representation of an organization's internal structure, indicating how various tasks or functions are interelated

formal connections among various divisions or departments represented in this form

Forces of an Organization's Environment

Figure

(various factors that comprise the environment)

Suppliers

Competitors

Distributors

Customers

• aka low-cost strategy
• based on an organization's ability to provide a product or service at a lower cost than its rivals
• company choosing this strategy seeks to gain a significant cost advantage over other competitors and pass the savings on to consumers in order to gain market share
• strategy aims at selling a standardized product that appeals to an "average" customer in a broad market.

• based on providing customers with something unique that makes the organization's product or service distrinctive from its competition
• typically uses a product organization design whereby each product has its own manufacturing, marketing, and R&D departments
• key managerial assumption is that customers are willing to pay a higher price for a product that is distinctive in some way

• designed to help an organization target a specific niche in an industry unlike both the low-cost and differentiation strategies, which are designed to target industry-wide markets
• may utilize any of a variety of organization designs, ranging from functional to product to network, to satisfy its customers' preferences
• choice reflects the niche of a particular buyer group, a regional market, or customers who have special tastes, preferences, or requirements
• basic idea is to specialize in ways that other organizations can't effectively match
• major assumption for companies adopting this strategy is that they can attract a growing number of new customer and continue to attract repeat buyers

• means that the organization is composed of units that work on specialized tasks using different work methods and requiring employees with unique competencies
• created through a division of labor and job specialization

• various units coordinate their work to achieve common goals
• ex) rules and procedures, departments have common goals, departments are organized similarly, etc... 

• break down activities into separate, highly specialized tasks, rely extensively on standardized rules, and centralize decision making at the top
• bureaucratic
• hierarchical structure of control, authority, and communication
• communication and decision making are primariy vertical, top-town
• communication emphasizes directions and decisions issued by superiors.

• encourages leaders and subordinates to work together in teams and to communicate openly with each other
• employees are encourages to communicate with anyone who might help them solve a problem
• decision making is decentralized
• authority, responsibility, and acountability flow to employees having the expertise required to solve problems as they arise
• well suited to a changing environment

refers to the number of employees directly reporting to a person

• optimally not too narrow that the manager "micromanages" subordinates or too broad so that the manager loses the ability to lead subordinates

• the right to make a decision
• the glue that holds the vertical and horizontal parts together
• implies both responsibility and accountability

• manager's expectation that the employee will accept credit or blame for his work
• flows from the bottom to the top
• point at which authority and responsibility meet and is essential for hgh performance

• the delegation of authority to lower level of employees or departments
• approach that requires leaders to decide what and when to delegate, to select and train personnel carefully, and to formulate adequate controls

• Functional
• Product
• Geographical
• Network

• grouping leaders and employees according to their areas of expertise and the resources they use to perform their jobs
• usually found in organizations that have adopted a low-cost business strategy and distribute or produce a high volume of products

• economical because it results in a simple design
• leaders create one department for each primary function to be performend (i.e. marketing, HR, production)
• keeps admin expenses low because everyone in a department shares training, expertise, and resources

Pitfalls include:

• inadequate communication between units
• conflicts over product priorities
• difficulties with coordination btwn departments
• focus on departmental rather than organizational issues and goals
• development of leaders who are experts only in narrow fields

• means that all functions that contribute to a product are organized under one leader
• divide organization into self-contained units that are responsible for developing, producing, and selling their own products and services to their own markets
• most commonly used in companies pursuing a differentiation business strategy

Potential Benefits

• permitting fast changes in a product line
• allowing greater product line visibility
• fostering a concern for customer demands
• clearly defining responsibilities for each product line
• developing leaders who can think across functionl lines

Potential pitfalls

• not allowing efficient utilization of skills and resources
• not fostering coordination of activities across product lines
• encouraging politics and conflicts in resource allocation across product lines
• limiting career mobility for personnel outside their own product lines

• organizes activities around location
• allows organizations to develop competitive advantage in a particular region according to that area's customers, competitors, and other factors
• permits leaders to specialize in particular markets
• versatile
• practices, procedures, and standards can vary according to reginal conditions

• subcontracts some or many of its operations to other firms and coordinates them to accomplish specific goals
• sometimes also called a virtual organization
• leaders need to coordinate and link people to perform activities in many locations