Organising for success:

structure and processes

SESSION 16
OVERVIEW
Organisational structures- Mintzberg's
configurations

Test yourself 1
Multinational and global structures
International divisions

 Here the home-based structure may be retained at first, whether

functional or divisional, but the overseas interests are managed through a
special international division.
 The international divisions will draw on the products of the home company
and gain advantage from this technology transfer.
 The disadvantage is a lack of local tailoring of products or technology.
 Such structures tend to work best where there is a wide geographical
spread but quite closely related products.
International subsidiaries

 Are geographically based and operate independently by country.

 In these companies virtually all the management functions are nationally
based, allowing for higher degrees of local responsiveness.
 The control of the parent company is likely to be dependent on some form
of planning and reporting system and perhaps an ultimate veto over
national strategies, but the extent of global co-ordination is likely to be
low.
 The main problem lies in failing to achieve synergy between business units.
Global product companies

 Represent a move away from the international divisional or subsidiary structure

to an integrated structure.
 Here the multinational is split into product divisions, which are then managed
on an international basis.
 The logic of such an approach is that it should promote cost efficiency
(particularly of production) on an international basis, and should provide
enhanced transfer of resources (particularly technology) between
geographical regions.
 The international development of many Japanese companies in electronics
and car manufacture has been managed in this way.
 Research has shown that the theoretical benefits of the global product
structure are not always realised. Although cost efficiency is improved, it does
not appear that technology transfer is necessarily enhanced.
Transnational corporations

 Are matrix-like structures that attempt to combine the local responsiveness

of the international subsidiary with the advantages of co-ordination found
in global product companies.
 A major strength is in transferring knowledge across borders.
 The key lies in creating an integrated network of interdependent
resources and capabilities.
Boundaryless organisations

 The aim of a boundaryless organisation is to remove barriers to growth and

change and ensure that employees, the organisation, customers and
suppliers can collaborate, share ideas and identify the best way forward
for the organisation.
 Typical boundaries found in organisations are:
 Vertical boundaries
 Horizontal boundaries
 External boundaries
TYPES OF BOUNDARYLESS
ORGANISATIONS

There are three main types of boundaryless organisation:

 The hollow structure – where non-core activities are outsourced
 The modular structure – where some parts of product production are
outsourced
 The virtual structure – where the organisation is made up of a collaboration
of other organisational parts
Illustration of Boundaryless
Organisation- Amazon

 Amazon is now one of the best known on-line retailers. Amazon operates
its website but relies on external book publishers and other suppliers, book
warehouses, couriers and credit card companies to deliver the rest of the
customer experience. These partners are also expected to provide
Amazon with information on, for example, stock availability, delivery times,
promotional material, etc. The customer feels that they are dealing with
one organisation, not many. In addition, the Amazon Marketplace allows
other organisations and individuals to sell their goods through the Amazon
website, and its Associates system provides a means for others to earn
referral fees by directing customers from their own website to Amazon
products.
 Test Yourself 2
Outsourcing

ADVANTAGES
 The main perceived benefit of outsourcing is reduced cost. Using external
services can be much cheaper than employing in-house IT staff and not
using them fully or efficiently
 It is used to overcome skills shortages.
 Outsourcing can bring flexibility.
 outsourcing allows organisations to focus on their core skills and activities
where they have a clear competitive advantage, and sub-contract non-
core activities.
Outsourcing

DISADVANTAGES
 Dependency on supplier for the quality of service provision.
 When a company cedes control to a single supplier, it becomes dependent
on the quality of the supplier's skills, management, technology and service
know-how.
 A risk of loss of confidentiality, particularly if the external supplier performs
similar services for rival companies.
 Difficulties in agreeing and enforcing contract terms.
 The length of contract (the risk of being 'locked in'). Lost in-house expertise and
knowledge.
 A loss of competitive advantage (if the function being outsourced is a core
competence, they must not be outsourced).
 Outsourcing might be seen by management as a way of off-loading problems
onto someone else, rather than as a way of managing them constructively.
Business partnerships

 Business partnerships can take many forms, from loose informal agreements, partnerships
and formal joint ventures to contracting out services to outside suppliers within a
boundaryless organisation.
 Business partnerships are co-operative business activities, formed by two or more
separate organisations for strategic purposes.
 Ownership, operational responsibilities, financial risks and rewards are allocated to each
member, while preserving their separate identity and autonomy.
 Business partnerships can be long-term collaborations bringing together the strengths of
two or more organisations to achieve strategic goals.
 Business partnerships can also help result in improved access to information and
technology.
 Some organisations form Business partnerships to retain some of the innovation and
flexibility that is characteristic of small companies.
 Business partnerships may be used to extend an organisation's reach without increasing its
size.
 Other Business partnerships are motivated by the benefits associated with a global
strategy, especially where the organisation lacks a key success factor for some market
Shared services

A shared service refers to the centralisation of a service (or services) that has previously been
carried out remotely at each business unit. Common examples happen in areas of IT and
accounting
Advantages
 There should be economies of scale on cost.
 The service can be benchmarked against external service providers.
 Efficiency can be improved (for example, a single IT system can be used and reduce the
need for multiple systems that may have difficulty in communicating with each other).
 All talent and expertise in the service can be gathered in one place so that knowledge
management within the organisation is improved.
 Shared services can also help remove organisational boundaries between business units.
Shared Services(cont)

DISADVANTAGES
 There is likely to be initial resistance to change, especially as the move will
often lead to redundancies across business units. But also because local
business managers will lose control of a service that they may consider
vital to their success.
 Creating appropriate targets for the service can be time consuming and
difficult.
 There may be issues in determining the price that should be charged to
business units for the use of the service.

Test yourself 3
Business process improvements

 A change to an individual business process might lead to a competitive

advantage or remove existing competitive disadvantages by either reducing
costs or differentiating the business.
 For example, if a bank can reduce its mortgage approval period from 10 days
to 1 day, then this could allow the mortgage activity to stand out from rivals. In
order to achieve this change the bank will have to redesign the approval
process (for example, by changing job roles, using more efficient IT systems
etc.).
Techniques:
 firstly, we consider which processes should be outsourced and which should be
redesigned (using Harmon's matrix), and
 secondly, we consider how an individual process might be redesigned.
Harmon's process-strategy matrix

According to Paul Harmon a process-strategy matrix is a matrix formed by an

estimate of:
 the strategic importance of a process on the horizontal axis the process
complexity and
 dynamics on the vertical axis.
This matrix can be used to determine how to manage individual processes.
Illustration- Harmon’s Matrix

 Applying Harmon's process-strategy matrix to a

children's bicycle manufacturer – Wheelies Co. The
company manufactures bicycles which are then sold
on to retailers for sale in their retail outlets. The
management at Wheelies have identified the
processes that need to be done.
 New product design.
 Negotiating partnership deals with other organisations.
 On-line purchasing.
 Stock control.
 Credit card approval.
 Bicycle assembly.
 Delivery – international.
 Funds investment.
The “commoditization” of business
processes

 Commoditisation is the evolutionary process that reduces all products and services to
their lowest common denominator.
Commoditisation tends to happen when
 there is comparability between the firm's processes and the competences of outside Test yourself
suppliers, 4
 there is standardisation of processes making it easy to assess whether the process will be
improved by outsourcing and to find appropriate outsource agents, and
 the costs of outsourcing these services can be lower than the cost of providing them
internally.
For example, when running, say, a music concert a venue may have previously arranged its
own security and ticket checks. However, this process is now widespread at events such as
political rallies, sports events, festivals etc, so that the process itself has become very
standardised and has moved towards commoditisation. It is therefore very common now for
music venues to outsource security and ticket checks
Business Process Re-engineering or
Redesign (BPR)

Typical causes of problems in Typical solutions in processes

processes
 activities are unnecessary  removing swim lanes
 removing unnecessary activities
 activities are in the wrong
 combining job roles
order
 combining activities
 activities are in the wrong swim  reducing handovers between swim lanes
lane  changing the order of activities
 outsourcing activities.
 activities are missing
 activities take too long.
EXAM FOCUS

In an exam you may be asked to:

 evaluate the effectiveness of an existing process, and
 make suggestions for its redesign.
Evaluating the effectiveness of an existing process
Are there any gaps or steps missing? Is there duplication? Are there overlaps,
where several people or teams perform the same task or activity? Are there
activities that add no value?
Process redesign solutions
Suggest practical solutions considering pros and cons of it
Test yourself 5
SUMMARY
ANY QUERIES