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Organisation structure for IB

Lecture No. -7

Topic- Organizational structures for IB

Lecture Outcome-

Meaning, Factors influencing organization structure, options of designing of organizations, typesof basic organization structure, choosing a best suitable structure, related issues in choosing

Organizational structures for IB

Organizational structures ( often called organization charts) is its basic vehicle through which

strategy is implemented & through which the work of the organization is actually implemented.

In fact, strategy, determines the structures needed for implementation.through its design, the firmshall:

-Allocate organizational resources

-assign tasks to its employees

-instruct employees about the firms rules, procedures, & expectationsrelating to their jobs, &

-collect & transmit information necessary for problem solving & decision making etc.Factors influencing organization structure

Environment : which includes:Internal environment : management orientation

Organization size

Employee strengthExternal Environment: uncetaintity

Differentiation & integrationGlobalization Vs local responsiveness

Options for Designing of Organisations of MNCsTWO:

Vertical/ Tall Organisations:Vertical/tall organisations refer to increase in the length of the organisation's hierarchy chain of

command. The hierarchical chain of command represents the company's authority -accountability relationship between superiors and subordinates. Authority and responsibility flow

from the top to the bottom through all the levels of the hierarchy. Accountability flows from the

lowest level to the highest level. Employees at each level should report to their superior, who inturn should report to his boss. Thus, the activities are reported to the top. Authority is more

centralized in tall organisation.

(2) Horizontal/Flat OrganisationsHorizontal/flat organisations refer to an increase in breadth of an organisation's structure. The

increasing bio-professionalisation and multi-professionalisation and wide acceptance for

empowerment allowed even the large business firms to reduce the number of hierarchical levelsof their organisations. Consequently, large sized firms also started adopting horizontal/f1atorganization by delayering.

In fact, this structure is well suited for the small size business firms.

Authority is more decentralised in relatively flat structures. Manager with broad span of control

must grant more authority to his subordinates. Decisions are more likf!ly to be made by theemployees who are at the helm of affairs and more familiar with the situations and ground

realities.

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Organisational l;lctivities are mostly performed informally. Professional managers are treated as

real professionalists. .Basic organizational structures are as follows:

(1)International division structure

(2)Worldwide functional structure

(3)Geographic area structure

(4)Global Product division structure

(5)Mixed structure

(6)Matrix structure

(7)Networked structure

(8)Strategic Business Unit Structure

(9)Decentralized Business Unit Structure

Choosing a structure

Although there are no standard requirements, a relatively small no. of variables can help inchoosing an organizational form that best fits the needs of a given firm in a given set of

circumstances. These are

(1)the relative importance in the present & future of foreign & domestic markets to the firmscompetitive strategy.

(2)The historical background of the firm & its evolutionary stage in global operations

(3)The nature of the firms business & its product strategy

(4)The management traits & management philosophy of the firm(5)The availability of & willingness to invest in internationally experienced management

personnel

(6)The capacity of a firm to adjust to major organizational changes

(7)The degree of centralization & the extent to which the firms wants to decentralized its powerof decision making & grant autonomy to its subsidiaries

Related issues in global organization designThere are eight major issues

(1)centralization vs. decentralization

(2)role of subsidiary director(3)non traditional organizational arrangements

(4)changing role of information technology in organizing

(5)need for integrating mechanism

(6)control systems(7)managing corporate culture

(8)managing change in international business