By students, for students.

ISM crash course: organisational strategy

In Management, Marketing on January 24, 2013 at 11:16 pm

hierarchy_by_multidimensional_art-d4ac86g

Businesses come in all shapes and sizes, but in every case their structure consists of a distribution of  the authority to allocate tasks and coordinate operations. Accordingly,  organisational structure determines the way firms operate and perform by establishing procedure and decision-making processes. Ideally, then, a company’s structure should complement its purpose.

Multinational enterprises (MNEs) vary greatly in form and function. Whereas, small to medium businesses (SMEs) might be expected to choose between a product or functional organisation, multinationals have to account for the difficulties of operating in international markets which might by geographically, culturally or politically distant.  This has led to the adoption of diverse organisational forms which can be bedazzling in their hierarchies and  confusing in their connections. Rugman and Collingson (2012) identify five key variables MNEs weigh when choosing their structure, but emphasise that the relationship between structure and strategy is not totally explained:

  • Relative importance of international operations
  • Company history and international experience
  • Their line of business and product strategy
  • Management strategy
  • The flexibility of the firm in adapting to organisational changes

So, without any further ado, here is the HBR guide to organisational structure. (Click to enlarge)

1.Organisation structure 1

2.Organisational structure 2

3.Organisational structure 3

 ExampleBenetton

United Colors of Benetton 

The United Colors of Benetton is known for its high-street fashion, controversial ad campaigns and European origin. Its unusual organisational structure, the ‘flagship network’ is less renowned. The fashion-house operates as the middle process of a value chain that takes in materials from outside suppliers and sells through independent retailers who buy into the Benetton franchise. UCoB designs and dyes the clothing using wool treatments it meticulously developed over half a century.

 Its limited FDI has made some commentators question its multinational status, but there is no denying that United Colors of Benetton has made the most of their firm specific and country specific advantages.  The firm’s Italian headquarters draws on the cultural capital of a city that has set the tone of the world’s wardrobes since the 1960s and positions Benetton within the European economic bloc. Importantly, using independent retailers as channels to international markets has allowed UCoB’s leadership to concentrate on building the brand equity which lends the company its competitive edge.

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