’s rules, procedures, & expectationsrelating to their jobs, &
-collect & transmit information necessary for problem solving & decision making etc.
Factors influencing organization structure
Environment : which includes:
Internal environment : management orientation
External Environment: uncetaintity
Differentiation & integration
Globalization Vs local responsiveness
Options for Designing of Organisations of MNC’s
Vertical/ Tall Organisations:
Vertical/tall organisations refer to increase in the length of the organisation's hierarchy chain of command. The hierarchical chain of command represents the company's authority - accountability relationship between superiors and subordinates. Authority and responsibility flow from the top to the bottom through all the levels of the hierarchy. Accountability flows from the lowest level to the highest level. Employees at each level should report to their superior, who in turn should report to his boss. Thus, the activities are reported to the top. Authority is more centralized in tall organisation.
(2) Horizontal/Flat Organisations
Horizontal/flat organisations refer to an increase in breadth of an organisation's structure. The increasing bio-professionalisation and multi-professionalisation and wide acceptance for empowerment allowed even the large business firms to reduce the number of hierarchical levels of their organisations. Consequently, large sized firms also started adopting horizontal/f1at organization by delayering.
In fact, this structure is well suited for the small size business firms.
Authority is more decentralised in relatively flat structures. Manager with broad span of control must grant more authority to his subordinates. Decisions are more likf!ly to be made by the employees who are at the helm of affairs and more familiar with the situations and ground realities.
Organisational l;lctivities are mostly performed informally. Professional managers are treated as real professionalists. .
Basic organizational structures are as follows:
(1)International division structure
(2)Worldwide functional structure
(3)Geographic area structure
(4)Global Product division structure
(8)Strategic Business Unit Structure
(9)Decentralized Business Unit Structure
Choosing a structure
Although there are no standard requirements, a relatively small no. of variables can help in choosing an organizational form that best fits the needs of a given firm in a given set of circumstances. These are
(1)the relative importance in the present & future of foreign & domestic markets to the firm’s competitive strategy.
(2)The historical background of the firm & its evolutionary stage in global operations
(3)The nature of the firm’s business & its product strategy
(4)The management traits & management philosophy of the firm
(5)The availability of & willingness to invest in internationally experienced management personnel
(6)The capacity of a firm to adjust to major organizational changes
(7)The degree of centralization & the extent to which the firms wants to decentralized its power of decision making & grant autonomy to its subsidiaries
Related issues in global organization design
There are eight major issues
(1)centralization vs. decentralization
(2)role of subsidiary director
(3)non traditional organizational arrangements
(4)changing role of information technology in organizing
(5)need for integrating mechanism
(7)managing corporate culture
(8)managing change in international business