The overall objective of the assignment is to develop my knowledge of Management Virtual Organization and their management structure. I have studied these organizations mainly through their corporate website.
I have also referred to the annual report of these organizations. These resources provide and in-depth comprehension of management structure, business culture, corporate responsibilities, mission statement, corporate vision, etc.
In total I have presented an overview of three multinational organizations and two MVO (Management Virtual Organizations)
My work include SWOT analysis, advantages and disadvantages of organizational structure, characteristic of effective global structure, features of virtual organizations, etc.
Last but not the least, wherever applicable, I have provided suitable recommendations to Furniture Works on key areas such as mode of communication, organizational structure, such as matrix structure, joint venture, setting up a virtual organizations, etc. Based on my research, I have tried to include all strategic aspects of MVO in my assignment.
I would like to particularly acknowledge my college LONDON SAM for their course material provided by them which enabled me to enhance my management skills and abilities.
I would like to express my profound gratitude to my module Prof. Dr. Rajini Chandrashekar who shared her expert knowledge, provided assistance and encouragement to successfully complete the task assigned
I would also like to offer my sincere thanks to Pepsico, Intel Corp and Gap Inc for publicly making available their annual reports and other valuable information on their corporate website. This information provided sound understanding of the organization.
This assignment is my own work I have provided appropriate references throughout the assignment
I have referenced these source within the assignment and provided full description in the bibliography
Introduction of the task:
Investigate three multinational organization carrying business across different cultures. After carefully researching write a report on cultural understanding that management of these organizations have developed.
Objectives of the task:
- Investigate three multinational organizations practice of cultural understanding
- Prepare report on the cultural understanding of three investigated organizations.
Subject: Report on Value of cultural understanding that management of the organization have developed.
I have researched three multinational organizations PEPSICO, INTEL and GAP INC
Company 1 - Pepsico
Pepsico is a multinational corporation with a large variety of products and has its offices/business in places such as North and Latin America, Europe, India and China.
The company's lofty vision is as follows:
"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate- environment, social, economic- creating a better tomorrow than today."
The company carries out their vision by undertaking programs that are environmental friendly, activities that benefit the society and enhancing shareholder value by making PepsiCo a truly sustainable company.
Company's Mission and business culture
Pepsico's mission is to continue to be the world's premier consumer products. Company focuses on convenient foods and beverages. They endeavor to produce financial rewards to investors while providing opportunities for growth and enrichment to their employees, their business partners and the communities in which they operate. In everything the company does, they strive for honesty, fairness and integrity.
Pepsico's mission for 2008 was "Performance with Purpose" which the CEO of Pepsico - Indra K. Nooyi elaborates on when she says this mission "combines the two things that define what we do-growing the business, and acting as ethical and responsible citizens of the world"
Company's values and philosophy
The company's values & philosophy are centered on being a socially and environmentally responsible company. Therefore every policy it formulates and decision it makes is based on the following guiding principles:
- Care for customers, consumers and the world they live in.
- Sell only products that they can be proud of.
- Speak with truth and candor.
- Balance short term and long term.
- Win with diversity and inclusion.
- Respect others and succeed together.
Company 2 - Intel Corporation
Intel is a computer chip manufacturing company. Its processors are found on a variety of computers and other electronic devices the world over. Intel was founded in the year 1968 by Bob Noyce and Gordon Moore. Intel Corp was also ranked one the 100 best corporate citizens in the world by CRO magazine at number 13 on the list.
Intel's vision is to continue to push the boundaries of innovation in order to make people's lives more exciting, more fulfilling, and easier to manage. It is a company that's always in motion, fueling an industry that never rests. This enables them to collectively deliver better solutions with greater and faster benefits.
Company's Mission and business culture
Intel's mission is to create bold advancements in technology that can continually enhance people's lives. It believes in making significant investments in innovation and promoting the concept of sustainability in their operations and in communities worldwide.
The company strives to motivate imaginations and enable positive change that improves their quality of life and make their lives more interesting.
The company describes its vision in two words 'Leap ahead.' Their mission is to find and drive the next leap ahead - in technology, education, culture, social responsibility, manufacturing and more - to continuously encourage their customers, partners, consumers and businesses to join them as they continue to take exciting leaps forward.
Company's values and philosophy
Intel's code of conduct ensures that they maintain the highest standards of integrity in their operations. The company delights their customers, employees, and shareholders by persistently delivering the platform and technology advancements that become essential to the way the people work and live Their values and philosophy include:
- Customer Orientation
- Risk taking
- Great place to work
- Results orientation
Company 3 - Gap Inc.
Gap Inc. which was established in 1969 runs the largest number of retail specialty stores across the globe. It runs the world's five renowned clothing brands: Gap, Banana Republic, Old Navy, Piperlime and Athleta.
Late Don Fisher, the founder of Gap Inc. established the company by conceiving a simple idea of making it easier for the masses to find a pair of jeans.
This year CRO magazine has ranked Gap Inc. one of the "100 Best Corporate Citizens" among major U.S. companies for the fourth straight year.
The company's headquarters offices are located San Francisco. Their product design offices are located primarily in New York City, San Francisco and London. As of August 2009, they operate 3,145 stores across the globe
Including countries like United States, Canada, United Kingdom, France, Ireland, Japan, etc.
The company's vision is to continue to seek to investment in initiatives that will help drive traffic, deliver inspiring product, and enhance the shopping experience. It is carrying out is vision by introducing new store prototypes as it works to modernize their fleet and improve productivity.
Company's Mission and business culture
The company's mission is upholding strong commitment to serve the needs of their customers while delivering quality earnings and long-term value to their investors and shareholders.
Gap's product value is to make it easy for people to express their personal style. The company is continually developing all its brands to exceed their customer's expectation. This is achieved by creating innovative and inspiring designs, based on the experience and through communication with people about their likes, dislikes, needs, expectations, etc.
Company's values and philosophy
Gap's values and philosophy revolves around the following 4 key principles:
- Think: customers first
- Inspire: creativity
- Do: what's right
- Deliver : results
The company makes pivotal decisions keeping in mind the customers' needs and expectations. They believe in creating quality products that exceed customer expectations.
They inspire creativity by challenging the status quo. Innovative, creative anew ideas and ways of working are the key element in their business culture.
The company attaches equal importance to both the process and the outcome. They believe that how they do business is as important as what they do. Honesty, integrity, sharing are the driving forces of their business culture.
Finally they are committed to deliver the best results possible. Taking responsibility, setting priorities and meeting their goals are an integral part of their business culture.
Based on our research on the above 3 companies it can be concluded that all the 3 organization share the same focus which is to enhance their cultural understanding by constantly identifying the needs of their clients and delivering to their needs by investing in continuous innovation thereby improving the quality of life of the people.
Introduction of task 2
This task outlines the management practice adopted by 3 organizations facing different cultural needs. The task covers the varied management practices of the organizations followed by formal and informal structure of the organization.
Objective of the task:
- To identify the management practices adopted by the 3 organizations chosen in task 1 who are operating in different cultures.
- To write a short and detailed report on management practice adopted by the organization.
- The report should also include the formal and informal multicultural relationships developed in the organizations.
1. Organization Structure
PepsiCo is an adaptive organization, as they are continuously seeking constant improvement and keeping new ideas in the marketplace while its products progress along their life cycles. PepsiCo has a decentralized organizational structure, with operational decisions made within the separate business units while being governed by policies at the corporate level. PepsiCo has a Code of Conduct that is universal in the sense that it applies to all businesses owned by PepsiCo.
- PepsiCo offers opportunity to encourage their employees to take initiative and to participate in decision making
- As per their website the company has a "Professional but Fun" corporate culture which means employees are free to achieve their goals without any burden of structure.
- Their management is casual and accepts innovative ideas from their each employees whether they are from the top level or the lower level
- PepsiCo has approximately 200,000 employees worldwide.
- The company believes that it is the employees that make the company.
- Like all other multinational corporations PepsiCo has a diverse workforce with employees from all different races, cultures and faiths.
- The organization provides comprehensive benefits such as health care to motivate their employees
- It also provides for their employees retirement plans with an objective to addresses their retirement financial needs
- They provide short and long-term educational loans, scholarship programs and tuition reimbursements
- Apart from the health care, they also provide for dental plans, vision and other benefits
- Provide insurances such as life, accident, short-term and long-term disability.
5. Decentralized management
- The authority and decision making power is distributed.
- Operational decisions are made at separate business units
- Corporate level governs the business policies
- Organization is led by experienced and skilled management
6. Training and development
- PepsiCo provides continuous training to retain its talented employees
- It provides training on the company values, code of conduct, etc.
- The company significantly invests in training and professional development to retain exceptional employees
- As per their annual report for 2008, the company is developing a new learning management system "PepsiCo University" to provide functional leadership training to its business associates across the globe
7. Recruitment and Selection
- Recruitment and selection is decentralized
- The company's recruitment policy is to achieve employment equity
- Women and minority groups are given equal opportunities for recruitment purposes
- The company's recruitment policy to promote diversity
Management Practice adopted by Intel Corporation:
1. Organizational Structure
- Intel is a leading organization providing in information technology. The organization consists of large self-governing divisions. Intel uses matrix management organizational structure with cross-functional divisions including information technology, knowledge management, human resources, finance, legal, change control, data warehousing, common directory information management and cost reduction teams. This enables Intel to effectively respond and adapt to the ever-changing global conditions.
Since Intel is in the processor manufacturing industry, its culture consists of the following core components as per their website:
- Constant innovation.
- Customer orientation
- Results orientation
- Risk taking
- Great place to work
3. Recruitment and selection
- Intel has a decentralized recruitment and selection policy
- Intel has approximately over 83,000 employees worldwide.
- The company believes that their employees are their greatest investments
- To further strengthen their culture and values, Intel hires and retains the best and the brightest minds
- Intel's centralized human resources development division provides quality service and support worldwide.
4. Company's mission and values
As per their website their mission and values are as follows:
- Delight their customers, employees, and share holders by restlessly delivering platform and technology advancement that becomes essential to the way they work and live
5. Decentralized management
- Intel has a decentralized management structure. The employees of Intel are encouraged to come up with new product ideas on their own. Considering the nature of the industry it is in, Intel believes that its employees cannot be innovative and productive if there are numerous constraints imposed. This decentralized management structure empowers their workforce and therefore Intel is the most competitive organization in the industry.
- Intel offers comprehensive compensation and benefit programs to motivate their employees based on their performance
- It also provides long-term financial security and protection to its employees and their families
- As a motivation Intel offers cash bonus plans and cash rewards to their employees.
Management Practice adopted by Gap Inc:
1. Organizational structure
- Gap Inc. which was established in 1969 runs the largest number of retail specialty stores across the globe. It runs the world's five renowned clothing brands: Gap, Banana Republic, Old Navy, Piperlime and Athleta. The organization is committed to provide quality products to customers around the world, to enhance profitability for its shareholders and to make a difference in the lives of people they operate.
- As per their website, Gap Inc. has 4 key principles "Think customers first, inspire creativity, do what's right and deliver results"
- They inspire creativity by challenging the status quo. Innovative, creative anew ideas and ways of working are the key element in their business culture.
3. Training and development
- The company offers training and development programs to all their employees worldwide
- They have sessions and online job coaching and in store experiences.
- They have welcome program for their new employees to introduce their business culture, customer's brands, and their policies and procedures.
4. Company's mission statement
- The company's mission is upholding strong commitment to serve the needs of their customers while delivering quality earnings and long-term value to their investors and shareholders.
5. Decentralized management
- The company has franchise agreements with local businesses in many countries
- Gap Inc. ensures that all the employees from top level to bottom including Board of Directors meet the legal requirements around the world and also operate responsibly and with integrity.
- The company believes that their employees are what make them great company. Their workforce worldwide consists of bright, innovative, and passionate individuals working in various divisions such as product design, merchandising, distribution, marketing etc.
- Gap Inc. upholds pluralism in the workforce. It promotes an inclusive work environment. Commitment, flexibility and team work are the hallmark of their employees. They offer exiting opportunities to learn stretch and grow.
7. Recruitment and selection
- Recruitment decisions are decentralized
- The company believes in equal opportunity without regard to race color, age, gender, religion, national etc
- They expect every employee to prevent discrimination, and harassment in the workplace
- Every organization designs their structure to interact between members of organization
- There are two types of structure
- Formal structure
- Informal Structure
FORMAL STRUCTURE OF ORGANISATION
- This Structure is the hierarchical structure in which organization organize to assign their employees responsibility according to their positions and ability i.e "Who will report to whom"
INFORMAL STRUCTURE OF ORGANISATION
- Informal structure is a relaxed and informal way of communicating with the members in the organization.
The Management practice to be adopted by Furniture Works:
- To design organizational chart because that help you to form a structure in the organization.
- Due to the formal Structure the organization meets its objectives.
Introduction of task 3
I have conducted research on 2 organizations that operate in a virtual manner. Based on my research I have identified the suitable areas that management of Furniture works needs to look into when setting up a virtual organization
Objective of the task:
- We have to carry out research into 2 organizations which are operating virtually i.e. in virtual manner.
- After carrying out successful research, you have to recommend certain areas where management of Furniture Works has to concentrate while it is setting up a virtual organization.
- Produce a presentation showing your recommendations to the management of Furniture Works.
I have conducted research on the following 2 organizations that operate in a virtual manner:
I selected the above-stated organizations as they are mainly in the business of selling products and services. As Furniture works operations will entail selling of furniture, these organizations can be sound role models for Furniture works to develop its best practice.
Amazon.com started operations as a virtual organization in 1995. They offer the largest variety of products worldwide. The company caters to 3 groups of customers: consumer customers, seller customers and developer customers. They also earn revenue through online advertising.
As per their website their vision is:
"To be the earth's biggest customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."
As state above amazon.com has 3 major groups of customers:
They provide goods to consumer customers through their retail websites. They provide wide range of variety, competitive prices and utmost convenience to their customers.
Amazon.com provides a platform to seller customers enabling them to sell their products on amzon.com.
The developer customers of Amazon.com use their website services to access technology infrastructure that they can use.
PerkettPR is a virtual organization that serves its diversified clients as a Public Relations Agency. The company works comprehensively for its clients assisting them to write effective press material.
As per their website their mission is:
"You're not our only client, but you'll feel like you are."
PerkettPR provides exceptional public relations services by bringing superior talent to companies at a reasonable price. The company also provides planning services and next generation communication solutions to keep their clients on the top.
According to the company's website 99% of their work is done over the phone. Therefore it saves considerably which is passed on to its clients through their reasonable pricing policy.
Features and characteristics of virtual organization
Based on my research of the above-stated organizations, I have summarized their characteristics as follows:
- These organizations are web-based networks of various independent entities such as buyers, sellers, manufacturers, service providers, etc.
- They operate across geographical boundaries and time
- These entities are connected through internet or other forms of information technology.
- They share revenue, costs, clientele, market base, etc.
- They operate with minimal infrastructure costs such as occupying costs, etc.
Recommendations to Furniture works on management of virtual organization:
Setting up of a virtual organization
"In order to have a rapid response to the market (customers), companies have to reorganize themselves around response to customer demand, forging tight relational and technological bonds with core suppliers and longterm customers. That is the shape of the corporation of the future, a virtual corporation." Pastore, R. (1993). A Virtual Visionary, CIO, p. 46, July 1993.
As per the above-stated excerpt, Furniture works needs to reorganize itself by setting up a virtual organization in order to competently respond to the global market.
In order to survive and thrive in a global market which is ever evolving, it is very important for an organization like Furniture works to be flexible and expand its operations globally.
Furniture works should reorganize itself into a virtual organizational model where it collaborates with various independent entities bringing together their expertise, skills, know-how and selling the furniture to the clients across the country under the tag of Furniture works. It should outsource the production and delivery components of the business. In this model, Furniture works will have to set-up its website through which it will undertake marketing and promotion activities of furniture across the country. When a client visits the website and intends to buy furniture from Furniture works, it will outsource the production and delivery of the furniture to the client's closest available business entity. This will ensure timely delivery of products to clients.
The setting up of a virtual organization can be accomplished in 3 stages:
Stage 1 - Research for identifying business entities
This is the 1st stage where Furniture works being the originator of a virtual organization would have to identify entities to enter into business collaboration. In order to get the right people and the right combination Furniture works would have to conduct extensive research in the following areas:
- Market expansion
- Customer demands and needs
- Specialized skills of various business entities
- Degree of reliability of various business entities
- Efficient means of inter-organizational communication
Based on the results of the research undertaken Furniture works will identify business entities which will be a part of the virtual organization and will work in co-ordination.
Stage 2 - Dissemination of information and arrangement of infrastructure
After identifying the business entities, the second stage would enter into business collaboration with those business entities. This will entail dissemination of information about business plans and its implementation, business strategies, role of each business entity, right, privileges and restrictions of the business entities, etc. At this stage Furniture works will also reach an agreement with all the business entities involved on the means of communication.
Cost and revenue allocation:
At this stage it will be necessary for Furniture works to reach an agreement between all the entities involved for distributing the costs and revenue. The verbal agreements will have to be translated into legal agreements between the parties. Cost price and the selling prices will be pre-determined. Furniture works will receive the gross revenue which will then be allocated based on a pre-determined proportion to the business entities by Furniture works.
Means of communication:
Effective communication is a key to the successful implementation and long term sustenance of a virtual organization. An important step in this stage will be that Furniture works in consortium with all the business entities will have to decide on the means of communication in order to interact with each other effectively. This may include internet, intranet, worldwide web, electronic email, video-conferencing, etc. Extensive use of information technology is the backbone of any virtual organization and has overcome the barriers of distance and time.
Stage 3 - Execution
In this stage Furniture works will execute the virtual business operations. Furniture works will have to assign specific tasks to the business entities. The business tasks will have to be carried out by the various entities in the most efficient and economical manner by delivering quality products to the clients. Furniture works will have to continually oversee the performance of these business entities.
By converting into a virtual organization, Furniture works will be able to emerge as a competitive company operating efficiently with minimal overhead costs. As a virtual organization Furniture works will reap the following benefits:
- It will enable Furniture works to respond to constantly changing customer demands and market environment in a competitive manner.
- It will be able to provide customised products addressing to the specific needs of the customers.
- It will be able to provide a wide variety of quality products based on the expertise, skills and know-how of its business partners across the country.
Introduction of task 4
In this task I have prepared a report describing the various aspects of effective online and direct communication that are available to Furniture works.
Objective of the task:
- We have to submit a detailed report on various ways of online and direct communication ways that are available in the today's world.
- The management of Furniture works is worried with regards to the communication problems which would be resolved by submitting the affore-mentioned report.
Communication is an integral part in any business. There are various forms of communication available to an organization. They are broadly categorized as follows:
- Direct communication
- Online communication
Direct communication which is also known as the traditional form of communication. The different forms of direct communication are as follows:
Written communication - letters, memos, and reports
The traditional written communication in the form of letters, reports is still one of the most commonly used ways to communicate in business. This form of communication is used to communicate to business partners, clients, shareholders, financial institutions, etc.
This is a very formal means of communication. Business organizations generate and issue annual reports to its clients, shareholders, financers, bankers, etc. to communicate the overall performance of the business. Letters are also written for inter-office communication. There are many organizations that still communicate with their existing and prospective clients through letters. Memos are used to communicate with employees and management.
The advantage of written form of communication is that it allows you to customize it making it suitable for specific recipients. In addition written communication can be a great trail to refer to in unfavorable circumstances such as lawsuits.
Telephones are and continue to be a form of direct oral communication that cannot be replaced. Telephones are used as both formal and informal means of communication. Telephone conference allows businesses to communicate with multiple people over the phone simultaneously. Therefore communication is made possible across geographical distance. It is the most easily accessible form of communication. Many virtual business organizations use telephones as an important medium of communication with their clients. This includes customer service, customer complaints, and customer inquiries administered over the telephone.
This form of direct communication entails face to face meetings. Meetings can be convened for different group of people with various objectives. This would include:
Annual General Meeting for shareholders to communicate financial information
Meeting convened with prospective clients to communicate products and services offered by the organization.
Meeting convened with employees of the organization to communicate Human Resource policies.
Meeting convened with business partners to discuss business plans, strategies, and management.
The advantage of this form of communication is that people meet face to face and this fosters discussion, brainstorming, responsiveness, agreement, etc. Strategic business decisions can be unanimously made in meetings. Issues can be collectively and efficiently addressed in meetings. Therefore face to face meetings are still one of the most commonly used form of direct communication.
The most important advantage of online communication in a business is that it is up and running 7 days a week and 24 hours a day.
The different forms of online communication are as follows:
The website of a company is a wealth of information and communication. It can be a great source of communication for the clients, potential business partners, investors, stakeholders, etc. An organization can communicate various aspects of its operation to their existing and potential clients, business partners, etc. by posting the following information on its website:
- Goods and services offered
- Exchange and refund policies
- Organization's vision, mission statements, code of conduct, etc.
- Annual reports that reflect financial viability of the organization
- Contact information
- Branches and locations
An increasing number of organizations are now doing all their business online and the segment of online clients is growing. Therefore evidently websites as a form of online communication is becoming more and more powerful. The cost of maintaining a website is reasonable. In addition, the website provides for a convenient and efficient way of communication.
Electronic mail commonly known as email is the most used method of online communication. It has significantly replaced the letters and the memos that were mailed in the past using postal services. Time is of essence in an organization. Virtual organizations that work in collaboration with its business partners use email to communicate as this not only an effective but more importantly a rapid way of communication. When an organization uses emails as opposed to traditional means of communication, the cost savings are substantial. Emails can be used to communicate with multiple people at the same time as by just composing one email it can be sent to multiple recipients simultaneously. In addition the email options now available allow you to track the delivery and reading of the emails by the recipients.
Email is also used for sending important documents. For example documents can be scanned and converted into a PDF format and sent through email electronically. This can save the expenses which the organization would incur otherwise on postage, stationery such as paper, envelopes. In an organization where communication is voluminous resorting to email can result in tremendous savings.
Intranet Instant Messaging
This form of online communication in Virtual organizations which have several business partners scattered across the country or the globe. This is very much similar to publicly available online chatting such as MSN Messenger, Yahoo Messenger, etc. However the only difference is that the organizations limit the communication network to be available only to its business partners through intranet. The advantage of this form of communication is that it is real-time and instantaneous. The parties communicating through intranet instant messaging are online at a given point in time and therefore the communication is real-time. This can optimize the organization's inter-office communication because it is answered in seconds and in some circumstances seconds can count. For instance if one of the business partners employee is unable to answer a customer inquiry which is beyond her scope of knowledge, she can right away send an instant message to her supervisors and in all likelihood she will receive the response from at least one of the supervisors within seconds. This keeps the turnaround time for the customer as minimum as possible.
Messages can also be transmitted through intranet instant messaging for parties that are not online but once online they are able to retrieve those messages.
Conclusion and recommendation
Although the direct form of communication is commonly prevalent, in my opinion Furniture works should use the online communication as it not only saves time and costs but is an effective form of communication.
Introduction of task 5
In this task I have prepared a report for Furniture works making suitable recommendations to the management on creating effective global structures.
Objective of the task:
- The management of Furniture works is concerned with the threats that they can encounter while operating overseas.
- Being a management consultant you have to make recommendations to the management on how you can overcome the issues being faced, the organization structure and the authority and responsibility to be assigned.
With world getting smaller and smaller globalization has become a very strong driving force. The technological advancements in computer networking and telecommunications have enabled even small business organizations to make an entry in the global market.
Following is the SWOT analysis of being a global business organization:
- Internationally competent
- Diversified base of revenue and profitability
- Pluralistic nature of the organization
- Large base of customers and markets
- Economies of scale
- Diverse workforce
- Competitive market
- Excessive dependence on technology
- Weak management controls
- Lack of communication and co-ordination
- Significant potential for organization's growth
- Access to cheap labour, raw material and resources
- Access to best international skills and technical know-how
- Room for product and business expansion
- Risk associated with social, cultural, and legal environment
- Changes in country's economic policies
- Changes in governing political parties
- Online security risks
Factors affecting the choice of business structure:
An organization has to consider different aspects before selecting the right global organization structure. Following are some of the aspects that an organization should review:
- Study the global market and the business driving forces
- Assess the factors that cause management challenges
- Align the vision, mission and goals of the organization with the appropriate organizational structure
Characteristics of an effective global structure:
An effective global structure has the following characteristics:
- Adapts rapidly and in the best way with the changing environment
- Decentralized decision making
- Free mobility of resources
- Empowerment for managers and employees
- Effective communication and coordination
Types of global business structures:
There are different types of global business structures and an organization should choose the one that best suits its needs.
This structure is based on the functions performed in the organization by the unit or division. For example the organization chart for a functional based structure consists of the President, production department, marketing department, sales department, customer support department, legal department, administration department, etc.
As the name suggests this structure is based on organizing the units/divisions on the basis of the various types of products and services offered. An organization producing 4 types of products A, B, C, and D will have 4 different divisions namely Product A department, Product B department and so on.
This structure is a mix of function and product structures and therefore has the best of both the worlds. A matrix structure is made up of functional and product lines of authority operating concurrently in an organization. This is achieved by authority flowing vertically within the functional divisions and authority flowing across within various product divisions.
Reasons why Furniture works should choose matrix structure:
As mentioned earlier it is imperative to find an organizational structure that works best for the organization, as the wrong set up could adversely affect operations in the organization. As Furniture works is embarking on a new phase of being global I strongly recommend the matrix structure for the following 2 main reasons:
As Furniture works enters the global market it will offer a diverse set of furniture depending on the local demands. It will have a varied complex business environment and therefore will require functional specialist. By using the matrix structure, Furniture work can draw the advantages of functional skills to strengthen their products and adapt to the local changing environment.
The matrix structure will enable Furniture works to benefit from economies of scale and effective and collective use of resources. It allows free flow of resources between the divisions and units depending on the needs and requirements of the organization.
Advantages and disadvantages of a matrix structure:
Advantages of a matrix structure:
- Allows adjusting to local business environment
- Optimum utilization of product and function specialists
- Optimum utilization of tools and equipment
- Cost efficient operations
Disadvantages of matrix structure:
- Conflict and confusion due to dual line of authority
- No clear definitions of roles and responsibilities
- Imbalance of power and authority between functional and product divisions
As the advantages of matrix structure far outweigh the disadvantages of matrix structure, Furniture works should consider setting up a matrix global structure.
How to create an effective global structure?
In order to create an effective global structure Furniture works needs to go through a number of steps which are broadly categorized as follows:
This can be further categorized in to specific stages. Furniture work should go through the following specific stages to create an effective global structure:
1. Identifying organizational needs:
Identifying the organizations goal is the most important stage in the formation of a global organizational structure. The organizational goals, the objective and the function are the key basis of developing global business and management strategies.
2. Assess the current organizational structure:
It is important to asses the current organizational structure by identifying its strengths and weaknesses. This will provide a sound guideline for selecting the right global structure that suits the organizational requirements.
3. Understanding the local social, political and cultural environment:
Going global is not an easy task as one cannot disregard the risks posed by local social and cultural environments. For instance an organization may have huge potential for growth if it enters in a country like Sri Lanka simply because of the dense population. However it can be extremely tough to set up a foreign venture due to the unstable and volatile social and political environment.
4. Review the different organizational structure:
The organization should weigh the pros and cons of all the prevalent global structures. In addition it is very significant to review the legal implications associated with global structures.
5. Identifying the basis of selection for the global structure:
A key feature of an effective global structure is that it is adaptable, flexible and highly responsive to the organizational goals. Therefore these factors should be considered when selecting the most effective global structure.
6. Identifying the method of entry:
In order to enter the global market, an organization has 4 options of entry available:
- Joint Venture
- Investment venture
It is imperative that the organization should review all the above forms of entry and assess them based on their positive and negative implications on the organization's strategies.
7. Organizing and communicating steps and procedures
Once the organization has decided on the global structure and the form of entry in the global market, it is crucial to communicate this structure across the organization. An effective global structure should always promote effective communication. Steps and procedures necessary for setting up the global structure should be shared not only with management but will employees. This will instill a sense of empowerment in the employees and boost their morale and productivity.
Recommendations and conclusion:
After carefully reviewing the organizational goals and strategies of Furniture works, I would like to recommend the following:
- Furniture works should enter the global market by setting up joint ventures with competent local partners. This will enable Furniture works to better understand the local demands and the social, political, cultural factors that affect the global business environment.
- Furniture works should consider matrix structure as this structure aligns best with Furniture works' goals, objectives, functions and business strategies. This will enable Furniture works to benefit from the grid of specialized functional and products structures.
In conclusion, I would like to emphasize on the importance of monitoring the performance of the global structure chosen on a continuous basis. It is highly recommended that Furniture works should establish benchmarks and assess the organization's performance against those benchmarks. This will be a sound basis for formulating future business strategies and policy-making.
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