Module 8 Flashcards
Outline the four organisational design issues?
Division of Labour - degree of work specialisation
Distribution of labour - degree of specialisation
Departmentalisation - degree of work uniformity (how work activities are grouped together)
Span of Control - number of departments
What are the advantages of functional design?
- The structure is a logical reflection of the firm’s functions.
- It is based on specialization (i.e., the purchasing department has expertise in buying all the components and materials which go into production) which is efficient.
- It is efficient because individuals in functional departments learn to speak a common language (accounting, purchasing, quality control, and so on).
- It minimizes the extent of duplication of effort.
- Training of employees is narrowed and simplified.
- It facilitates tight control and the legitimate authority of the chain of command is reinforced.
What are the disadvantages of functional design?
- Overspecialization can take place and this can narrow the business viewpoints in functional departments.
- The development of managers is limited to their functional areas.
- Coordination between departments can weaken.
- Employees identify more strongly with their departments than with the culture of the firm.
- The chief executive may be overburdened.
- Managers may fail to develop a strong focus on customers, products or markets.
What are the advantages of territorial design?
- It tailors work units to the particular features of customers in a given region, i.e., British, Japanese, American, and French.
- It provides an excellent training ground for managers as they are assigned to different regions.
- It provides an excellent basis for the career development of managers (movement from field operations to company headquarters).
- It creates work units that are highly responsive to specialized customer needs.
What are the disadvantages of territorial design?
- There is a danger of duplication of effort across departments serving various territories or regions.
- The company must be able to hire general managers who are capable of handling several functions such as production, sales and human resources.
What are the advantages of product divisional design?
- It provides adaptability and flexibility in meeting the needs of customers and the company’s ability to manage a set of related products.
- External changes can be detected more readily and understood in product-relevant terms.
- Employees gain deep understanding of product and market characteristics (product divisions are good training grounds for developing managers with generalizable skills).
- The structure encourages the development of separate business units (profit-centers) which top management can pit against each other through friendly competition to maximize profits.
- Performance measures are easy to create and judging the performance of various product divisions is less complicated.
- The design shifts some of the burden for general management from corporate executives to division executives (This reduces the extent of diversity in the chief executive’s job making easier the management of a large company with diverse products, customers and territories).
What are the disadvantages of product divisional design?
- Product divisions can duplicate effort and resources as they attempt to solve similar problems without consulting other divisions (The corollary to this is that corporate executives have less day-to-day control over product division operations).
- Finding and training people to head each division is a difficult job.
- When product divisions attempt ‘joint ventures’ conflicts can arise due to sharing resources and agreeing on ‘transfer prices’.
What are the principle advantages of matrix design?
- The matrix design combines the strengths of the product divisional and functional designs.
- The design blends an emphasis on market changes with management and technical expertise in given product or project areas.
- It develops managers with technical product and project knowledge who can communicate effectively with marketing, production, and personnel from other functional departments.
- A self-contained department can devote its undivided attention to the needs of its product, project or customer groups.
- The firm can focus on specific products and their development without creating permanent units which may outlive their usefulness.
What are the principle advantages of matrix design?
- It is a confusing design because employees may not know who their ‘real boss’ is. The project manager is worried constantly about the project, while the functional manager frets over departmental details. This confusion can lead to political game-playing and loss of work focus in the project and functional areas.
- The design requires excellent planning and resource allocation to ensure that functional work proceeds and projects do not ‘starve’.
- Project managers must have excellent technical, political communication, and managerial skills. When an organization decides to ‘go matrix’, it must often do extensive training or hire new employees with project management experience.
- The design may lead to excessive overhead costs because projects may over-hire technical and support staff.
Compare and contrast centralisation and decentralisation?
Centralization is the retention of authority to make decisions by top management. Decentralization is the process of pushing authority down the organizational hierarchy so that decisions are made as close to the origin of organizational problems as possible.
Highly centralized firms usually trigger:
• Formalization, which is defined as written documentation of rules, regulations, and procedures which guide employee behavior and organizational decision-making.
• Standardization, which is the degree to which behavior variation is allowed in a job or a series of jobs.
What are the strengths associated with centralisation?
- Meshes well with rapid change and fast company growth
- High awareness for projects, programs, or products
- High task focus that yields control over time, financial, and human resources
- Customer can determine task responsibilities and project-personnel are highly responsive to their needs
- Concurrent multiple tasks can be coordinated across functional departments
What are the weaknesses associated with centralisation?
- Innovation is often restricted to projects or specialised programs
- Difficult to allocate pooled resources such as computer analysis
- Co-ordination problems in joint functions, such as purchasing
- Deterioration of broad managerial skills and potential for loss of technically skilled employees
- Jurisdictional and priority disputes
- Possible neglect of high level coordination to ensure organizational effectiveness
What is Keiretusu?
Keiretsu is a corporate system that links suppliers and manufacturers that are clustered together to take advantage of geographic, logistical, and financial proximity.
Define a conglomerate?
A conglomerate is a holding company that acquires many other companies which have entirely different business strategies and operate in diverse industries. It is the expression of the strategic principle of unrelated diversification. Unrelated diversification is the acquisition of companies because they are:
- undervalued,
- financially distressed; or
- likely to grow but cannot because they have limited capital.
What is a strategic alliance?
A strategic alliance is a cooperative agreement between two firms that fall short of a merger or full partnership. They are best thought of as a transitional arrangement that can be used to overcome a competitive disadvantage in international markets.
Strategic alliances are used to gain economies of scale in production or marketing, or fill perceived gaps in technical or manufacturing skills, to gain access to markets by lowering entry barriers. The drawbacks of alliances are that they require exhaustive coordination through meetings and task forces, decisions have to be made on what is shared and what remains proprietary, overcoming language and cultural barriers, the need to rise above suspicion and mistrust, and the potential to depend too much on expertise in another company.
