Identifying Structural Characteristics Of A Firm Commerce Essay

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Every firm should have a strategic plan which specify the future direction of the business, the responsibilities of the managers should be organized to achieve the strategic plan, for this firms have their organizational structure that identifies responsibilities for each job position and relationships among those positions, the organizational structure also indicates how all the job responsibilities fit together, the organizational structure affects the effectiveness and efficiency with which the firm produces its product and therefore have an impact on the firm's value, all business must make decision when choosing a structure that fits it's business goals, so therefore needs to understand different types of organizational structure, compare them with each other and try to reduce the disadvantages or negative impacts that the chosen structure might have on the business goal.

4.2.2. Organizational height: organizational structure can also be defined by its height, a tall organizational structure implies that there are many layers from the bottom of the structure to the top, a short organizational structure means there is no much distance from the bottom of the structure to the top because there are not many layers of employees between the bottom and the top.

4.2.3. Line versus staff position: the job position in an organizational structure is classified as the line or staff position, they are established to make decision that achieve specific goals, the staff position supports the effort of the line positions, the staff positions provide assistance to the line positions and authority to make decision is assigned to the line position.

Various types of organizational structure are affected by all the features listed above; the nature of structure that best suits an organization has to do with the objective and strategy the organization. Although many companies still use the centralized, hierarchal structure that has got many rules and regulations, if the firm's strategy fits a centralized kind of structure, there is no need for a change. However, some organizations have a decentralized structure to suit their strategy.

It is important to determine the organizational structure that best fit a particular company. A wrong structure can result into poor communication, poor customer service, poor product development, and some other business problems. Any of these issues can be detrimental to an organization and could result in revenue lost or total failure of the organization. The three main types of organizational structures are functional, divisional, matrix structure and network structure

4.3. Types of Organizational Structure

4.3.1. Functional organizational structure:

A functional structure is defined as a design that groups similar or related occupational specialties together, functional structure is perhaps the most logical and basic form of departmentalization used mainly by smaller firms because it make efficient use of specialized resources and it also makes supervision easier since each manager would be an expert in only a narrow range of skills, Functional structure have some disadvantages which might surface as the organization grows such that functional managers might find it difficult to report to the head and getting immediate response might be an issue, it will also be difficult to control quality as each department may feel isolated from others which will lead to difficulty working with together in unified way to achieve the organization�s goal

4.3.2. Divisional organizational structure:

Divisional organizational structure divides the organization according to the type of work, region, and product and so on, employees are divided based on the product/customer segment/geographical location, it allows for flexibility and quick response to environmental changes. It also enhances innovation but results in duplication of resources because, for example we need to have equipment, for each division. Obviously, it does not support the exchange of knowledge between people working in the same profession because part of them is working in one division and the others are working in other divisions

4.3.3. Matrix organizational structure:

Employees are grouped by both function and products in matrix structure. This structure can combine the best of different structure.

When matrix structure is used individuals report to more than one superior at the same time, it occurs when product departmentalization is superimposed on a functionally departmentalized organization. In a matrix organization, authority flows both down and across. Matrix have some advantages such as added flexibility and it can also increase productivity, raise morale and nurture creativity and innovation, employees also experience personal development through doing variety of jobs, Matrix structure also have some disadvantages, having employees report to more than one supervisor can cause confusion about who is in charge and other difficulties such as personality clashes, poor communication, undefined individual roles, unclear responsibilities and because more managers and support staff may be needed finding ways to reward individual and team performance may be difficult.

4.3.4. Network organizational Structure

Network structure is a modern structure which includes the linking of numerous, separate organization structure to optimize their interaction in order to accomplish a common, overall goal, because it consists of multiple organizations that works together to produce goods and services, a network organizational structure is seen as a more complicated and complex structure than any other structure.

In a network structure, administration is the primary function performed and other functions such as engineering, marketing and finance could be contracted out to other organization, a network organization does not manufacture the products it sell most time, network structure is associated with limited formal structure.

An advantage of network structure is the flexibility that allows the organization to adjust quickly to changes and some of the challenges faced by managers in network structured organization include controlling the work done by other organizations and the vulnerability associated with relying on outside contractors.

5.6. Culture and Performance

Managerial behavior to a large extend shapes the culture of an organization and in turn influence upon its effectiveness. Drucher (1975) relates management with culture, people and performance. Managerial behavior is the determinant of organizational culture and performance.

Performance culture is at the heart of competitive advantage. For many years, competitive advantage required smarter strategies and superior assets. A high performance culture depends on the organization commitment at the highest level, which is to set it in motion and maintain the momentum that safeguards on-going high performance

5.6.1. Culture-Performance Relationships

Organizational culture has the possibility to enhance it�s performance, individual satisfaction, sense of certainty on how problems should be handled and so on, However, if an organizational culture gets out of step the organizational effectiveness may decline, organizational culture and performance are clearly related, recent studies shows that:

� Organizational culture can have an important effect on firm's long-term economic performance

� Organizational culture will perhaps be an even more significant factor in defining the success or failure of firms.

� Organizational cultures that obstruct strong long-term financial performance are not rare; they improve easily, even in companies that are filled with sensible and intelligent people

� Although it is tough to change but if managers understand what sustains the culture organizational cultures can be made more performance enhancing.

The ability to change the way people think is the central attribute of a successful leader, managers must get thousands of employee in an organization to reason in similar ways about the purpose of the business and what they must do individually to accomplish that purpose.

We can summarize the effect of organizational culture on employee behaviour and performance with some key ideas. First, knowing the culture of an organization allows employee to understand both the history of the firm and present methods of operation. This knowledge provides guidance about expected future behaviours. Secondly, Organizational culture can foster commitment to corporate philosophy and values. This commitment generates shared feelings of working towards common goals. Thirdly, organizational culture, through its norms, serves as control mechanism to channel behaviours towards desired behaviours and away from undesired behaviours. Finally, certain types of organizational cultures may be related directly to greater effectiveness and productivity than others.

The need to determine which attributes of an organization's culture should be preserved and which should be modified is constant so there is need for organizational performance measurement.

5.6.2. Organizational performance: Concept and measurement

Organizational performance can bet be explained by the following equations as illustrated by Davis (1986):

Human Performance X Resources = Organizational performance

Human performance has to be mixed with resources such as tools, power and raw material to get overall work performance as indicated by equation. Davis, further explains the human performance as a product of ability and motivation given by equation:

Ability X Motivation = Human Performance

Further, ability is described as the product of knowledge and skill. This is

Knowledge X Skill = Ability

Motivation results from an individual's response to specific situations and the attitudes are affected by situations while determining levels of motivations. Thus,

Attitude X Situation = Motivation

Situational factors include man-made, formal, informal or extra organizational controls such as authority and wage system. These human controls are frequently misunderstood by people, Organizational behavior is represented by motivation as organizational behavior also motivates workers to acquire ability, it is the most significant part of the whole equation of human performance, the importance of organizational behavior is shown by the equation below

Knowledge X Skills = Ability

Attitude X Situation = Motivation

Ability X Motivation = Human Performance

Human Performance X Resources = Organizational performance

5.6.3. Determinants of Organizational Performance

High level organizational performance is possible by effective utilization of its total resources, in broader terms; resources can be described as human, technological and capital and performance in terms of productivity and satisfaction of people.


Integration of these resources is done by people who are engaged for accomplishing organizational goals. Organization takes in raw material, people, information and energy from its environment and transforms or converts them into products and services that are exported to this environment. Therefore there is an interaction of people, technology and external environment.

people form organizations because they have learnt to fulfill their needs more effectively in a group rather than as individuals, they organize to attain division of labor and specialization of efforts, because all these leads to enhanced proficiency which in turn results in greater productivity than individual effort can ever provide, thus an organization is a means to achieve mutual goals more effectively. Explicitly it is a social system therefore it needs a culture that drives it goals and resources.