Organization Architecture

 Nukhba Jurri 13024854-098
Organization Architecture
 MaryamNazir 13024854-073
Types of structures
 Sonia Noreen 13024854-084
Control System And Incentive
 MariumShabbir 13024854-083
Processes, organizational Culture & People

If we talk about the Organization of international business then we refers to
organization architecture
Now lets define organization architecture :
“The totality of a firm’s organization, including formal organization structure,
control systems and incentives, processes, organizational culture, and people”
To be the most profitable, firms need to be sure:
the different elements of the organizational architecture are internally consistent.
the organizational architecture matches or fits the strategy of the firm.
the strategy and architecture of the firm are consistent with each other, and
consistent with competitive conditions.

Architecture
Structure
Integrating
Mechanism
Vertical
Differentiation
Centralized
Decentralized
Horizontal
Differentiati
on
Functional structure
Product divisional
structure
International division
structure
World Wide Product
Division Structure
World Wide Area
Structure
Global Matrix
Structure
Control &
Incentives
Processes &
culture &
people

1. Organization structure
o Department
o Division
o Region make organization
o The location of decision-making responsibilities
2. Control system & Incentives
o Measure performance of subunit
o Judgments about how well managers are running those subunits.
o Incentives are the devices used to reward appropriate managerial behavior
3.Process, Organization culture & People
o Processes are the manner in which decisions are made & work performed.
o Refers to the norms and value shared among the employees of
organization.
o Organization architecture also made by people.

Structure
Processes
Incentive & control
Culture
All these concentrate on the people
to make organization performance
well.

“Department, division ,region make organization
the location of decision-making responsibilities”
Further Organization structure have 3 dimension
a) Integrating Mechanism
b) Vertical Differentiation
c) Horizontal Differentiation

a. Integrating Mechanism
It can be define as coordination between subunits of organization.
( lowest co-ordination localization strategy)
( Highest co-ordination Transnational
strategy)

 Formal :
1. Direct contact.
2. Liasion Roles.
3. Teams
4. Matrix structures
 Informal
1. Knowledge network
2. All information collected in one place.

(2) Vertical Differentiation
It enables the managers to locate the location of decision making.
It has two type:
 Centralized Decision Making
“The decision making is done by only top management”
 Advantages:
 Facilitates coordination
 Ensure decisions consistent with organization’s objectives
 Gives top-level managers the means to bring about organizational
change
 Avoids duplication of activities

 Decentralized Decision Making
“Decision making power is distributed in different levels of management”
 Advantages:
 Relieves the burden of centralized decision-making
 Motivate individuals
 Permits greater flexibility
 Can result in better decisions
 can increase control
 It can be worthwhile to centralize some decisions and decentralize others

(3) Horizontal Differentiation:
“Horizontal differentiation is concerned with how
the firm decides to divide itself into sub-units”
“It describes the division of organization”
The decision is usually based on:
 function
 type of business
 geographical area

1. Functional structure
2. Product divisional structure
3. International division structure
4. World Wide Product Division Structure
5. World Wide Area Structure
6. Global Matrix Structure

“A functional organization is a type of organizational structure in
which the organization is divided into smaller groups based on
specialize functional areas”
 One product
 One head quarter
 One country
 Small firm

The divisional structure is a type of organizational
structure that groups each organizational function into a
division.
 More then one product .
 One headquarter
 Local country
 Small & Large firm

When firms internationally expand production is known as
international divisional structure.
 More then product ( local production)
 Head quarter
(domestic and international)
 Each product with own functional structure.
 Sometimes conflicts raise .

 Highly diversified firm adapt this structure.
 More then one products
 Local and international production.
 Every subunits has its own functional structure.
Advantages:
 Value creation coordination with other units.
 Realized cost economy and location economies.
 Transfer core competencies.
 Not locally responsive.

 Low diversification and a domestic structure based on
function
 Divides geographic areas
 Decentralizes operational authority
 local responsiveness
 Consistent with a localization strategy

Head quarter
Division( country)
1
Division( country)
2
Division( country)
3
Product
A
Product
B
Product
C

A matrix organizational structure is a company structure in
which the reporting relationships are set up as a grid, or matrix,.
Employees have dual reporting relationships generally to both a
functional manager and a product manager.

Advantages:
 Remove limitation of World wide area structure &
worlds wide product structure.
 Differentiate product line and area vise
Disadvantages:
 Result in conflict between areas and product divisions
 Finger pointing.

 A firm’s leaders major task to ensure that the action of
subunits are consistent with the firm’s overall strategy
and financial objectives
 This is achieved through control and incentive system
 Evaluate the performance of Organization and how
effect on the control system

Definition:
“Control helps to check the errors and to take the
corrective action so that deviation from standards are
minimized and stated goals of the organization are
achieved in a desired manner.”

There are four main type of control system:
1. Personal Control:
 Direct control the subordinates
 Mostly use in the small firms
2. Bureaucratic Control:
 This system through set the rules regulation that
directs the action of subunits
 The most important bureaucratic control are budget
and capital sending rules

3.Output Control:
 Setting goals for subunits and achieve them.
 Output more receive then control system more good
 Control system is achieved by comparing actual
performance against targets and intervening
selectively to take corrective action
4.Cultural Controls:
 Norms , values, custom play major role for increase the
performance
 Firms with strong culture have less need for other forms of
control

 Incentive are the devices used to reward behavior
 Tie performance for output control => reward
 Incentives depend on employer and nature of work
 Co-operation and co-ordination increase between
manger and subordinates
 Different nation and different culture use different
devices

 The key of understanding the relationship between
international strategy, control systems and incentive
systems is performance ambiguity which exist that
subunits poor performance are not clear.
 Performance ambiguity is mostly subunits
performance depend on the other subunits
performance

 Processes:
“Processes can be define as the manner in which
decisions are made and work is performed”
 Sometimes processes used across national boundaries as
well as organizational boundaries.
 Can be develop anywhere within a firm’s global
operational network.
 Integrating mechanisms can help firms leverage processes
 Formal => Exchange Ideas Helps in Leverage processes.
 Informal => Efficient working

 Culture refers to a systems of values and norms that are
shared among people
 Organizations have their own values and norms that
employees are encouraged to follow.
 Organizational culture tends to change very slowly.

Organizational culture comes from:
 Founders and important leaders of Organization.
 National social culture.
 The history of organization.
 Decisions made in past.

Organizational culture can be maintained through:
 Hiring on merit base
 Promotional practices
 Reward strategies
 Socialization processes
Formal ways (training programs)
Informal ways(friendly Advices)
 Communication strategies

 When organization moves into international market it faces
hurdles like different language, norms and beliefs, tastes and
preferences etc.
 If the organization does not align itself with the prevailing culture
then it cannot attain benefits of expansion.
 “Strong” culture:
Not always good
May not lead to high performance
Could be beneficial at one point, but not at another
 “Adaptive” cultures
 Companies with adaptive cultures have the highest
performance.
Flexible to decision making.

 The interrelationship between the four basic strategies
1. Localization
2. International
3. Global standardization +organization architecture
4. Transnational

 Combination of Strategy, Structure, and Control Systems
Strategies Interdependency Performance
Ambiguity
Control
Localization
Strategy
(locally responsive
Pressure high)
Low
[local production & sale in
international]
Low
[easily identify factors of
error]
Low
[subunit manager understand
better then headquarter
management]
International
Strategy
(Both pressure low)
Medium
[ subunit management
tell the needs and
demand of that area]
Medium
[nor easy not difficult to
identify factors of error
cause of low pressures]
Medium
[headquarter mgt & subunit mgt
both take decisions]
Global Standard
Strategy
(cost reduction pressure
high)
High
[to achieve cost eco firm
need to coordinate with
subunits]
High
[difficult to identify factors
of error ]
High
[headquarter mgt control the
subunits]
Transnational
strategy
(Both pressure are high)
Very high
[-Value addition from one
country
-locally responsiveness from
Very high
[so difficult to identify
factors of error]
Very high
[mgt should control al subunits]

For a firm to succeed, two conditions must be met:
i. The firm’s strategy must be consistent with the
environment and place in which the firm operates.
ii. The firm’s organization architecture must be consistent
with its strategy.

 INERTIA:
“Property by which a thing continues its existing
condition”
 Organizations are difficult to change
 Sources of inertia include:
The existing distribution of power and influence
The current culture
Senior managers’ preconceptions about the appropriate business
model.

 Management should take necessary actions to chose
structure of organization to enhance its positive effects.
 Alliance the strategies with organizational structure and
their requirement

Organization Architecture

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