Organisational Structure, International Business, RUG
Chapter 1: Organizations and organizational effectiveness
The three definitions of an organization:
1. Tool or instrument to realize objectives, and goals, and carry things out
2. Two or more people working together, cooperatively within identifiable boundaries, to
accomplish a common goal or objective
3. Value creation: input, conversion, and output
Grouping people and recourses to produce goods and services is the essence of organizing.
An organization is a tool people use to coordinate their actions to obtain something they
desire. Entrepreneurship: the process by which people recognize opportunities to satisfy
needs and then gather and use resources to meet those needs.
The organizational environment is the set of forces and conditions that operate beyond an
organization’s boundaries but affect its ability to acquire and use recourses to create value.
Value is created in 3 stages: input, conversion, and output.
The organizational environment is the set of forces and conditions that operate beyond an
organization’s boundaries but affect its ability to acquire and use recourses to create value.
1. inputs: raw materials, money human resources
2. conversion: machinery, computers, and human skills
3. outputs: finished goods and services
4. organizations environment: sales of outputs allow the organization to obtain new
supplies for input
Why do organizations exist? When working together, people can create more value than
when working separately.
● To increase specialization and the division of labor
● To use large-scale technology
○ Economies of scale: cost savings that result when goods and services are
produced in large volume on automated production lines
○ Economies of scope: cost savings that result when an organization is able to
use underutilized resources more effectively because they can be shared
across different products or tasks
● To manage the organizational environment
● To economize on transaction costs. now workers do not have to discuss who will do
what, but the organization will decide.
○ Transaction costs: the costs associated with negotiating, monitoring, and
governing exchanges between people
● To exert power and control to make the workflow more efficient
Organizational theory is the study of how organizations 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 recourses to achieve organizational goals. the
people in charge have to coordinate and motivate their colleagues.
Organizational culture: the set of shared values and norms that control organizational
members’ interactions with each other and with suppliers, customers, and other people
outside the organization. people react differently to situations and interpret environments
differently.
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
its goals.
Organizational change: the process by which organizations redesign their structures and
cultures to move from their present state to some desired future state to increase their
effectiveness.
The importance of organizational design and change: Dealing with contingencies: an event
that might occur and must be planned for. (rising gas prices, the emergence of a new
competitor).
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.
Core competencies: managers’ skills and abilities in value-creating activities
Strategy: the specific pattern of decisions and actions that managers take to use core
competencies to achieve a competitive advantage and outperform competitors.
Companies must innovate and introduce new technologies to compete in today's market.
They can increase how much their companies innovate by creating a nice atmosphere to
work in.
Control, efficiency, and innovation are the most important processes managers use to asses
and measure how efficient they are at creating value.
● Control over the external environment and ability to attract recourses and customers
● Innovation: developing skills and capabilities to discover new products and
processes. and it means creating and designing organizational structures
2
, ● Efficiency: means developing modern production facilities using new information
technologies that can produce and distribute a company’s products in a timely and
cost-effective manner and improve productivity
An organization is effective when:
1. It can secure scarce and valued resources from outside the organization
2. Internal systems approach: creatively coordinate resources with employee skills to
innovate products and adapt to changing customers’ needs. ability to be innovative
and function quickly
3. It can convert skills and resources efficiently into finished goods and services
External recourse approach: method managers use to evaluate how effectively an
organization manages and controls its external environment. ability to secure, manage, and
control scarce and valued skills.
Measure this by comparing your organization’s stock prices, profitability, and return on
investment to another organization. On top of that, the quality of your products, being the
first one to respond when a change in the environment happens
An organization needs a structure and a culture that fosters adaptability and quick
responses. It needs to be flexible to speed up decision-making. You can measure this by
looking at the time needed to make a decision, the time needed to get new products on the
market, and the time spent coordinating different departments.
The technical approach is used to evaluate how efficiently an organization can covert some
fixed resources into finished goods and services. You can measure it in terms of productivity
and efficiency
Managers create goals to measure how well a company is doing. Official goals are guiding
principles that the company states in its annual report and in other public documents. These
lay out the organization's mission: they explain why the organization exists and what it
should be doing. official goals are supposed to legitimize the actions and organization.
Operative goals: specific long- and short-term goals that guide managers and employees as
they perform the work of the organization.
Chapter 2: Stakeholders, managers, and ethics
Stakeholders: people who have an interest, claim, or stake in an organization, in what it
does, and how well it performs.
● Inside stakeholders:
● shareholders
● managers
● workforce
3
