Appex Corporation's business is supplying management information systems and intercarrier network services to various cellular phone companies. In 1986, Appex entered this fast-growing market as a very small organization. Between 1986 and 1990, revenues grew 1600%. Similar growth was also seen inside the company as the number of employees rose from 26 to 180 between 1988 and 1990. Due to the relative youth of both cellular phone technology and Appex, the company faced major difficulties in transitioning to the larger landscape. As it became clear that the current internal structure needed change, newly hired COO Shikhar Ghosh brought several ideas to the company in an effort to improve the organizational structure. Ghosh changed the organizational structure about every six months, with each new structure presenting new problems to the company. A couple years after Ghosh was brought in, Appex was bought out. The organization that acquired Appex gave them freedom in choosing a structure to work with, as long as it fit in with their direction. I recommend that the Appex division adhere to a matrix (network) structure.
Porter's Five Forces
* Threat of Entry of New Competitors: The cellular phone industry was just getting off the ground in the late 1980s and was growing at an extremely fast pace. Because of this fast paced growth, the threat of new entrants was very high. Kalakota's eBusiness 2.0 mentioned the high number of young, fast-growing industry-leading companies failing to maintain their market share due to new entrants outperforming them. The best example is America Online. Both Prodigy and CompuServe had carved out their own section as a leading internet provider only to see America Online come in and take it from them. The threat of new entrants is high for Appex. * Intensity of Competitive Rivalry: Much like the threat of new entrants, the intensity of competitive rivalry is also high. Appex had done an admirable job in competing with their competitors. For example, many competing, established firms combined resources to form a joint entity called ACT. ACT consisted of GTE, Cincinnati Bell, and McDonnell Douglas. In this case, Appex came out ahead by installing a particular product into the marketplace before ACT could, but the fact that their competition joined forces still shows the high intensity of competition in a rapidly-growing industry. * Threat of Substitutes: The cellular phone industry was in its beginning stages around 1990, so the threat of substitutes did not exist at this time. * Bargaining Power of Customers: The customer's bargaining power was quite low around 1990. Clients would lock into contracts and did not have many options at the time. More than likely, these cell phone companies that purchased Appex' products did not have many options; therefore, their bargaining power was relatively low. * Bargaining Power of Suppliers: Appex does not have a conventional supplier. The product they sell to customers are intercarrier services and management information systems, which means that they do not buy raw materials from a supplier. Instead, their suppliers are their employees whom supply the company with information, knowledge in the field, and new ideas for products/solutions. Since the industry was young, these workers probably did not have prior experience in the field. Since the workers did not have much prior experience in the field, the required skill sets were probably not exclusive to the cellular phone industry. Since these skill sets were not specific to their industry, there was probably an abundance of potential employees in the job market that would be able to provide (supply) the company with ideas and information. Since there was an abundance of potential employees, the bargaining power of suppliers was relatively low.
Initially, the problem was a complete lack of structure. As the...
References: Cash, Introduction to Organization Structure
Kalakota, e-Business 2.0
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