Management 301 Chapter 6 Book Notes
Management 301 Chapter 6 Book Notes Management 301
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This 7 page Study Guide was uploaded by Stephanie Marie on Sunday February 8, 2015. The Study Guide belongs to Management 301 at a university taught by Professor Mangaliso in Fall. Since its upload, it has received 267 views.
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Date Created: 02/08/15
Management 301 Chapter 6 Organizational Structure and Design Principles of Organizational Structure 0 Organizational structure the sum of the ways an organization divides its labor into distinct tasks and then coordinates them 0 Organizational design the process of assessing the organization s strategy and environmental demands and determining the appropriate structure 0 Organizational chartsa graphic illustration of the relationship among a firm s units and the lines of authority among supervisors and subordinates Base of an organization s structure is people and activities Differentiation The extent to which tasks are divided into subtasks and performed by individuals with specialized skills 0 Benefit greater specialization of knowledge and skills 0 Task differentiation differentiation by what employees do 0 Cognitive differentiation the extent to which people in different units within an organization think about different things or about similar things differently Integration 0 The extent to which various parts of an organization cooperate and interact with each other 0 Boundary spanner individual who coordinates all activities in a unit 0 Interdependence driving force of integration the degree to which each unit or person depends on other units or people to accomplish a required task 0 Three Types 0 Pooled interdependence When several groups are largely independent in their functions but collectively contribute to a common output 0 Sequential interdependence when the outputs of one group become the inputs of another group 0 Reciprocal interdependence when two or more groups depend on one another for inputs 0 Another factor that can in uence the need for integration uncertainty o The extent to which organizations cannot accurately forecast future input thoughtput and output factors 0 Achieved through a variety of mechanisms 0 Rules rules establish guidelines for behavior and consequences under speci c conditions Standard operating procedures for the organization 0 Goals Goals are more effective than rules What outcomes individuals should achieve High level of effort to achieve 0 Values Fundamentally important behaviors activities and outcomes When there is high uncertainty and high interdependence values is the best mechanism Formalization o The official and de ned structures and systems related to decision making communication and control in an organization 0 Officially designating the line of authority within an organization is a common way of achieving formalization Line of authority specifies who reports to whom 0 They also stress unity of command The notion that an employee should have one and only one boss 0 More formal organizations also limit a supervisors span of control The number of employees reporting to a given supervisor 0 Tall organization structure A structure that has multiple layers or is high in terms of vertical differentiation 0 Flat organization structure A structure that has fewer layers in its hierarchy than a tall organization 0 lnformalization o informal organization the unofficial but in uential means of communication decision making and control that are part of the habitual way things get done in an organization Centralization and Decentralization the level at which decisions are made o centralized organization organizations that restrict decision making to fewer individuals usually at the top of the organization decentralized organization organizations that tend to push decision making authority down to the lowest possible level Common Organizational Structures 0 Functional Structures 0 Used to organize the rm around traditional functional areas such as a accounting nance marketing operations and so on 0 One of the most common types because it separates the spiralized knowledge of each functional area through horizontal differentiation and can direct that knowledge toward the key products or services 0 Advantages Well suited for small and medium sized rms lt facilitates functional knowledge of the rm It reduces the duplication of the rm s functional resources lt facilitates coordination within the rm s functional areas 0 Weaknesses It often creates problems of coordination across the rm s functional groups It leads to a narrow view of the organization s overall goals It can limit the attention paid to customers as functional groups focus on their speci c areas It can result in the organization responding more slowly to market changes It often burdens chief executives with decisions that involve multiple functions 0 Product Structure 0 Firm is organized around speci c products 0 Each product group contains all of the traditional departments a functional structure has 0 Each product is treated as a pro t center A unit or product line whose related expenses are deducted from the revenue it generates 0 Advantages Individuals in different functional areas within the product group focus more on the speci c products and customers The performance of the rm s products is typically easier to evaluate There is usually a greater product responsiveness to market changes It often reduces the operating decision making burden of the top executive o Disadvantages Duplication and lack of economies of scale for functional areas It can create problems for customers who purchase products across multiple product groups Sometimes there are con icts between the rm s corporate objectives and the objectives of its product group There is an increased likelihood of con ict between different product groups and greater difficulty coordinating across product groups 0 Division Structure 0 Extension of product structure 0 Strengths Organizing various product families within a division can reduce functional duplication and enhance economies of scale for the rm s functional activities To the extent that product families within a division serve common customers customer focus is often stronger Cross product coordination within the division is often easier Cross regional coordination within the product families and within the division is often easier 0 Disadvantages Primarily appropriate for large diversi ed companies with signi cant numbers of speci c products and product families It can inhibit cross division coordination It can create coordination dif ciulties between corporate and division objectives 0 Customer Structure 0 Organized around categories of customers 0 Used when categories of customers have independent differing needs 0 Strengths It facilitates in depth understanding of speci c customers It increases the firm s responsiveness to change in customer preferences and needs as well as the firm s responsiveness to actions taken by competitors to better serve customers 0 Weaknesses It creates duplication of functional resources in each of the customer units It often makes it difficult to coordinate between customer units and corporate objectives It can fail to leverage technology or other strengths of one unit across other units 0 Geographic or Regional Structure 0 Structure based on various geographical areas or regions in which it has operations 0 Advantages It typically leads to indepth understanding of the market customers governments and competitors within a given geographical area It usually fosters a strong sense of accountability for performance among regional managers It increases the firm s responsiveness to unique changes in the market government regulations economic conditions and so forth for the geographic area 0 Disadvantages It often inhibits coordination and communication between regions It can lead to greater con ict and coordination difficulties between regions and the firm s corporate office It normally produces duplication of functional resources cross regions Separating production facilities across multiple regions reduce the opportunity to gain economies of scale It can foster competitive behavior among regions which is particularly frustrating for customers who have operations across multiple regions 0 Matrix Structure Two organizational structure superimposed on each other Dual reporting relationships One person reports to two bosses Advantages O O O 0 It typically facilitates information ow throughout the organization It can enhance decision making quality because the organization considers both intersecting perspectives in making key decisions It is best suited to a changing and complicated business environment It can facilitate the exible use of human resources Network Organizational Structure 0 Contemporary structures that do not have common names or labels 0 One of the most common ways to network with an external organization is to outsource a value chain activity 0 Network structure the formal or informal relationships among units or organizations for example along the firm s value chain 0 One of the most compelling advantages is that networking allows managers to focus on core competencies or the activities that are most likely to yield competitive advantage Designing Organizations 0 Two main determinants are the external environment and the strategy of the company 0 The external environment 0 Environmental complexity The breadth and depth differences and similarities in an organization s external environment Examples product complexity customer complexity For example a BIC pen is less complex than making a Boeing airplane 0 Environmental Dynamism Static environments can have few or a lot of factors in the environment but they tend to remain stable over time Factors in dynamic environment change rapidly o The Organization s Structure 0 Second major element manager s will consider when designing their organization s structure is the company s strategy 0 Structure should support and leverage the strategy 0 Organizational Structures in an International Context 0 Extent of foreign sales 0 Product diversi cation o A domestic organization with an export department Most rms add an export department to their existing structure to handle specialized tasks 0 A domestic organization with an international division When the volume of exports exceeds the capabilities of few specialists rms commonly establish an international division International divisions are typically responsible for all functional activities relative to international markets Products are produced within the normal domestic organizational structure 0 Advanced Global Structures When the organization outgrows its initial international structure it can choose form 6 advanced global structures Correspond to the basic functional geographic global division customer and matrix structures already discussed except with a global rather than domestic scope Outsourcing the practice of contracting out a signi cant activity within the organization to an independent party Organizing to think globally and act locally 0 Global approach integrating the rm s activities on a O O coordinated worldwide basis In contrast differences among countries and customer preferences are two key factors that cause an organization to use the local approach Local approach involves differentiating activities in each country served Direct Contact 0 Important means of integrating by sharing information Liaisons 0 An individual designated to act as a bridge or connection between two or more areas of a company Teams 0 Teams can serve as an effective integration mechanishm
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