Change that exists in today’s economy


World appears to be converging economically, politically and culturally. The national borders have become irrelevant, huge developments in information, communication and technology has taken place. Ownership patterns of organizations around the globe have become more complex like joint ventures, cross-border acquisitions etc. global strategies have merged in the production of goods and services, distribution and management of labour. These have had an immense impact on business activities. The world economy is now more closely interlinked and finance has become a global resource.

Overview of the recent financial crisis

The problems with the repayments of subprime mortgages in the US set off the concerns on lending around the world in august 2007.this has now slowly crept and in September 2008 with the fall down of Lehman brothers followed by a bank bailout, including a merger proposal for Lloyds and HBOS the world economy has gone into a credit crunch. A commodity price has risen rapidly. Much of turbulence has created resulting in redundancies, bankruptcies and nationalizations. (Northern Rock nationalized on Feb 2008, Woolworths got bankrupted, IBM layoffs still going down today etc.)

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Hence change has brought uncertainties and insecurities in today's economy to a great extent. Clearly all the organizations and management practices.

Rise of commerce

Industrialization was primarily concerned with the transition from a subsistence economy to a money-market economy; the mechanism which triggered off this change was the factory system owing a lot to the merchant class in Britain. Rowntree's along with Cadbury are examples of well-known paternalistic employers back then. The early factory system stresses on its adhoc, trial and error nature and antagonistic relationship between owners and employers based on class which was later analysed by Marx.

British industrial practices, methods and technologies were diffused to other European countries and to USA with similar emphasis on employer-employee relationship. However as the nineteenth century progressed organizations grew more complex in size and number and there was a need to replace the “Rule of thumb” approach to organizations.

b) Evaluate the strengths and weaknesses of bureaucratic organizations
Ans: - Max Weber believed that bureaucratic organizations were the dominant institutions of industrial society. He recognized its technical superiority. For Weber, bureaucracy entailed a departure from traditional forms of authority and the focus was on Rational Legalism, to achieve efficiency. By analyzing the organizational innovations in Germany at the turn of 20th century, Weber identified the core elements of bureaucracy as division of labour, merit based recruitment, hierarchy of authority, clearly defined goals etc. However he also feared it would be a threat to responsible government, unless there was strong political control. Weber identified three types of legitimate authority.

  • Rational legal.
  • Traditional.
  • Charismatic.

Advantages of Employing Bureaucracy

This report highlights little strength of bureaucracy ac follows;

  • Bureaucracy serves as a basic foundation for a better understanding and application of
    newer organizational design approaches.
  • Operational efficiency and effectiveness can still be improved despite of the changes
    in technology and worker attitudes, by the selective application of such bureaucratic
    principles as the division of labour, hierarchy of authority, consistent rules and
    procedures, placement on the basis of expertise etc.
  • Social research reveals that many employees intellectually thrive in bureaucratic
    environments. According to this research bureaucratic have higher levels of
    education, personal responsibility, self-direction, and open-mindedness.
  • Benefit of Bureaucracy for employees also includes job security, retirement pension,
    disability coverage etc.

Disadvantages of Employing Bureaucracy

Like any other organisational model, the bureaucratic theory also has some weak points. The discussions earlier indicated that the human element, both internally and externally, is treated impersonally. In return, the company is treated the same way by the employees. This means that there is no deep-rooted desire on each and every personnel to do their part in achieving the goals of the company. Other claims that the use of a rigid system would trigger red tape. This ultimately defeats the purpose of imposing a system in the first place.

All in all, if a company which doesn't have the environment that will complement the bureaucratic theory essentially signed a death wish if it uses it nonetheless. A good example would be the case of Procter and Gamble. Studies on the said company maintained that it has a slow process of innovation. ( 2003) The creation of new brands and other market expansion initiatives has been considerably sluggish such that it has been significantly been left behind by its closest competitors in the retail industry. ( 2002) This slow development on the part of the company tends to limit what (2006) coined as bureaucratic inertia. The concept basically indicates the incapability of the company to trigger developments based on certain undertakings. The company dealt with this problem not by eliminating the implementation of the bureaucratic model in their operations. In its place, they opted to highly differentiate their products in the market to ensure increased performance. ( 1996) In this case, abandoning the tried and tested principles of the bureaucratic model was out of the question. In its place, the management did their jobs that formulated on their discretion a way for their products to complement the existing system. Though their standing in the market is still unstable, this is not because of their business policies to implement bureaucracy. It is because of the intensity of the competition in the international retail market.

Alternative forms of organisation development-In search of new paradigms

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Since 1970's there has been a major conceptual shift in the organizations of work and production. As some writers claims, the era of “Post Fordism” began.

Japanese Model: Lean Production

The model by Japanese corporations (1970's and 1980's), does not fit Weber's ideal type of Bureaucracy. Particular focus was given on shop floor practices and quality. (Quality circles, Total quality management, W.E. Deming) Some of the characteristics include:

  • Bottom- up decision making
  • Less specialization
  • Job security
  • Merging of lives and private lives
  • Consensus decisions
  • Zero inventories
  • System of Just in time etc.

Usually “culture” is seen as the key element in accounting for the growth of Japanese firms.

Examples: Honda, Nissan, Toyota.

Culture- Excellence Approach

Culture is viewed as a pervasive factor which shapes the entire environment of business. Attempted by Tom Peters & Robert Waterman, 1982; Rosabeth Moss Kanter, 1989, and Charles Handy, 1989, to predict and promote the ways in which companies operate in the future in order to become successful.

Geert Hofstede (1991) identified a number of key cultural values that can be used to explain differences in business practices and worker behaviour.

The work of Peters and Waterman challenged and rational theories of management. According to him, the main attributes of excellent companies are identified by flatter structures, innovation, entrepreneurship, middle management staff, reward systems etc.

Hence, the importance on culture, individual achievement and all-round excellence was emphasized throughout this distinct approach.

Learning organization

It is believed that Mintzberg's “Adhocracy” (1988), comes into useful practice. Committees are formed then and there to handle matters as and when a matter arises, also called the “Learning Organization”, there is less vertical hierarchy and more delayering.


Ad-hoc structures are best suited for industries where the procedures are non-predictable such as Interior designing, Microsoft and fashion.
Another example would be traditional networks such as “Chinese Family business” (1992). It is mainly small medium firms operating in low trust environment; it is based on fundamentals of Quanxi (connections), dignity and respect (Mianzi). These systems are known for speed and flexibility and they allow for opportunistic diversifications.