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outside its boundaries that can impact it. Forces can change over time and are made up of Opportunities and Threats. Opportunities: openings for managers to enhance revenues or open markets. New technologies, new markets and ideas. Threats: issues that can harm an organization. economic recessions, oil shortages. Managers must seek opportunities and avoid threats.
General Environment
Technological Forces Global Forces
Supplier s
Firm
Economic Customers
Forces
General Environment
Task Environment
Management
Suppliers
Internal Environment
Managers usually cannot impact or control these. Forces have profound impact on the firm. Includes interest rate changes, unemployment rates, economic growth. When there is a strong economy, people have more money to spend on goods and services.
Result in new opportunities or threats to managers. Often make products obsolete very quickly. Can change how we manage.
Social structure refers to the relationships between people and groups. Different societies have vastly different social structures. National culture includes the values that characterize a society. Values and norms differ widely throughout the world. These forces differ between cultures and over time.
These are often seen in the laws of a society. Today, there is increasing deregulation of many state-run firms.
Perhaps the most important is the increase in economic integration of countries. Free-trade agreements (GATT, NAFTA, EU) decreases former barriers to trade. Provide new opportunities and threats to managers.
Managers need to secure reliable input sources. Suppliers provide raw materials, components, and even labor. Working with suppliers can be hard due to shortages, unions, and lack of substitutes. Suppliers with scarce items can raise the price and are in a good bargaining position. Managers often prefer to have many, similar suppliers of each item.
Compaq Computer first used special computer stores to sell their computers but later sold through discount stores to reduce costs. Some distributors like Wal-Mart have strong bargaining power. They can threaten not to carry your product. Usually, there are several groups of customers. For Compaq, there are business, home, & government buyers.
most serious force facing managers. High levels of rivalry often means lower prices. Profits become hard to find. Barriers to entry keep new competitors out and result from: Economies of scale: cost advantages due to large scale production. Brand loyalty: customers prefer a given product.
Necessity for ongoing investment in human resources recruitment, education, training Effects of international trading blocks, automation, outsourcing, shifting facility locations upon labor dislocations
14
Birth
Reflects the changes that take place in an industry over time. Birth stage: firms seek to develop a winning technology.
Competitor rivalry increases, prices fall. Least efficient firms fail and leave industry.
Relationships between suppliers, distributors more stable. Usually, industry dominated by a few, large firms.
Managers must measure the complexity of the environment and rate of environmental change. Environmental complexity: deals with the number and possible impact of different forces in the environment.
The more forces, the more complex the mangers job becomes.
Managers must pay more attention to forces with larger impact. Usually, the larger the organization, the greater the number of forces managers must oversee.
All levels of managers should work to minimize the potential impact of environmental forces.
Many firms have sought to reduce the number of suppliers it deals with which reduces uncertainty.
Examples include reduction of waste by first line managers, determining competitors moves by middle managers, or the creation of a new strategy by top managers.
Many firms use specific departments to respond to each force. Mechanistic structures have centralized authority. Roles are clearly specified. Good for slowly changing environments. Organic structures authority is decentralized. Roles overlap, providing quick response to change.
Rod Canions forecast of Compaqs future was wrong due to his incorrect view of the environment. Seek ways to respond and influence stakeholder perception. By gaining information outside, managers can make better decisions about change.
More management levels involved in spanning, yields better overall decision making.
Figure 3.5
Gatekeeping: the boundary spanner decides what information to allow into organization and what to keep out.
Includes reading trade journals, attending trade shows, and the like.
Environment
Organization
To what degree are tasks subdivided into separate jobs? On what basis will jobs be grouped together? To whom do individuals and groups report? How many individuals can a manager efficiently and effectively direct? Where does decision-making authority lie? To what degree will there be rules and regulations to direct employees and managers?
All businesses have to organise what they do A clear structure makes it easier to see which part of the business does what There are many ways to structure a business
By function: arranging the business according to what each section or department does By product or activity: organising according to the different products made By area: geographical or regional structure
By customer: where different customer groups have different needs By process: where products have to go through stages as they are made What are the advantages/disadvantages of different types of business structure?
Strategy
Organization Size
Legal counsel
V.P Production
Industrial Products DirectorProduction Consumer Products DirectorProduction
Western Eastern Region Region Consumer Consumer Products Products etc. Sales Sales Manager Manager
etc.
etc. etc.
etc. etc.
etc. etc.
etc. etc.
This depends on the business type, size and structure used Lets look at a functional structure:
Chief Executive
Board of Directors
Production
Marketing
Accounts
Personnel
IT
Advantages Specialisation each department focuses on its own work Accountability someone is responsible for the section Clarity know your and others roles
Disadvantages Closed communication could lead to lack of focus Departments can become resistant to change Coordination may take too long Gap between top and bottom
type of product or service. Geographic structure: divisions based on the area of a country or world served. Market structure: divisions based on the types of customers served.
A Product Organization
Chief Executive Officer
President
Product Group 1
Product Group 2
Product Group 3
ProSales duction
R&D
Acctg.
ProSales duction
R&D
Acctg
ProSales duction
R&D
Acctg.
CEO Corporation
Corporate Managers
Lighting Division
Television Division
Advantages Clear focus on market segment helps meet customers needs Positive competition between divisions Better control as each division can act as separate profit centre
Disadvantages Duplication of functions (e.g. different sales force for each division) Negative effects of competition Lack of central control over each separate division
CEO Corporation
Corporate Managers
Northern Region
Western Region
Southern Region
Eastern Region
CEO Corporation
Corporate Managers
Educational Institutions
Individual Customers
Advantages
Disadvantages
Serve local needs better Positive competition More effective communication between firm and local customers
Conflict between local and central management Duplication of resources and functions
Results in a complex network of reporting relationships. Very flexible and can respond rapidly to change. Each employee has two bosses which can cause problems.
Functional manager gives different directions than product manager and employee cannot satisfy both. Product Team Structure: no 2-way reporting and the members are permanently assigned to the team and empowered to bring a product to market.
Team Managers
Product Team
CEO
Func. Managers
Sales Design Production
Manufacturing
Manufacturing
Manufacturing
= Team member
Organisational design Choosing and implementing structures that best arrange resources to serve the organisations mission and objectives A problem-solving activity that should be approached from a contingency perspective Key directions in structural change:
Shift from vertical to horizontal
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Chapter 11
45
Contingency
Chapter 11
46
The
Chapter 11
47
Adaptive
organisations
Operate with a minimum of bureaucratic features Operate with cultures that encourage worker empowerment and participation.
Chapter 11
48
Mechanistic designs:
Centralised Many rules and procedures Narrow spans of control Specialised tasks Few teams and task forces Formal and impersonal means of coordination.
Organic designs:
Decentralised Fewer rules and procedures Wider spans of control Shared tasks Many teams and task forces More informal and personal means of coordination.
Chapter 11 49
Environment
Strategy
Technology
Human Resources
Usually need to decentralize authority. Strategy: Different strategies require the use of different structures.
A differentiation strategy needs a flexible structure, low cost may need a more formal structure. Increased vertical integration or diversification also requires a more flexible structure.
More complex technology makes it harder for managers to regulate the organization. Technology can be measured by:
Task Variety: new problems a manager encounters. Task Analyzability: programmed solutions available to a manager to solve problems.
High task variety and low analyzability present many unique problems to managers.
Low task variety and high analyzability allow managers to rely on established procedures.
Small
one-of-a-kind products.
Mass
Continuous
Workers must watch for unexpected problems and react quickly. A flexible structure is needed here.
Human
organizational structure.
Higher skilled workers who need to work in teams usually need a more flexible structure. Higher skilled workers often have professional norms (CPAs, physicians).
Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.
Thank you
and Good Day