what are some of the factors that cause organizations to redesign their products or services?

Because the Environment

Considerations of the external environment—including doubt, contest, and resources—are key in determining organizational design.

Learning Objectives

Identify the inherent complexities in the external environment that influence the design of an arrangement's construction

Key Takeaways

Fundamental Points

• Organizational design is dictated by a variety of factors, including the size of the visitor, the variety of the organization 'southward operations, and the environment in which it operates.
• According to several theories, considerations of the external environment are a cardinal aspect of organizational design. These considerations include how organizations cope with atmospheric condition of uncertainty, procure external resources, and compete with other organizations.
• A company in a highly uncertain surround must prioritize adjustability over a more rigid and functional strategy. In contrast, a company in a mature marketplace with limited variability and uncertainty should pursue more structure.
• A company with a low-cost strategy relative to its competition may benefit from a more simplistic and fixed structural approach to operations, while a visitor pursuing differentiation must prioritize flexibility and a more diversified structure.

Cardinal Terms

• strategy: A plan of activity intended to accomplish a specific goal.
• differentiation: A strategy focused on creating a unique production for a item population.

Overview

Organizational blueprint is dictated by a variety of factors, including the size of the company, the multifariousness of the arrangement'southward operations, and the environment in which information technology operates. Considerations of the external environment are a key aspect of organizational design. The environment in which an system operates tin can be defined from a number of different angles, each of which generates dissimilar structural and pattern strategies to remain competitive.

Complexity

Complexity theory postulates that organizations must adapt to incertitude in their environments. The complexity theory treats organizations and firms as collections of strategies and structures that collaborate to achieve the highest efficiency within a given environment. Therefore, companies in a highly uncertain surroundings must prioritize adaptability over a more than rigid and functional strategy. Alternatively, a fixed and specific approach to organizational pattern will capture more value in a mature market, where variability and uncertainty are limited.

Resources Dependence

Another perspective on organizational design is resource dependence theory—the written report of how external resources affect the behavior of the organization. Procuring external resources is important in both the strategic and tactical management of any visitor. Resource-dependence theory explores the implications regarding the optimal divisional structure of organizations, recruitment of board members and employees, product strategies, contract construction, external organizational links, and many other aspects of organizational strategy.

Competition

Another environmental gene that shapes organization design is competition. Higher levels of contest require different organizational structures to kickoff competitors' advantages while emphasizing the company's own strengths. A company that demonstrates strength in differentiation relative to the competition benefits from implementing a divisional or matrix strategy, which in turn allows the company to manage a wide variety of demographic-specific products or services. Alternatively, a visitor that demonstrates a low-cost strength (producing products cheaper than the competition) benefits from employing a structural or bureaucratic strategy to streamline operations.

Identifying External Factors

In because organizational design relative to the environment, managers may find it helpful to apply 2 specific frameworks to place external factors and internal strengths and weaknesses:

• SWOT assay : In this particular model, a company'due south strengths and weaknesses are assessed in the context of the opportunities and threats in the business environment. A SWOT analysis enables a company to identify the ideal structure to maximize its internal strengths while capturing external opportunities and avoiding threats.
• Porter's five-forces assay: This analysis identifies factors of the manufacture'south competitive environs that may substantially influence a company's strategic pattern. The five forces include ability of buyers, ability of suppliers, rivalry (competition), substitutes , and barriers to entry (how difficult information technology is for new firms to enter the manufacture). Understanding these varying forces gives the company an idea of how adaptable or fixed the organizational structure should exist to capture value.

Porter's five-forces model: Porter's five-forces assay identifies v environmental factors that can influence a visitor's strategic design: power of buyers, power of suppliers, competition, substitutes, and barriers to entry.

Smaller, more agile companies tend to thrive ameliorate in uncertain or constantly changing markets, while larger, more structured companies office all-time in consequent, predictable environments. Agreement these tools and frameworks alongside the varying external forces that human action upon a concern will allow companies to make strategic organizational decisions that optimize their competitive strength.

Considering Company Size

The size and operational scale of a company is of import to consider when identifying the ideal arrangement construction.

Learning Objectives

Explain how the size of a company helps determine the organizational structure that optimizes operational efficiency and managerial capacity

Cardinal Takeaways

Key Points

• Visitor size plays a substantial part in determining the ideal structure of the company: the larger the company, the greater demand for increased complexity and divisions to achieve synergy.
• Companies may adopt whatsoever of vi organizational structures based on company size and diversity in scope of operations: pre-bureaucratic, bureaucratic, post-bureaucratic, functional, divisional, and matrix.
• Smaller companies role best with pre-bureaucratic or post-bureaucratic structures. Pre-bureaucratic structures are inherently adaptable and flexible and therefore particularly effective for small companies aspiring to expand.
• Larger companies usually attain higher efficiency through functional, bureaucratic, divisional, and matrix structures (depending on the calibration, scope, and complexity of operations).
• Understanding the varying pros and cons of each construction will help companies to plan their system blueprint and structure in a way that optimizes resources and allows for growth.

Central Terms

• economies of scale: Processes in which an increase in quantity will result in a decrease in average toll of product (per unit).
• Homogeneous: Having a uniform makeup; having the aforementioned limerick throughout.
• economies of scope: Strategies of incorporating a wider variety of products or services to capture value through the ways in which they collaborate or overlap.

Company Size and Organizational Structure

Organizational design tin be defined narrowly as the strategic process of shaping the organisation's structure and roles to create or optimize competitive capabilities in a given market place. This definition underscores why information technology is important for companies to identify the factors of the arrangement that decide its ideal structure—virtually specifically the size, telescopic, and operational initiatives of the company.

Visitor size plays a specially important role in determining an organization's ideal structure: the larger the company, the greater the need for increased complexity and divisions to achieve synergy. The organizational structure should exist designed in means that specifically optimize the effort and input compared to output. Larger companies with a wider range of operational initiatives require careful structural considerations to achieve this optimization.

Types of Organizational Structure

Companies may adopt ane of six organizational structures based upon company size and diversity of telescopic of operations.

Pre-bureaucratic

Platonic for smaller companies, the pre-bureaucratic structure deliberately lacks standardized tasks and strategic sectionalization of responsibility. Instead, this is an agile framework aimed at leveraging employees in any and all roles to optimize competitiveness.

Bureaucratic

A bureaucratic framework functions well in large corporations with relatively circuitous operational initiatives. This structure is rigid and mechanical, with strict subordination to ensure consistency across varying business units.

Post-bureaucratic

This structure is a combination of bureaucratic and pre-bureaucratic, where individual contribution and command are coupled with authority and structure. In this structure, consensus is the driving force backside decision making and authority. Post-bureaucratic structure is amend suited to smaller or medium-sized organizations (such as nonprofits or community organizations) where the importance of the decisions fabricated outweighs the importance of efficiency.

Functional

A functional construction focuses on developing highly efficient and specific divisions which perform specialized tasks. This structure works well for big organizations pursuing economies of scale, usually through production of a large quantity of homogeneous goods at the lowest possible cost and highest possible speed. The downside of this structure is that each division is mostly democratic, with limited communication beyond business organization functions.

Divisional

A divisional structure is also a framework best leveraged by larger companies; instead of economies of scale, however, they are in pursuit of economies of telescopic. Economies of scope simply means a loftier variance in product or service. Every bit a result, different divisions will handle different products or geographic locations/markets. For example, Disney may take a segmentation for TV shows, a division for movies, a division for theme parks, and a division for merchandise.

Matrix

A matrix structure is used by the largest companies with the highest level of complexity. This structure combines functional and divisional concepts to create a production-specific and partitioning-specific organization. In the Disney case, the theme park division would besides incorporate a functional structure within it (i.e., theme park accounting, theme park sales, theme park customer service, etc.).

Strategic Organizational Blueprint

Structure becomes more difficult to modify as companies evolve; for this reason, understanding which specific construction will function best within a given visitor surround is an important early footstep for the direction team. Smaller companies office best every bit pre-bureaucratic or post-bureaucratic; the inherent adjustability and flexibility of the pre-bureaucratic structure is particularly effective for modest companies aspiring to expand. Larger companies, on the other hand, attain higher efficiency through functional, bureaucratic, bounded, and matrix structures (depending on the calibration, telescopic, and complexity of operations).

McDonald'south fast-nutrient restaurants departmentalize varying elements of their performance to optimize efficiency. This structure is divisional, meaning each specific company functioning is segmented (for example, operations, finance/accounting, marketing, etc.).

Because Technology

Technology impacts organizational blueprint and productivity by enhancing the efficiency of advice and resource flow.

Learning Objectives

Recognize the intrinsic structural value of the ever-evolving technological environment

Key Takeaways

Key Points

• Organizations employ technological tools to heighten productivity and to initiate new and more than efficient structural designs for the organization. These uses of technology become potential sources of economic value and competitive reward.
• An example of an organizational structure emerging from newer technological trends is what some have called the "virtual organization," which connects a network of organizations via the internet.
• A network structure is another kind of organizational structure that is heavily reliant upon applied science for advice.
• More than traditional organizational structures besides do good greatly from the advance of technology. Managers can communicate and consul much more finer through using technologies such as electronic mail, calendars, online presentations, and other virtual tools.

Key Terms

• supply chain: A organization of organizations, people, technology, activities, data, and resources involved in moving a product or service from the supplier to the client.
• network: Whatsoever interconnected grouping or system.

Organizational design tin can be defined narrowly as the strategic process of shaping an arrangement'due south structure and roles to create or optimize capabilities for competition in a given market.

Technology is an important cistron to consider in organizational design. Modernistic organizations can exist treated as complex and adaptive systems that include a mix of homo and technological interactions. Organizations can utilize technological tools to enhance productivity and to initiate new and more efficient structural designs for the organization, thereby calculation potential sources of economical value and competitive reward.

Technology: Technology has opened doors to incorporating new and advanced forms of organizational design. This is most notably seen through rapid global communications and the power to constantly and economically exist in contact.

Technological Organizational Structures

An example of an organizational structure that has emerged from newer technological trends is what some have called the "virtual organization," which connects a network of organizations via the internet. Over the internet, an organization with a modest core tin can nevertheless operate globally as a market place leader in its niche. This tin dramatically reduce costs and overhead, remove the necessity for an expensive office edifice, and enable small, dynamic teams to travel and conduct work wherever they are needed.

A like organizational design that is heavily reliant upon technological capabilities is the network structure. While the network construction existed prior to contempo technologies (i.eastward., affordable communications via net, cell phones, etc.), the existence of complex telecommunications networks and logistics technologies has greatly increased the viability of this structure.

Technology and Traditional Structures

Technology can also touch on other longstanding elements of an organization. For example, data systems allow managers to take a much more than analytic view of their businesses than before the advent of such systems. Managers tin communicate and delegate much more effectively through using technologies such as electronic mail, calendars, online presentations, and other virtual tools.

Technology has too impacted supply concatenation management —the management of a network of interconnected businesses involved in the provision of product and service packages required past the end customers in a supply chain. Supply concatenation management now has the capacity to track, forecast, predict, and refine the outbound logistics, contributing to a wide diverseness of logistical advantages (such as minimizing costs from warehousing, fuel, negative environmental impacts, or packaging).

Engineering science simplifies the process of managing reports, collecting communications, and keeping in touch, enabling management in more formal structures to take on more workers. Increases in technology have essentially allowed organizations to scale up their companies through more effective and efficient teams.

Considering the Organizational Life Cycle

The life bike of an system is of import to consider when determining its overall design and structure.

Learning Objectives

Describe the fashion in which life cycles influence an organization'due south overall design and structure

Central Takeaways

Key Points

• From an organizational perspective, the " life cycle " tin can refer to various factors such as the historic period of the organization, the maturation of a particular product or process, or the maturation of the broader industry.
• In organizational ecology, the idea of age dependence is used to examine how an organization's hazard of mortality relates to its age. Richard L. Daft outlines unlike patterns of historic period dependence in his four stages model.
• The thought of the Enterprise Life Cycle in enterprise architecture argues for a life cycle concept as an overarching design strategy —a dynamic, iterative procedure of changing the enterprise over time by incorporating, maintaining, and disposing of new and existing elements of the enterprise.
• Companies must understand clearly where they are in their life wheel and what influence this will have on their optimal organizational structure.

Cardinal Terms

• life bicycle: The useful life of a product or system; the developmental history of an private, group or entity.
• cess: An appraisal or evaluation.
• strategy: A plan of action intended to achieve a specific goal.

Organization pattern can exist defined narrowly as the strategic process of shaping organizational structure and roles to create or optimize capabilities for competition in a given marketplace. The life cycle of an organization, industry, and/or production tin can exist an important factor in organization pattern.

The life cycle of a business: Organizations must always be striving to sustain their position in a given competitive environment. This frequently requires structural evolution and rapid iterations in the feedback loop of disruption, growth, refinement, and renewal.

Overview of the Life Cycle

From an organizational perspective, "life cycle" tin can refer to various factors such equally the historic period of the organization itself, the maturation of a particular production or procedure, or the maturation of the broader industry. In organizational environmental, the idea of age dependence is used to examine how an organization's risk of bloodshed relates to the age of that organization. Generally speaking, organizations get through the post-obit stages:

1. Birth
2. Growth
3. Maturity
4. Reject
5. Death

The Enterprise Life Cycle

The Enterprise Life Cycle is a model that underlines the way in which organizations remain relevant. The Enterprise Life Bicycle is the dynamic, iterative process of changing an enterprise over time by incorporating new business processes, technologies, and capabilities, likewise as maintaining, using, and disposing of existing elements of the enterprise.

Richard L. Daft'south Four Stages

Richard L. Daft theorized four stages of the organizational life bicycle, each with critical transitions:

1. Entrepreneurial stage → Crisis: Need for leadership
2. Collectivity stage → Crisis: Demand for delegation
3. Formalization stage → Crisis: Too much crimson tape
4. Elaboration stage → Crisis: Demand for revitalization

Structural Implications of the Life Bike

The life cycle of an organization is important to consider when making decisions about the organization's structure and blueprint. Richard L. Daft's model underlines critical issues within each phase of an organization'southward life bicycle that can often be solved through intelligent structural blueprint.

Daft first notes that the entrepreneurial (or startup) stage of an organization requires leadership. In this situation, decision-making must exist enabled and bureaucracy should exist minimized. This lends itself well to pre-bureaucratic stuctures in which everyone involved is empowered to have the reins and utilize their creativity and innovation.

In the collectivity stage, momentum has been created and expansion is required. This is where functional or bounded strategies may begin to emerge, enabling managers to build teams and delegate tasks.

Companies continue to expand in the formalization stage, requiring increased hierarchy and more levels of authority to corroborate a given decision. In this stage they grow large enough to accommodate functional, divisional, or even matrix structures in order to produce at scale. Organizations in this stage must be careful non to fall too strongly into rigid structures that inhibit or disrupt efficiency, communication, or decision-making.

The Enterprise Life Wheel comes strongly into play in the elaboration phase. During this stage the organisation must retain its relevance in the industry through reinforcing competitive advantages and/or creating new products to fill changing consumer needs. This requires a neat deal of organized creativity and exploration of new markets, which may justify team or divisional structures within the broader organizational structure. Such structures allow modest teams to experiment and react quickly equally they try new entrepreneurial strategies while the larger organization maintains operative efficiency in established markets.

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Source: https://courses.lumenlearning.com/boundless-management/chapter/factors-to-consider-in-organizational-design/

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