Organization Architecture
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Transcript of Organization Architecture
Organization of international business
Nukhba Jurri 13024854-098Organization Architecture
Maryam Nazir 13024854-073Types of structures
Sonia Noreen 13024854-084Control System And Incentive
Marium Shabbir 13024854-083Processes, organizational Culture & People
Group Members
If we talk about the Organization of international business then we refers to organization architecture
Now lets define organization architecture : “The totality of a firm’s organization, including formal organization structure,
control systems and incentives, processes, organizational culture, and people”
To be the most profitable, firms need to be sure: the different elements of the organizational architecture are internally consistent.the organizational architecture matches or fits the strategy of the firm.the strategy and architecture of the firm are consistent with each other, and consistent with competitive conditions.
Organization Architecture
Organization ArchitectureArchitecture
StructureIntegrating Mechanism
Vertical Differentiation Centralized
Decentralized
Horizontal Differentiation Functional structure
Product divisional structure
International division structure
World Wide Product Division Structure
World Wide Area Structure
Global Matrix Structure
Control & Incentives
Processes & culture & people
Continue.1. Organization structure
o Departmento Division o Region make organization o The location of decision-making responsibilities
2. Control system & Incentives o Measure performance of subunit o Judgments about how well managers are running those subunits.o Incentives are the devices used to reward appropriate managerial behavior
3.Process, Organization culture & Peopleo Processes are the manner in which decisions are made & work performed.o Refers to the norms and value shared among the employees of organization.o Organization architecture also made by people.
Interrelationship:Structure ProcessesIncentive & controlCulture
All these concentrate on the people to make organization performance well.
Organization structure “Department, division ,region make organization the
location of decision-making responsibilities”
Further Organization structure have 3 dimension
a) Integrating Mechanismb) Vertical Differentiationc) Horizontal Differentiation
a. Integrating Mechanism It can be define as coordination between subunits of organization.
( lowest co-ordination localization
strategy) ( Highest co-ordination
Transnational strategy)
Continue.
Formal :1. Direct contact.2. Liasion Roles.3. Teams4. Matrix structures
Informal 1. Knowledge network2. All information collected in one place.
Types of Integration mechanism :
Continue. (2) Vertical DifferentiationIt enables the managers to locate the location of decision making.It has two type:
Centralized Decision Making “The decision making is done by only top management”
Advantages: Facilitates coordination Ensure decisions consistent with organization’s objectives Gives top-level managers the means to bring about organizational change Avoids duplication of activities
Continue. Decentralized Decision Making“Decision making power is distributed in different levels of management” Advantages: Relieves the burden of centralized decision-making Motivate individuals Permits greater flexibility Can result in better decisions can increase control It can be worthwhile to centralize some decisions and decentralize others
(3) Horizontal Differentiation: “Horizontal differentiation is concerned with how
the firm decides to divide itself into sub-units”“It describes the division of organization”
The decision is usually based on: function type of business geographical area
Continue.
TYPEs of structures:
1. Functional structure2. Product divisional structure3. International division structure4. World Wide Product Division Structure5. World Wide Area Structure6. Global Matrix Structure
1. Functional structure “A functional organization is a type of organizational structure in
which the organization is divided into smaller groups based on specialize functional areas”
One product One head quarter One country Small firm
2. Product Divisional structure The divisional structure is a type of organizational
structure that groups each organizational function into a division.
More then one product . One headquarter Local country Small & Large firm
3. International divisional structure
When firms internationally expand production is known as international divisional structure.
More then product ( local production) Head quarter (domestic and international) Each product with own functional structure. Sometimes conflicts raise .
Continue.
4. World wide product division structure
Highly diversified firm adapt this structure. More then one products Local and international production. Every subunits has its own functional structure.
Advantages: Value creation coordination with other units. Realized cost economy and location economies. Transfer core competencies. Not locally responsive.
Continue.
Low diversification and a domestic structure based on function
Divides geographic areas Decentralizes operational authority local responsiveness Consistent with a localization strategy
5. Worldwide area structure:
Continue
Head quarter
Division( country)1
Division( country)2
Division( country)3
Product A
Product B
Product C
6. Global matrix structure A matrix organizational structure is a company structure in
which the reporting relationships are set up as a grid, or matrix,. Employees have dual reporting relationships generally to both a functional manager and a product manager.
Advantages: Remove limitation of World wide area structure &
worlds wide product structure. Differentiate product line and area vise Disadvantages: Result in conflict between areas and product divisions Finger pointing.
Continue.
The International Structural Stages Model
Control System And Incentive A firm’s leaders major task to ensure that the action of
subunits are consistent with the firm’s overall strategy and financial objectives
This is achieved through control and incentive system Evaluate the performance of Organization and how
effect on the control system
What is control?Definition:“Control helps to check the errors and to take the
corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in a desired manner.”
Types of Control System
There are four main type of control system:1. Personal Control:
Direct control the subordinates Mostly use in the small firms
2. Bureaucratic Control: This system through set the rules regulation that
directs the action of subunits The most important bureaucratic control are budget
and capital sending rules
Continue.3.Output Control: Setting goals for subunits and achieve them. Output more receive then control system more good Control system is achieved by comparing actual
performance against targets and intervening selectively to take corrective action
4.Cultural Controls: Norms , values, custom play major role for increase the
performance Firms with strong culture have less need for other forms of
control
Incentive system Incentive are the devices used to reward behavior Tie performance for output control => reward Incentives depend on employer and nature of work Co-operation and co-ordination increase between
manger and subordinates Different nation and different culture use different
devices
Concept of Performance Of Ambiguity The key of understanding the relationship between
international strategy, control systems and incentive systems is performance ambiguity which exist that subunits poor performance are not clear.
Performance ambiguity is mostly subunits performance depend on the other subunits performance
Processes: “Processes can be define as the manner in which
decisions are made and work is performed” Sometimes processes used across national boundaries as
well as organizational boundaries. Can be develop anywhere within a firm’s global
operational network. Integrating mechanisms can help firms leverage processes
Formal => Exchange Ideas Helps in Leverage processes. Informal => Efficient working
Processes, organizational Culture & People
Culture refers to a systems of values and norms that are shared among people
Organizations have their own values and norms that employees are encouraged to follow.
Organizational culture tends to change very slowly.
Organizational Culture
Organizational culture comes from:
Founders and important leaders of Organization. National social culture. The history of organization. Decisions made in past.
Creating Organizational Culture
Organizational culture can be maintained through: Hiring on merit base Promotional practices Reward strategies Socialization processes
Formal ways (training programs)Informal ways(friendly Advices)
Communication strategies
Maintaining Organizational Culture
When organization moves into international market it faces hurdles like different language, norms and beliefs, tastes and preferences etc.
If the organization does not align itself with the prevailing culture then it cannot attain benefits of expansion.
“Strong” culture:Not always goodMay not lead to high performanceCould be beneficial at one point, but not at another
“Adaptive” cultures Companies with adaptive cultures have the highest
performance.Flexible to decision making.
Organizational Culture In The International Business
The interrelationship between the four basic strategies
1. Localization2. International 3. Global standardization +organization architecture 4. Transnational
Architecture & Strategy
Combination of Strategy, Structure, and Control Systems
Strategy And Architecture
Strategies Interdependency Performance Ambiguity
Control
LocalizationStrategy(locally responsive Pressure high)
Low [local production & sale in international]
Low [easily identify factors of error]
Low [subunit manager understand better then headquarter management]
International Strategy(Both pressure low)
Medium [ subunit management tell the needs and demand of that area]
Medium [nor easy not difficult to identify factors of error cause of low pressures]
Medium [headquarter mgt & subunit mgt both take decisions]
Global Standard Strategy (cost reduction pressure high)
High[to achieve cost eco firm need to coordinate with subunits]
High[difficult to identify factors of error ]
High[headquarter mgt control the subunits]
Transnational strategy (Both pressure are high)
Very high[-Value addition from one country -locally responsiveness from all other countries]
Very high [so difficult to identify factors of error]
Very high [mgt should control al subunits]
For a firm to succeed, two conditions must be met:
i. The firm’s strategy must be consistent with the environment and place in which the firm operates.
ii. The firm’s organization architecture must be consistent with its strategy.
Environment, Strategy, Architecture, & Performance
INERTIA: “Property by which a thing continues its existing
condition” Organizations are difficult to change Sources of inertia include:
The existing distribution of power and influenceThe current cultureSenior managers’ preconceptions about the appropriate business
model.
Organizational Inertia
Management should take necessary actions to chose structure of organization to enhance its positive effects.
Alliance the strategies with organizational structure and their requirement
Organization of IB & Management :
Thank you