Mintzberg theorists build business upon competition

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Introduction

Mintzberg (2009) and other early theorist build business upon competition in the market place. As theorists evolve, they began to move to theories that are more revolutionary, such as Blue Ocean. According to Marcus and Kim (2005) innovation drives firms to new markets were competition is no longer relevant. As technology increases, what a firm can achieve one could draw a correlation of innovation to technology. This paper will outline the interconnections and roles of strategy, structure and technology as it pertains to a business's organization, how structure directly correlates to strategy and how technology is being used as a strategy for long-term organizational sustainability. The paper continues to explore Subway and the company's management strategy.

Traditional Theories

Early psychologists provided an insight into personnel actions within a company predominantly on characteristics of what motivates and leadership attributes. The Hawthorne studies of 1927 led to an understanding of the significance of the societal phenomenon, such as what he deemed informal groups, group norms and conformity (Hawthrone Studies, 2008). We later see this concept in Mintzberg's Ten Schools of Management (1998) as the Culture School is considered a social progression and the Power School align parties with like interest to attain power within the company. Important as Hawthorne's micro-level lessons were, they experienced the difficulties of being lessened to the interactions of parts, creating difficulties in the understanding of linkage between the individual behavior and the framework of the company in which they operate. Sociologist specializing in organizational theory took a different viewpoint, placing the company within its environmental build, more specific to its responsibility to society and its establishments again drawing direct correlation with Mintzberg's (1998) Environmental School. Some sociologists have examined formal organizational structures. Morgan (1986) provides a classical interpretation of organizations. Dating from Weber's (1947) early theory on bureaucracy, the study of human social behavior has paid a closer attention to the behaviorism of groups and their dynamics within organizations. Businesses are not simply corporeal elements; they are also social systems: with a magnitude of dimensions that are not tangible and cannot be measured (Shafritz et. al 2005). The bases for many traditional organizational structure are molded from physical and engineering mold, Red-ocean company's prescribe more these system theory that considers organizations as formal entities which exists within industry boundaries which create change in the environment and to that have to adjust to environmental change in order to survive whereby blue-ocean company's must create new environments to operate.

Thompson & McHugh (2002) point out that most of the literature about organizations is about work organizations. They argue that the distinctive nature of management, control and other social relations in such organizations is due to their profit-seeking nature. However, they also concede that all large organizations share some characteristics noting that, as Weber (1947) recognized, there are continuities of structure and practice deriving from the bureaucratic form present within all large-scale organizations. They also acknowledge that many organizations within the public sector have been operating within a market environment.

According to Gortner (1997) "An organization, by its most basic definition, is an assembly of people working together to achieve common objectives through a division of labor" (p. 297). A business offers a way of using personal attributes within a group to complete more than can be accomplished by the all members of the group pulling together in a combined effort working as individuals for the betterment of the group. Most strategy theorists postulate that companies are formed to realize a profit by delivering goods or services to a customer. Historically, business analysts, economists, and academic researchers have questioned theorist who have attempted to elucidate the social focus of organizations, to include the decision making process, the distribution of control and power, conflict resolution, and the resistance to organizational change.

Interconnections and Roles of Strategy, Structure and Innovation

There is a direct connection between the formal and informal framework of policies and rules, within which an organization arranges its lines of authority and communications, and allocates rights and duties (Galbraith, 1994).Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. This structure depends entirely on the organization's objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy.

Subway Sandwich Shops: Strategy vs. Structure

In the summer of 1965 Dr. Peter Buck, decided to invest $1000.00 in a submarine sandwich shop. One could submit he did not begin with thoughts of strategy, Blue Ocean or Red Ocean but instead with an idea. We could speculate that when he handed Fred DeLuca the money that he more than likely said; we make a good submarine sandwich and I bet we could make a lot of money selling them. Fred looked at Dr Buck and simple asked how it works. Little did he know more than 43 years, 30,000 stores, in 87 countries later he would be starting the ultra successful franchise now know as Subway(Subway Web Team, 2009). One could also suggest that according to Weber's Theory of organization that divisions were established, where by Fred Deluca were the Division of Labor and Dr. Buck was the Administrative Division thereby creating a Red Ocean company. One could also suggests the innovation of fresher product was creating new market space for businesses nationally rather than in a local market, because a need is identified nationally; thereby, creating a Blue Ocean strategy in a new market.

Once a business understands, what it is trying to supply to the consumer the business can better determine how to provide their product. The need has to first be identified and then we can go about the business of developing the strategy of meeting that need, the structure best created to support that strategy, and the strategy best used to sustain the growth of that need. One cannot help but to ask is strategy based upon structure or vice versa. It is the old adage, which came first the chicken or the egg or in this case, what came first the structure or the strategy. In our example of the subway company, the organization clearly came before strategy. The organization may have fallen into place through the natural selection but nonetheless it was established from the very beginning.

Conclusion

Classical economics viewed the organization as a solitary entity working to maximize revenue. It did not take into account social aspects and complications of human dynamics especially in conflict management across various tears of the organization. The fixation with competition in existing markets fails account for uncharted market space. Red-ocean theories in part owe their existence to manner in which organizations respond to such one-dimensional ideas. It became necessary to understand behavior, which seemed to be irrational.

In conclusion, this paper discussed the role of strategy, structure and innovation and how they interconnect. Structure and strategy may be different dependent upon the type of organization but a business must be properly organized to implement the company's strategy. Technology must be adaptive to the economic changes in the market place to be viable to long term organizational sustainability.

References

  • Galbraith, Jay R. Competing with Flexible Lateral Organizations. 2d ed. Addison-Wesley, 1994.
  • Gortner, Harold F., Julianne Mahler, and Jeanne Bell Nicholson. Organization Theory: A Public Perspective. 2d ed. Harcourt, 1997.
  • Hawthrone Studies (2008) Human Relation Contributors, April 17, 2009 from http://www.accel-team.com/motivation/hawthorne_02.html
  • Jay M. Shafritz, J. Steven Ott, and Yong Suk Jang (2005) Classics of Organization Theory, Sixth Edition. Belmont, CA: Thomson Wadsworth.
  • Kim, Chan W. & Mauborgne, Renée (2005), Blue Ocean Strategy: How to Create Uncontested
  • Market Space and Make the Competition Irrelevant, Harvard Business School Press 2005
  • Mintzberg, Henry, Ahlstrand, Bruce and Lampel, Joseph (1998), Strategy safari, A Guide Tour
  • Throughout the Wilds of Strategic Management. New York, Free Press 1998
  • Mintzberg, Henry (2009), Thoughts on Strategy, Building Organizational Community - not just for "the good times". Retrieved on 13 Nov 2009 from http://www.onstrategyconsulting.com/blog/?p=46
  • Morgan, Gareth (1986) Images of organization, Sage Publications Beverly Hills
  • Senge, Peter M. (1990) The Fifth Discipline, Currency and Doubleday New York
  • Thompson, P. and McHugh, D. (2002) Work Organizations, 3rd edition, Palgrave.
  • Weber, Max (1947) The Theory of Social and Economic Organization. Translated by A. M. Henderson & Talcott Parsons,The Free Press, April 15, 2009, from http://www.hrmguide.co.uk/history/classical_organization_theory.htm
  • Subway Web Team (March 23, 2009) Subway Homepage, Retrieved on 03 Dec 2009 from http://www.subway.com/subwayroot/AboutSubway/history/subwayHistory.aspx

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