I. Identifying External Factors In considering organizational design relative to the environment, managers may find it helpful to employ two specific frameworks to identify external factors and internal strengths and weaknesses: SWOT analysis : In this particular model, a company’s strengths and weaknesses are assessed in the context of the opportunities and threats in the business environment. A SWOT analysis enables a company to identify the ideal structure to maximize its internal strengths while capturing external opportunities and avoiding threats.
Porter’s five-forces analysis: This analysis identifies factors of the industry’s competitive environment that may substantially influence a company’s strategic design. The five forces include power of buyers, power of suppliers, rivalry (competition), substitutes , and barriers to entry (how difficult it is for new firms to enter the industry). Understanding these varying forces gives the company an idea of how adaptable or fixed the organizational structure should be to capture value. ELEMENTS WHEN DESIGNING AN ORGANIZATIONAL STRUCTURE I. Work Specialization Describes the degree to which tasks in an organization are divided into separate jobs. The main idea of this organizational design is that an entire job is not done by one individual. It is broken down into steps, and a different person completes each step. Individual employees specialize in doing part of an activity rather than the entire activity. II. Departmentalization It is the basis by which jobs are grouped together. For instance every organization has its own specific way of classifying and grouping work activities. There are five common forms of departmentalization: 1. Functional Departmentalization . As shown in the Figure 2-1, it groups jobs by functions performed. It can be used in all kinds of organizations; it depends on the goals each of them wants to achieve. Figure 2-1Functional Departmentalization example Different aspects on this type of departmentalization: Positive Aspects Negative Aspects o Efficiencies from putting together similar specialties and people with common skills, knowledge, and o Poor communication across functional areas o Limited view of organizational
orientations o Coordination within functional area o In-depth specialization goals 2. Product Departmentalization . It groups jobs by product line. Each manager is responsible of an area within the organization depending of his/her specialization Figure 2: Product Departmentalization example Source: Bombardier Annual Report Different aspects on this type of departmentalization: Positive Aspects Negative Aspects o Allows specialization in particular products and services o Managers can become experts in their industry o Closer to customers o Duplication of functions o Limited view of organizational goals 3. Geographical Departmentalization . It groups jobs on the basis of territory or geography.
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- Fall '19