Organization Theory and Design

What is the definition of the organization?

An organization is a social grouping of individuals, with a common goal, with a set of structures and systems, and whose activities and objectives are linked to the external environment. Organizations are composed of social entities or people who can know and understand situations, make demands, and pursue the interest of the group. An organization has a common goal in which all members are united for that common goal although there might be specific goals that each member is pursuing his/her interest. It has a structure or a system that members have to follow, and this structure is specially designed with job descriptions and ways of communication that might be different from the others. (Daft, Murphy, and Willmott 10)

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Seven reasons organizations exist

  1. Organizations exist for economic purposes. It is cheaper to conduct business within organizations than individual transactions in the market.
  2. Production can only be worked out effectively when done by a team cooperating than when working separately. (Barney and Hesterly 116)
  3. It is through organizations that the performance of individuals in a team can be measured effectively. This is known as the metering problem.
  4. Consumers benefit from efficient organizations that produce low-cost products and provide low-cost services.
  5. Organizations exist to help individuals who cannot get desired services individually.
  6. Forming an organization is part of human behavior. In an organization, roles are defined and values are formed. (Jex 2)
  7. Social organizations exist to help individuals and society.

Definition of effectiveness, and the difficulty of organizations to be effective

An organization must have leadership – effective leadership. An effective leader knows how to transform the organization into a dynamic and purposeful one where its goals and mission are sought by not only the leader but by everyone in the organization. Decisions that a leader makes every day affect the effectiveness of the organization. An effective organization should have the expertise and skill of a transformational leader, a leader who gets the work done and has a quality relationship with the employees. An organization depends on the leader and the employees. An organization may fail if there is the absence of an effective leader and cooperative employees who should cooperate and look at every possible way to make the organization’s goals and mission attainable and successful. (Bass and Avolio 1)

The difference between mechanistic and organic organization

The mechanistic design can be regarded as the bureaucratic way wherein there is a division of labor, authority is vested on strict structure from top-down, formal rules and measures are enforced, and promotion is based on accomplishments. This is a product design and is effective in a stable situation. Max Weber speaks of the mechanistic design as highly efficient.

In contrast to the mechanistic, organic design is best suited in an unpredictable environment. This is less bureaucratic and the structure is decentralized, allowing the lower- and middle-managers to cope with the changes in the environment. The mechanistic operates in the traditional vertical format, like what we see in fast-food chains. But organic designed companies are managed to adjust to changing situations. (Schermerhorn 198)

Describe the distinction between closed and open systems

The main feature of a closed system is its separation from the outside environment. A closed one is independent or can stand on its own, and is not influenced by the external environment; similarly, it does not influence its environment. An example we can cite is production inside an organization where there are sub-systems. Transactions are usually limited to minimize distractions or interruptions with the operational flow.

The open system is a contradiction of the closed one – it interacts with the outside environment. It acquires contributions and inspirations from the environment and, as a result, it provides outputs and contributions to the environment. Social organizations are great examples of an open system. The way they interact with society determines the success of their organizations. (Lucey 39)

What is the role of strategic direction in organization design?

Top managers are responsible for setting the goals and mission of the organization. This is usually done in consultation with the major shareholders. The purpose and mission become a primary part of the design and management of the company.

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Strategy and design are the main responsibilities of top management. Middle- and lower-level managers follow and have to do much for the guidelines set by the top management. The top managers carefully set the design in a careful process and proceeds or enforce it through several stages. At first, this is a messy process amid organizational politics and vested interests. There are tensions and considerations as the process goes on, and it is how the different departments cooperate that make the design successful. (Daft, Murphy and Willmott 50)

What is the difference between a goal and a strategy?

A goal is synonymous with a mission or objective, although there may be some distinctions between the terms. A strategy is a tool or method to attain the goal. Strategies involve some techniques to attain the planned goals. One of these strategies is the competitive forces formulated by Michael Porter and the strategy typology espoused by Miles and Snow.

Others are parts of the design and strategy of the organization. Organizations have to adopt various strategies in the course of business to be competitive and to attain their goals. The goals and mission are set before formulating the strategies, but these goals and mission are permanent while strategies vary and change over time. (Daft 80)

Briefly describe how to tell a bad strategy from a good one

Ways to determine a good from a bad strategy include results that create problems for the company, directly or indirectly. There are times that managers use techniques that may or may not benefit the company.

An example of a good strategic action is when the manager uses measures to define the best ways to improve the performance of new personnel who have just been recently hired for a specific project. The manager uses the technique to benefit the organization and help in attaining their goals and objectives. The bad side of this is when the manager tends to cut the cost of hiring by devising cheaper but lower quality methods. The outcome of this move is that the company acquires new personnel who are less qualified and may not perform well in their assigned job.

Describe the following

Functional Structure

This consists of departments that perform different functions which may focus on R&D, manufacturing, or other areas of marketing.

Functional Structure with Horizontal Linkages

This can be a re-design of the functional structure but the department has its various functional sections to focus on R&D, manufacturing, or marketing, along with accounting.

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Divisional structure

This is organized by specific goals, such as a division for products or services, or different projects and programs. The basis for this structure is determined by the outputs. This structure may not be too efficient if the different divisions do not cooperate.

Geographical structure

This structure is based on location and applied when the organization is global and has various branches and subsidiaries in different parts of the world. Each branch or subsidiary has its structure which may be divisional or functional. (Schermerhorn 165)

Matrix Structure

This kind of structure aims to provide skill or expertise and information on special projects. This is to provide services to large projects where the people or employees are drawn from the different functional sections to provide support for a team to implement a certain project. The matrix is a combination of divisional and functional structures. (Daft 65)

The components of the organization’s environment

The environment refers to the forces that affect the organization’s activities and performance. The environment includes the suppliers, customers, other organizations, government agencies that enforce regulations, human rights groups, and others. An organization’s structure is influenced by these environmental forces because of what authors call risks and uncertainties.

Some organizations face lesser environmental effects because of a few changes, like for example, no new businesses, no new technologies introduced, or little pressure by public interest groups. But other organizations are not lucky as they face rapid changes in government regulations, new entrants, no raw materials to create new products, and continuing demands by consumers for product changes.

Static environments are synonymous with lesser risks and uncertainties, and dynamic ones create more uncertainties. Organizations always try to minimize or eliminate environmental uncertainties. (Robbins 432)

What are some forces that influence environmental uncertainty? Which typically has the greatest impact on uncertainty – environmental complexity or environmental change? Why?

Factors that have environmental risks are actors, consumers, regulatory agencies, civil society, and more. A dynamic situation has some uncertainty.

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This makes the decision-making process difficult for managers.

Environmental complexity is the level of diversity among environmental forces. Some environments tend to be homogenous and simple, but others are heterogeneous and complex, for example, business applied with an Internet connection. This is the new trend in a world of intense globalization. The threat of new entrants is always present because it is easy to formulate a website.

What is an organic organization? A mechanistic organization? How do the environment influence organic and mechanistic structures?

The organic model is synonymous with the boundaryless model, which uses a lot of information network, or information infrastructure. Communication is effective and people “in the fields” (the middle- and the lower-level management staff) are involved in decision making. This system is known as hierarchical and cross-functional. This kind of management system is more effective with the use of new technology like the Internet. Employees become effective and managers are motivated to pursue organizational objectives.

The mechanistic is the bureaucratic type; it has departments, more formalization systems, and does not involve much information network. It employs downward communication.

What is an “organizational ecosystem?” How does this concept impact the changing role of management?

Organizational ecosystem refers to the environment created by the different organizations. It involves cooperative relationships that create opportunities, which is termed the ecosystem. Organizations don’t press each other; rather they try to picture how to strengthen themselves by focusing on cooperation. Knowing and determining the opportunities of this organizational ecosystem is a challenging task. In the new system, managers think of opportunities in the horizontal process rather than the vertical one. This process involves relationships with suppliers and customers who are regarded as team members. (Daft, Murphy and Willmott 186)

The influence on management is more pronounced because many organizations and managers are used to the traditional structure, the vertical structure. The organizational ecosystem stresses the horizontal structure, where managers have to deal with suppliers and customers.

Why do organizations become involved in inter-organizational relationships? Do these relationships affect an organization’s dependency? Performance?

It is important that organizations, managers particularly, involve in inter-organizational relationships because of the rich opportunity created by the so-called organizational ecosystem. There might be a little dependency created but the relationship is a healthy environment that is good for business and the customers. Public and private institutions are mired in bureaucratic systems (which sometimes are prone to corruption). The new relationships and the new network depart from the traditional system with boundaries. Organizations don’t have to pressure themselves; they need to cooperate for the good of the system and the community.

Concerning performance, the managers are more motivated to improve for the organization. Gone are the days where managers work driven by fear and pressures from internal and external environments. (Daft 74-75)

Define supply chain management

Supply chain management is the production of goods from raw materials to consumable products and the transfer and delivery of the goods from manufacturing to warehousing till these reach the hands of end-users. SCM involves several stakeholders, such as manufacturers, suppliers, transport systems, and customers.

SCM has to be effective, i.e. it has to involve speed and quality in the product and service because it affects the success of the organization. Successful SCMs adopt value-added processes in the supply chain. The process involves environment-friendly manufacturing and products created with less impact on the environment. (Shah 4)

The new focus in SCM is to shorten the manufacturing process and to have fewer effects on the environment. The supply chain cannot be effectively processed without organizations cooperating.

Traditional values in Mexico support high power distance and a low tolerance for uncertainty. What would you predict about a company that opens a division in Mexico and tries to implement global teams characterized by shared power and authority and the lack of formal guidelines, rules, and structure?

My initial and direct reaction is that it will be a catastrophe. Organizations depend on people, and people mean the managers, the employees, and the community. Without these groups cooperating, the organization will not be successful. First, there are two kinds of cultures present in an organization: the organizational culture and the culture of the country where the business is located. The new division that opens in Mexico should consider the Mexican culture – power distance and low tolerance on uncertainty; otherwise, there will be a contrast of cultures and performance of employees. Managers working in an environment of different cultures must adapt to that culture to make the organization and management effective.

What are some of the primary reasons a company decides to expand internationally?

When a company decides to expand internationally, its primary aim is to widen its market. Export-oriented companies can penetrate countries with large populations, like India, China, and the United States. Globalization has also motivated companies to operate internationally. Globalization is exacerbated by new technology and the Internet, which has triggered the Information Revolution.

One example is Jaguar cars, owned by Jaguar Land Rover (JLR), which has recently penetrated the international market, particularly China. The China market is a large segment of car lovers. There is a big demand for Jaguar cars in China, and to successfully gain the attention of this type of segment means enlargement and more profits for the company. JLR has also opened up manufacturing plants in Brazil and India.

Why would a company want to join a strategic alliance rather than go it alone in international operations? What do you see as the potential advantages and disadvantages of international alliances?

Cooperating with other organizations in the value-added supply chain has many benefits. Firms can save operating costs and costs of manufacturing new products by allying with other firms or suppliers. A strategic alliance is formed when two or more companies agree over the long term to jointly form a partnership for purpose of making new products or services. (Hill and Jones 324) Through the strategic alliance, a firm can have easy access to a foreign market. In China, for example, foreign firms that penetrate this very large market have to enter into a joint venture with a local firm. This is one of the Chinese regulations when it comes to the entry of foreign firms. (Hill and Jones 273)

Name some companies that you think could succeed today with a globalization strategy and explain why you selected those companies. How does the globalization strategy differ from a multi-domestic strategy?

Some of the companies with a global strategy that can be cited here are Toyota, Apple, and American car manufacturers Ford and General Motors. These companies have introduced the globalization strategy in business to be able to remain strong and competitive. Toyota is now the world’s leading car manufacturer and has branches in almost all key cities and many parts of the world. Apple is a world leader in computer sales and mobile technology, while Ford and General Motors are also world leaders in car making.

Most of these companies utilize Information Technology and the Internet in their brand of management. Each of these firms has experienced ups and downs in business and was hit hard by the global economic crisis. They would not have become big if they just applied the multi-domestic strategy, which is focused on a local scene with branches within a country. These firms have penetrated larger markets like China, India, the United States, Europe, and other Asian countries.

Discuss the three primary approaches to coordination and control as represented by Japanese, American, and European companies

Japanese used centralization to foster coordination and control toward their subsidiaries in many parts of the world. Top managers have full control over their branches through the use of technology and the Internet. Managers in different countries included their nationals in the team. This is also true with American and European coordination and control systems. This approach provided the companies to leverage what they wanted to enforce in their branches from the knowledge they had at their headquarters.

There were strong linkages to ensure that headquarters people were fully informed and had the say in the company’s strategic decisions. The approach provided by the American, European, and Japanese had difficulties in adapting to the local culture, but somehow they acquired the needed control.

Works Cited

Barney, Jay and S. Fox. “Organizational Economics: Understanding the Relationship between Organizations and Economic Analysis.” Handbook of Organization Studies. Ed. Stewart Clegg, Cynthia Hardy and Walter Nord. London: Sage Publications, 2003. 115-147. Print.

Bass, Bernardo and B. Avolio. Improving Organizational Effectiveness Through Transformational Leadership. California: Sage Publications Ltd., 1994. Print.

Daft, Richard. Organization Theory and Design (Tenth Edition). Ohio: South-Western Learning, 2010. Print.

Daft, Richard, Jonathan Murphy and Hugh Willmott. Organization Theory and Design. Hampshire: South-Western Cengage Learning, 2010. Print.

Hill, Charles and G. Jones. Strategic Management Theory. Mason, Ohio: South-Western Cengage Learning, 2013. Print.

Jex, Steve. Organizational Psychology: A Scientist-Practitioner Approach. New York: John Wiley & Sons, Inc., 2002. Print.

Lucey, Terry. Management Information Systems (Ninth Edition). London: Thomson Learning, 2005. Print.

Robbins, Stephen. Organizational Behavior (9th Edition). New Jersey: Prentice-Hall Inc., 2001. Print.

Schermerhorn, John. Exploring Management. Massachusetts: John Wiley & Sons, Inc., 2011. Print.

Shah, Janat. Supply Chain Management: Text and Cases. London: Pearson Education Ltd., 2009. Print.

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