Structure of an Organization

Topics: Management, Organizational structure, Organization Pages: 6 (1795 words) Published: July 19, 2014
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Organization structure refers to the method which the organization utilizes to distribute its workers and jobs across the organization so that the tasks of the organization can be performed and the goals of the organization be achieved. Therefore, there exists a number of such structures e.g. divisional, multidivisional, matrix or functional structure. This paper evaluates the usefulness of functional and multidivisional structures. Gareth Jones (2007) defined the organizational structure as the total number of ways whereby the workforce of the organization is distributed into different tasks and their coordination then is realized among such tasks. Adner & Levinthal (2001) observed that the way in which organization structure evolves is as a result of the shift in competition from innovation in product to innovation in process. This change, as the market for the products or service of the firm grows, causes the structure of the firm to grow as well and may therefore turn from functional to multidivisional. Utterback & Abernathy (1975) observed that after an organization is formed it compete with other organizations in the market on the basis of its differentiation strategy. They start off on the basis of product differentiation and as they grow further, they change their focus from product alone to cost differentiation strategy as well as economies of scale. This leads them to invest more in the manufacturing process and other processes to make their product stand out as a specialized one. Tushman & Anderson (1986) observed that this process may not be uniform every time. Some technological or technical discontinuity might cause this process to halt and thus start it all over again. They further observed that some companies may also focus on process innovation to stand out against competitors e.g. Toyota. However, other companies might like to continue on the basis of differentiation strategy e.g. BMW. Therefore, the lifecycle model represents a significant framework for organizations to devise their strategies and the processes they need to focus on in various competitive environments (Oster, 1994; Porter, 1980) Utterback & Abernathy (1975) also defined the ways whereby the evolution process of the organization shapes up the strategies of the firms. Gort & Klepper (1982) gave effect to lifecycle model of industries by employing microeconomics supply side rationales as well as evolutionary economics. They nevertheless derived the same results. They too observed that organizations evolved first on the basis of product differentiation and on the basis of functional model and gradually shifted towards the increase in the number of firms under their auspices. When they reach at the peak they have a number of firms under their umbrella which require for a more in-depth management causing them to shift towards divisional management. This stage is called the maturity stage of the organization. This is the stage when the firm is stable from low level to the top (Utterback & Suarez, 1993). Lifecycle theories all agree that organizations start on the basis of competitive strategies and as they evolve their structure experiences change. The early stage of any organization witnesses product innovation. The organizations usually focus on bringing innovation in a product that they launch in the market to distinguish it from the rest. The product is designed as per the latest needs of the consumer but existing needs are also satisfied by the product. Utterback & Abernathy, 1975 They then gave the examples of the product innovation in market by organizations i.e. the new products which were launched in market to compete with existing products on the basis of innovation and meeting the latest needs of the consumers e.g. AC systems were introduced to compete with DC systems and internal combustion engines were introduced to compete with...


Bibliography: Adner & Levinthal (2001): Demand heterogeneity and technology evolution: implications for product and process innovation. Management Science 47: 611-628.
Brews (2004): Exploring the Structural Effects of Internetworking. Strategic Management Journal, 25(5), 429–452
Dessler (2004): Management: Principles and Practices for Tomorrow’s Leaders
Gort & Klepper (1982): “Time Paths in the Diffusion of Product Innovations,” Economic Journal 92(3) (1982), 630-653
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Jones (2007): Organizational theory, design, and change (6th Ed) Prentice Hall
Oster (1994): Modern Competitive Analysis
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