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Summary Organizational Structure International Business
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Summary Organizational Structure International Business
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Organizational structure - IBTheory is a system of statements targeted at describing, explain and predicting a real world
phenomenon (Bacharach 1989). Theory is about abstraction from the observable.
Why theory matters? Helps us to synthesize and integrate observations made into a consistent
explanatory framework + can serve as a basic for making predictions on the effects of managerial
decision making + helps conclusions to be generalizable across different settings.
Chapter 1 Organization and organizational effectiveness
Organizations are intangible (=ontastbaar)
Essence of organization: grouping people and other resources to produce good and other services
Organization: is a tool people use to coordinate their actions to obtain something they desire or
value. An organization is a response and a means satisfying some human needs.
Entrepreneurship: is used to describe the process by which people recognize opportunities to satisfy
needs and then gather and use resources to meet those needs.
Organizational environment: is the set of forces and conditions that operate beyond an
organization’s boundaries but affect its ability to acquire and use resources to create value.
Value creation model: can be used to describe the activities of most kinds of organizations.
Why do organizations exist?
- To increase specialization and the division of labor. Together more can be accomplished than
working separately
- To use large-scale technology to achieve economies of scale and/or economies of scope.
- To management the organizational environment
- To economize on transaction costs the costs associated with negotiating, monitoring, and
governing exchanges between people.
- To exert power and control. Organizations can exert great pressure on individuals to conform to
task and production requirements in order to increase production efficiency.
Economies of scale: cost savings that result when good and services are produced in large volume on
automated production lines
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, Economies of scope: cost savings that result when an organization in able to use underutilized
resources more effectively because they can be shared across different products or tasks.
Organizational theory: is the study of how organization function and how they affect and are
affected by the environment in which they operate.
Organizational structure : the formal system of task and authority relationships that control how
people coordinate their actions and use resources to achieve organizational goals.
Organizational culture: the set of shared values and norms that controls organizational members’
interactions with each other and with suppliers, customers and other people outside the
organization
Organizational design: the process by which managers select and manage aspects of structure and
culture so that an organization can control the activities necessary to achieve goals.
Organizational structure and culture are the means the organization uses to achieve its goals.
Organizational design is about how and why various means are chosen.
Organizational change: the process which organizations redesign their structures and cultures to
move from their present state to some desired future state to increase their effectiveness.
Contingency: an event that might occur and must be planned for, like rising gas prices or the
emergence of a new competitor. (global environment and changing technology are raising
contingency)
Contingency theory: “No one best way to organize”. It depends context. Theoretical question:
- What are core relationships context characteristics – structure characteristics.
- What are relationships context – structure
- What are the mechanisms at work
When environmental uncertainty increases the effectiveness of organic structures increases.
Uncertainty-----(+mechanism) -- Organicness of structures
Uncertainty = Information essential for task execution – information at hand before task execution
6x environmental context
Contingency Universal mechanism: organization as information processing
systems
Rationalman.
perspectives
Configuration Classes or organization with their own theories
Daft & Anand Sequence of organizational forms
Resource Structuring of relationships with external parties
Dependence
Populatie exology Evolutionary theory of genesis and disappearance of organization
rational
forms
Notso
Institutional theory Organization adapt to norms and expectations in the
environment
Assumptions:
- Organization is open system
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,- In their task execution organizations are confronted with uncertainty
- Organization can be viewed as information processing system
Coordination mechanism (Mintzberg)
Competitive advantage: the ability of one company to outperform another because its managers are
able to create more value from the resources at their disposal
Strategy: the specific pattern of decisions and actions that managers take to use core competence to
achieve a competitive advantage and outperform competitors
Many sources of competitive advantage, such as skills in research and development that result in
novel product features or state-of-the-art technology, evaporate because they are relatively easy for
competitors to imitate. It is much more difficult to imitate good organizational design and carefully
managed change that brings into being a successful organizational structure and culture.
Why did the performance of these blue-chip companies deteriorate to such a degree? A major
reason is that managers lost control of their organizational structures and cultures.
Control (in the context of controlling the organization) means having control of the external
environment and having the ability to attract resources and customers.
Innovation: developing an organization’s skills and capabilities so the organization can discover new
products and processes.
Efficiency: developing modern production facilities using new information technologies that can
produce and distribute a company’s products in timely and cost-effective manner.
Approaches to measure organizational effectiveness
Approach What evaluates? Goals to set to measure effectiveness
External Ability to secure, manage, and - Lower costs of inputs
resource control scarce and valued skills - Obtain high-quality inputs of raw materials
approach and resources and employees
- Increase market share
- Increase stock price
Internal Ability to be innovative and - Cut decision-making time
systems function quickly and responsively - Increase rate of product innovation
approach - Reduce time to market
Technical Ability to convert skills and - Increase product quality
approach resources into goods and services - Reduce number of defects / costs
efficiency - Improve customer service
- Reduce delivery time to customer
Two types of goals used to evaluate organizational effectiveness official goals and operative goals
Official goals: guiding principles which are stated in annual report and in other public documents.
These are lay out in the mission (goals that explain why the organization exists and what it should be
doing).
Operative goals: specific long-term and short-term goals that guide managers and employees as they
perform the work of the organization.
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, Chapter 2 stakeholders, managers and ethics
Inducements: include rewards such as money, power, and organizational status
Contribution: the skills, knowledge, and expertise that organizations require of their members
during task performance
Inside stakeholders: are people who are closest to an organization and have the strongest or most
direct claim on organization resources shareholders, managers and the workforce.
Stakeholder Contribution to the organization Inducement to contribute
Inside
Shareholders Money and capital Dividends and stock appreciation
Managers Skills and expertise Salaries, bonuses, status, and power
Workforce Skills and expertise Wages, bonuses, stable employment,
and promotion
Outside
Customers Revenue from purchase of goods and Quality and price of goods and services
services
Suppliers High-quality inputs Revenue from purchase of inputs
Government Rules governing good business practice Fair and free competition
Unions Free and fair collective bargaining Equitable share of inducements
Community Social and economic infrastructure Revenues, taxes and employment
General public Customer loyalty and reputation Natural pride
When shareholders delegate to managers the right to coordinate and use organizational skills and
resources, a divorce of ownership and control occurs.
The allocation of rewards, or inducements, is an important component of organizational
effectiveness because the inducements offered to stakeholders now determine their motivation.
Authority: the power to hold people accountable for their actions and to make decisions concerning
the use of organizational resources.
There are two kinds of directors:
- Inside directors holds offices in a company’s formal hierarchy: they are full-time employees of
the corporation.
- Outside directors are not employees of the company: many are professional directors who hold
positions on the board of many companies. The goal of outside directors is to bring objectivity to
a company’s decision making and to balance the power of inside directors.
Chain of command: the system of hierarchical reporting relationships in an organization
CEO is responsible for setting the organization’s goals and designing it. The CEO selects key
executives to occupy the topmost levels of the managerial hierarchy. The CEO determines top
management’s rewards and incentives. The CEO controls the allocation of scare resources such as
money and decision-making power among the organization’s functional areas or business divisions.
The CEO’s actions and reputations have a major impact on inside and outside stakeholders’ views of
the organization and affect the organization’s ability to attract resources from its environment.
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