Organizational Operations

Organizational Operations

What are some of the advantages and disadvantages associated with a firm’s expansion into international markets?

The advantages and disadvantages of a firm’s expansion into international markets include the spread of the business risk and accessibility to new talents. Operating in multiple geographical markets enhances the enterprise’s profitability since losses in one region are offset by the profits earned in a different region (Dess, 2013). Expanding into international markets facilitates the accessibility to competent expertise required to realize the company’s objectives and enhance output. The disadvantages of expanding into global markets include currency fluctuation and adopting a new culture. The company should carefully monitor currency fluctuations, which could adversely affect business profits. Secondly, the company must effectively integrate the new culture into business operations.

What are the four factors described in Porter’s diamond of national advantage? How do the four factors explain why some industries in a given country are more successful than others?

Michael Porter’s four aspects in the diamond of national advantage include factor endowments, demand conditions, related and supporting industries, firm strategy, structure, and rivalry (Dess, 2013). Factor endowments entail the production factors required in business operations, including labor, capital equipment, premises, etc. Some nations have more advantages because they have a wider pool of skilled labor, while in some countries, the technological infrastructure is enhanced, hence facilitating business operations. The demand condition varies across the market, depending on demographic features and customers’ purchasing power. The presence of the related industries positively impacts the business by supporting its operations

Explain the two opposing forces—cost reduction and adaptation to local markets—that firms must deal with when they go global

Cost reduction should be achieved in attaining a competitive advantage by offering products at a lower cost compared to competitors. Notably, operating in international markets increases the company’s expenses, e.g., taxes, and hence the need for lower-cost operations to break even (Dess, 2013). At the same time, the company faces the pressure of adapting to local markets by customizing products and services in line with the customers’ needs in the market. Failure to align the products with customers’ needs would lead to a loss of sales.

References

Dess, G. (2013). Strategic management: Text and cases. McGraw-Hill Education.

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Summary Exercise: pp. 327-328

Answer/address three of the eight questions in a post with three substantive paragraphs

Organizational Operations

Successful organizations must ensure that they have the proper type of organizational structure. Furthermore, they must ensure that their firms incorporate the necessary integration and processes so that the internal and external boundaries of their firms are flexible and permeable. Such a need is increasingly important as the environments of firms become more complex, changing rapidly and unpredictably.

In the first section of the chapter, we discussed the growth patterns of large corporations. Although most organizations remain small or die, some firms continue to grow in terms of revenues, vertical integration, and diversity of products and services. In addition, their geographic scope may increase to include international operations. We traced the dominant pattern of growth, which evolves from a simple structure to a functional structure as a firm grows in terms of size and increases its level of vertical integration. After a firm expands into related products and services, its structure changes from a functional to a divisional form of organization. Finally, when the firm enters international markets, its structure again changes to accommodate the change in strategy.

We also addressed the different types of organizational structure—simple, functional, divisional (including two variations: strategic business unit and holding company), and matrix—as well as their relative advantages and disadvantages. We closed the section with a discussion of the implications for structure that arise when a firm enters international markets. The three primary factors to take into account when determining the appropriate structure are type of international strategy, product diversity, and the extent to which a firm is dependent on foreign sales.

The second section of the chapter introduced the concept of the boundaryless organization. We did not suggest that the concept of the boundaryless organization replaces the traditional forms of organizational structure. Rather, it should complement them. This is necessary to cope with the increasing complexity and change in the competitive environment. We addressed three types of boundaryless organizations. The barrier-free type focuses on the need for the internal and external boundaries of a firm to be more flexible and permeable. The modular type emphasizes the strategic outsourcing of noncore activities. The virtual type centers on the strategic benefits of alliances and the forming of network organizations. We discussed both the advantages and disadvantages of each type of boundaryless organization, and we suggested some techniques and processes that are necessary to successfully implement each type. These are common culture and values, horizontal organizational structures, horizontal systems and processes, communications and information technologies, and human resource practices.

The final section addressed the need for managers to develop ambidextrous organizations. In today’s rapidly changing global environment, managers must be responsive and proactive in order to take advantage of new opportunities. At the same time, they must effectively integrate and coordinate existing operations. Such requirements call for organizational designs that establish project teams that are structurally independent units, with each having its own processes, structures, and cultures. But, at the same time, each unit needs to be effectively integrated into the existing management hierarchy.

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SUMMARY REVIEW QUESTIONS

• Why is it important for managers to carefully consider the type of organizational structure that they use to implement their strategies?
• Briefly trace the dominant growth pattern of major corporations from simple structure to functional structure to divisional structure. Discuss the relationship between a firm’s strategy and its structure.
• What are the relative advantages and disadvantages of the types of organizational structure—simple, functional, divisional, matrix—discussed in the chapter?
• When a firm expands its operations into foreign markets, what are the three most important factors to take into account in deciding what type of structure is most appropriate? What are the types of international structures discussed in the text, and what are the relationships between strategy and structure?
• Briefly describe the three different types of boundaryless organizations: barrier-free, modular, and virtual.
• What are some of the key attributes of effective groups? Ineffective groups?
• What are the advantages and disadvantages of the three types of boundaryless organizations: barrier-free, modular, and virtual?
• When are ambidextrous organizational designs necessary? What are some of their key attributes?