Every organization has an internal structure that clearly defines the role and responsibilities of employees to achieve the strategic business goals. Organizational structure provides a broad picture of the managerial levels and how different tasks are grouped, divided and coordinated to accomplish the designated business goals. Its important to have a defined layout of an organization structure to get an insight into what and how employees function across different levels of an organization. There have been numerous studied conducted to elaborate on the organizational structure. Herein, the paper would focus on Tata Motors, LG, Google, Apple, Starbucks, LA Gear and how its organizational structure to achieve the strategic management goals. The companies display varied number of dimensions such as work force, products/services, management style etc. There are six major factors namely work specialization, departmentalization, chain of command, span of command, centralization/decentralization and formalization- defining the organizational framework. However, there are contingencies – size, technology, strategy and environment- creating issues for the organization to achieve its predetermined business goals. This report would discuss the impact of these contingencies on the organizational structure of the companies to achieve the business goals.
Organizational structure defines how various roles and responsibilities are divided across multiple managerial levels to achieve the strategic business goals. There are various types and shapes of organizational structure to meet the needs and the wants of the end consumers. Herein the focus is on organizational structure of six different companies through six elementary building blocks. The six important elements laying down the foundation of an organization structure are as follows:
Work specialization could be defined as the degree to which overall task of an organization is divided into small components. These divided jobs are further worked upon to improve the cumulative output efficiency. These small tasks or works are repeated throughout the day for the workers to get fully trained. Since the work doesn’t have difficult steps, workers can learn it easily and faster. This approach improves the output quality and controls cost in the production process (Thibodaux, 2012). This specialization requires workers to focus on the only designated task and ignoring all other tasks. An assembly line is a perfect example to show how each worker has specific task to perform in the production process.
Tata Motors is a huge organization with various business units running parallel to derive the strategic objectives. Tata Motors is a USD 42 billion company with a vast product portfolio comprising of passenger cars, sports vehicles, buses, trucks and defence vehicles (www.tatamotors.com, n.d). Herein, the work specialization is high as the company churns out lakhs of passengers and commercial vehicles in a year. This heightened capacity could only be possible with high degree of work division to speed up the production capacity.
There are many companies which exert excessive specialization. However, it creates problems with coordination between different teams and thus impacts the productivity (Daft and Marcic, 2010). As marketing competition grows, companies require skilled workers to meet the global challenges and meet their strategic goals. However, work specialization restricts the growth of the workers to a specific skill set only impacting the business goals.
Work specialization is inspired from management concept, division of labour. It was during the `18th century, Scottish economist Adam Smith came out with the concept of ‘division of labour and ‘specialization’ (Thaker, 2008). He demonstrated how division of work between different workers in a pin factory produced more pins than delegating it all to one worker. Herein, specialization allows honing their skills in the designated tasks, thereby improving their individual proficiency. Hence the workers are likely to innovate more to improve their work.
The same experiment was later repeated by Henry Ford in producing automobiles on an assembly line. He broke the entire manufacturing process into small parts where each part was performed by a separate individual. This experiment demonstrated that performance can be improved if work is divided and employees work in their specialized areas. The same principles have been adopted by Tata Motors to manufacture the number of cars per year.
1.2 Contingency factors
Organizational structure provides a broad framework for companies to exert their authority and develop a communication blueprint. There are factors impacting the organizational structure of an organization. Let’s discuss the organizational environment of Tata Motors with respect to four contingency factors:
Size: Size of an organization is important to define the boundaries of an organization structure. Tata Motors is India’s leading automobile manufacturer with a workforce of touching 60,000 people. Founded in 1945, the company has managed to become the largest automobile manufacturer based on its revenue in 2016 (Thakkar, 2016). The larger the size of an organization, it becomes difficult to manage a delegate the roles and responsibilities across various levels of the management.
Lately, Tata Motors had moved to a lean and agile structure from its previous 14 layers to only five to improve accountability amongst employees (Gopalan, 2017). This flat structure eliminates unnecessary middle layers and empowers the business units to become more accountable for their performance. the company has five grades, L1 to L5, with L1 being the top most level of management (Das, 2017). Thus, the employees would have to improve their work to stand accountable for their individual performance.
Strategy: Strategy and structure go in sync with each other to achieve the end objectives. As a company changes its strategy, the organizational structure has to change to fit into the strategic needs. Given the changing consumer demand, Tata Motors is changing its strategy to improve the rate of production of new vehicles. SUV Hexa which is slated to launch next year has ushered in strategic changes in the company’s organizational structure (Reuters, 2016). For instance, the company is mulling over the option to introduce two new modular platforms and remove six currently running platforms as part of its product strategy for the passenger car segment against the fierce competition from technology giants such as Google and Uber (Kumar, 2017). It would require employees to be all the more proficient in their assigned job to deliver the deserving results and achieve these strategic moves.
1.2.3 Technology: Technology is a major contingency and impacts organizational structure and productivity by streamlining the internal communication and resource system. Technology could be in various forms such as knowledge, skills, machines, work procedures, resources etc. Tata Motors is eyeing new technologies to improve its lost market share. The automobile giant wants to introduce driver-assistance financial into its vehicles such as automated parking and collision avoidance (Peermohamed, 2016). The company is actively engaged to incorporate new technologies such as sensors, camera, and radar to enhance the value of its vehicles and match up to the global standards. It aims to launch two new vehicles every year (Chacko, 2015), and thus it calls for major changes in its organizational structure to facilitate such changes across various levels to achieve the intended objectives.
1.2.4 Corporate Environment: Environment has crucial role to influence the organizational structure. The stability and predictability of the environment could have direct impact on an organization to effectively operate its functions. Tata Motors has consolidated corporate environment to establish its core values and beliefs amongst the employees at all levels. In 2015-16, the company’s market share slumped to 44% and 5.4 % in the commercial vehicles segment and passenger vehicles market respectively (Trefis Team, 2016). With restructuring plans in offing, the company eyes to pump more technologically sound vehicles in the market to grab a 50% market share and a double- digit market share in the commercial vehicles and passenger vehicles market (Trefis Team, 2016). This level of planning requires the organization to make its organizational structure flexible to eliminate the unnecessary elements and bring more coherence across various management levels.
Departmentalization allows division of business into strategic business units based on functions, geography, customer market, products or any other segregation criteria. As an organization grows in size, it is not feasible for one manager to supervise all the work. Thus, different departments are formed to effective divide the varied aspects of business in separate units. It basically groups different jobs into separate singular unit (Adeyoyin, 2015). Herein, LG electronics Inc would be discussed which has a centralized and hierarchical structure with four business units – Home Appliance & Air Solutions, Mobile Communications, Home Entertainment and Vehicle Components (www.lg.com, n.d.). The South Korean company has divided its core business into different departments with respective managerial setup to supervise all the business functions and operations. All the business operations, functions, processes and other important activities would happen under every strategic business unit to ensure that all the separate business units work independently.
During the 20th century, Gulick and Urwick (1937) unveiled the concept of departmentalization by purpose and process. These were later labelled as functional and divisional organization (Burns, Bradley and Weiner, 2011). Over the years, complexity in business environment increased and it resulted in the introduction of many more divisions to simply the functions. The types of departmentalization are as follows:
Herein, the important functions of the organization are divided into different sections for systematic activities. LG electronics has been divided into separate departments managing the primary activities such as production, finance, marketing, HR, R&D and many more to boost the production. All the departments have their respective goals to achieve to help the organization attain its strategic goals.
Product departmentalization: This depicts the division of business into number of distinct products manufactured. LG electronics has four main divisions namely home appliances & Air Solution, Mobile Communication, Home Entertainment and Vehicle Components. The business units have different targets to accomplish. For instance, the company aims to increase the production capacity at its battery factory for Chevy Volt, Bolt EV, and Chrysler Pacifica to 3GWh (Lambert, 2017). Likewise, it has been increasing production capacity steadily to meet the rising market demand.
Geographical departmentalization: This depicts the division of business into different geographic zones where the organization operates. In this organization structure, employees working in a specific geographic area or region report to one manager (DuBrin, n.d.). LG electronics has divided into business into different parts of the world such as Europe, North America, South America, Korea, PR China, Asia and ROW.
Process departmentalization: This provides division of business in terms of different internal processes requisite to stimulate production to achieve strategic objectives. LG electronics has various processes depending on the product and its internal mechanization.
Customer departmentalization: This depicts the division of business in terms of the types of consumers for its products. It requires clear identification of the specific needs and the wants of the consumers to form the basis of departmentalization. LG electronics has a wide range of consumers to cater to depending on the product divisions. For instance, the company will have independent managers for different products such as washing machine, fridge, smartphones etc.
There are contingency factors shaping the organizational structure of LG electronics. The four common factors are explained as follows:
Size: LG electronics has nearly 75,000 employees working across 118 locations around the world. The company has adopted a hierarchical organizational structure wherein except the CEO at the top management level, every employee has a supervising authority. The company has a broad product portfolio comprising of mobile handsets, air conditioners, flat panel TVs, washing machines DVD players and many more. Given the large size of the company, the organizational structure has been stretched to multiple layers of management. Since the company has global plans, it has tall structure to manage all the complexities. However, it does impact the effective decision making across various management levels.
Technology: Companies use advanced technology in the form of software, information systems, or other specialized IT solutions to effective run business operations. It potentially reduces the time invested in completing business processes or jobs. Over years, LG electronics has been making sound progress in the field of technology to achieve its strategic goals. LG has been making plans to incorporating internet-of-things capabilities to its products to match the latest trends (Jung-a, 2017). The South Korean giant has opened new research centres to create and develop competitive technologies to exploit the potential of artificial intelligence and robotics (Jung-a, 2017). This would increase the capacity of the company to facilitate technology for improving the internal operations and communication across the management levels of the organizational structure.
Corporate Environment: LG electronics has made a consolidated market position with its corporate environment encouraging growth and development. Despite of all the divisions, there should be standard values and beliefs for all the employees to embrace to render their services and increase profitability. LG encourages employees to spend couple of days every year in cultural training centres to get accustomed to the corporate values (Barry, 2000). They believe in creating transparent communication with the employees. Notwithstanding the job role, all the employees were made to participate in an innovative programme to discuss about the company’s significant matters such as performance, working conditions etc (Barry, 2000). Since the departmentalization is on higher side, the corporate values are hard wired in all the initiatives.
Strategy: LG has renewed interest in increasing the cost of premium TVs and other appliances to stimulate profitability and instigate strategic excellence (Lee, 2016). Given the global market competitiveness, the company is eyeing to focus on products and cost to gain competitive advantage. For instance, the company plans to come out with highly advanced products such as OLED TVs (LG Electronics USA, 2015). The company is focused to explore the potential of its wide range of value added products to improve growth opportunities around the world.
Chain of command
Chain of command depicts the hierarchy of reporting equation across management levels in an organization. It defines how power and authority is delegated to employees from top to the bottom level of the management in an organization. The chain of command is an effective tool for companies to maintain discipline and order whilst assigning accountability across the levels of management (Emisor, 2011). In the same vein, employees are supposed to own the responsibility of the job assigned by their supervisors. Thus, in most of the organizational structures, the line of command flows from top to bottom and line of accountability goes from bottom to top level of the management. If we refer to a standard chain of command, the President or the CEO is at the top of the hierarchy and immediate to him or her is the second line of reporting of the organizational hierarchy structure. The employees across the third line of organizational hierarchy structure reports to the previous one so on so forth. As the chain of command goes down, the power to take strategic decisions reduces but accountability increases.
Herein, the organizational structure of Starbucks Coffee Company would be discussed to understand its chain of command. It has matrix organizational structure with a clear chain of command to establish proper accountability and responsibility (Meyer, 2017). With centralized decision-making, the authority of the managers flows sideways and of functional managers from top to bottom of the management to fulfil business needs. The company adopted a new organizational structure with three geographic regions, each headed by a president. The three regions are China and Asia Pacific, Americas (US, Mexico, Canada and Latin America) and EMEA (Europe, UK, Middle East, Russia and Africa) (Lindsay, 2012). The company product portfolio comprises of coffee, tea and many other types of beverages and food products (Annual Report, 2016). The matrix structure is complex wherein each employee has more than one supervisor to report and has multiple layers of authority. Whilst it may look complicated on surface, it caters to dynamic market demand.
Henri Fayol introduced the concept of unity of command (CMI, 2012) which states that a clear chain of command improves the decision-making process and hence the productivity of an organization. This hierarchical method for organizing information flow, decision making, power, and authority, assumes that each level of the organization is subordinate to the level to which it reports. He was of the view that once the command was opposed and authority is challenged, the discipline order across all the levels gets disturbed. The same principle was later supported by Gulick and Urwick who stated that administrative departments in the government offices are supervised by single authority (Marume and Jubenkanda, 2016). As organizations have expanded with the changing business environment, the chain of command has been stretching across multiple levels of management.
There are factors governing the shape and design of an organization. The four common factors are as follows:
Size: Starbucks is one of the largest coffee chains in the world. The company has tall matrix structure to support its varied products and brands Tata Motors is a large size organization with distinct business units. The company has over 3,00,000 employees with nearly 25, 734 stores expanded in 75 countries (news.starbucks.com, n.d.). This compels the organization to embrace a matrix like organizational structure which could meet the varying market demands. Herein, in most of the cases, every single employee would have two or more than two reporting relationship with product manager and functional manager.
Strategy: Starbucks has been on the spree to expand its markets to different parts of the world. The company has introduced a wide range of coffee and many other foot products to meet changing market demands. It is in the same vein that the company is mulling over intensive plans to expand its footprint in Asian market (Trefis Team, 2016). Given its massive plans, it becomes essential that the company adopts a hybrid organizational structure to expand in markets whilst improving customers coffee experience to meet its strategic aspirations. The company has set a strategic goal to increase the number of stores by 12, 000 to touch the mark of 37,000 by 2021 (news.starbucks.com, 2016). Matrix structure allows the company to leverage its resources to improve communication across the management levels.
Technology: Starbucks has embraced latest technology solutions to improve its business processes and customer experience across its coffee stores. Soper (2017) has confirmed heavy investment in digital innovation to improve customers ordering processes, effective integration with existing operating systems, reward system and many more. The robust digital infrastructure ensures enhanced customer coffee experience with the company. For instance, the company has come out with a voice ordering app on its iPhone app and Amazon’s Alexa to reduce the long waiting time in queues outside the stores (Lashinsky, 2017). This improves the business processes and hence engages the customers with the company.
Environment: Starbucks corporate environment is integral part of organizational structure. It sets the tone of the entire working culture and helps employees drive business goals. The company instigates positive working environment for the employees to forge strong relationship with each other. Whilst Starbucks stores have warm and welcoming ambiance, the employees are trained to make the customers feel comfortable and develop trust on the company. The company promotes diversity and inclusivity to become a valued place for their customers and employees alike (Leinwand and Davidson, 2016). This helps the company effectively run through the matrix organizational structure as employees’ bond well with their colleagues and managers. The employees and managers are encouraged to fix the percolating flaws in the corporate environment and encourage positive behaviour for organizational success.
Span of control
It defines the number of employees under a supervisor. It has potential impact on the work flow and communication across the organizational level. However, the number is not constant for every organization. Span of control has significant role in an organizational setup and influences the organizational structure and by extension the mutual interaction between supervisors and subordinates across various levels of the management (Bandiera et al, 2012). For a narrow span of control, a single manager would have few subordinates, resulting in a tall organizational structure. On the other hand, a wide span of control asserts on the competency of a manager to control a large number of subordinates, thereby resulting in flat organizational structure. Narrow span of control involves large number of managers which could instigate communication issues owing to multiple levels of management unlike wide span of control which dithers away many internal issues within management levels.
Google is a search giant with a huge workforce and footprint across the world. The success of the company largely depends on the corporate culture and corporate structure which promotes innovation and excellence in whatever the company does. The span of control for the company has been shot to 10, thereby making the organizational structure flat (Gupta, 2016). It means a single manager would have to control 10 employees at a time. It will increase the work load on managers but reduces the need of middle layer of management and improves communication. However, as the product portfolio widens, the company had to become hierarchical to accommodate all the employee functions. So, the organizational structure stands as a matrix with an optimum level of flatness to eliminate the need of middle level management. The company’s organizational structure comprises of three aspects namely function-based, product-based and flat. It may appear complex in the first look, it has played crucial role in the success and growth of the company.
Span of control defines the nature of relations between the leaders and the subordinates. The concept of span of control was introduced by a British general Sir Ian Hamilton in 1922 . Given his experience in British military, he postulated that span of control should be between three and six (Rogers, 1972). This figure sets an ideal limit for other organizations to follow and adopt in their internet set up for improves business results.
The issues in the same were later delved by a French management consultant A.V. Graicumas in 1933 wherein he emphasized on the issues emerged due to the relation between the leader and different groups of the subordinates and the relation amongst the subordinates (Rogers, 1972). Later, Urwick (1964) corroborated the concept to a statement according to which no supervisor can control more than five or six subordinates. This concept has raised many issues and has been ignored by academicians, yet managers focus on it to define the relationships between employees across the management levels.
The four factors influencing the organizational structure and design are as follows:
Size: Google is a huge IT company with over 72,000 employees across the world. As the organization has introduced many products, it had to continuously increase the employee strength for effective management. The company has created a new parent company ‘Alphabet’ with Larry Page as the CEO whilst Sundar Pichai heads Google (Yarow, 2015). The large size of the company calls for matrix like structure. However, its recent decision to increase span of control has introduced flatness in the tonality. Thus, the existing organizational structure is a mixture of matrix structure with a touch of flatness.
Technology: Latest communication technologies and tools improve business efficiency and streamline the communication across management levels. The integration of technologies eliminates many jobs and reduce the management levels, thereby improving the communication between managers and subordinates (Farhanghi, 2013). With the inclusion of advanced technologies, Google potentially improves the flow of communication across different departments and henceforth improves business efficiency. For instance, G Suite is a cloud-based platform that allows a wide variety of mobile apps to effective collaboration and communication amongst the employees (Zarate, n.d.). Such web technologies reduce the gap between managers and subordinates to facilitate effective communication.
Strategy: Strategies are integral to influence organizational structure and design. All the basic elements across the organizational structure are changed in order to meet the strategic objectives. For instance, Google had to undergo restructuring once it created new parent company ‘Alphabet’ (Hern, 2015). There is lot of reshuffling being done to adjust with the dramatic changes.
Environment: Corporate environment is essential part of an organization to being coherence in the organizational structure. Google encourages open and honest communication which makes it a desirable organization in the world (Blackiston, 2017). Employees are trained to instigate corporate values and beliefs that support organizational and their professional growth. They provide ample opportunities for employees to open their mind and give suggestions for strategic victory. It results in developing positive relationship between the managers and employees to meet organizational challenges within the corporate structure.
Decision making has been a constant function for organizations. Generally, the decision-making authority resides at the top of the management level or it is delegated across low level of management. Organizational structures are important to define if employees at different levels of management have or not have the power to take decisions (Heide, Johansson and Simonsson, 2005). A managerial hierarchy and in extension the organizational structure is governed by the organizational environment and nature of the industry (Alonso, Dessein and Matouschek, 2008). As decision making is integral to sort out business issues and combat challenges, it is important to have a clear understanding of the power and control equation across the managerial hierarchy. This is where centralization and decentralization comes into the main frame. Kates and Galbraith (2007) has elaborated on the perennial discussions around the difference between centralization and decentralization whilst defining organizational design. Centralization and decentralization define the delegation of the authority amongst employees across the hierarchy of an organization.
A centralized system has decision making authority reserved at the top level with the lower levels restricted to mere execution of the strategic decisions (Siggelkow and Levinthal, 2003). Herein, the top CEO or President makes all the strategic decisions whilst delegating the subordinates to take the deserving action. On the contrary, decentralization promotes delegation of authority to the lower levels of the management and hence the decision-making power spreads across the managerial hierarchy.
Apple is world’s leading technological company with more than 1,00,000 employees. It is a perfect example of centralized decision making as the power is in the hands of the CEO Tim Cook. Given its broad product portfolio including the likes of iPhone, iPad, iPod, Mac and huge capital investment, the company requires centralized decision-making structure. The CEO has eleven executives of departments under him to wield control and manage (Apple, Inc., 2012). They have kept the organizational structure sorted out to keep the momentum going for the IT giant. All the top executives’ are responsible for their respective departments without sharing any cross connection with others. Bajarin (2011) confirmed that the company engages in centralized decision-making. Both the CEO and board of directors collaborate to take the decisions to be followed by employees down the managerial levels of the company (Lashinsky, 2011). It ensures that the top level management gets a clear picture about the entire organization and can potentially develops effective business strategies.
The concept of centralization of authority came into picture in the Qin Dynasty of China in 221BCE wherein the first Emperor of China, Qin Shi Huang practiced feudalism to exert control over many territories (Chiu, 2017). There were many hierarchies with the central control in the hands of the Emperor while the lower hierarchies conformed to the rigid centralized and bureaucratic rule. Though the Qin Dynasty survived for like 15 years and succumbed to its closure after the death of the king, the impact Qin Shi Huang created was hard to ignore with his principles reflected in businesses in the current century.
This autocratic system allows quick decision making with the onus completely on the shoulders of the monarch. However, with the demise of the king, new rules and practices were set in to run the government and military organization. As market competition grows in industries, there is high relevance for making decisions to meet the needs of the end consumers (Karlöf, 2012). Thus, there should be delegation of authority to the lower levels to improve the efficiency of the internal communication across the hierarchy of the management.
There are factors creating influencing organizational design and structure. The four factors are as follows:
Size: Apple is a huge organization with a market cap of $800 billion (Balakrishnan, 2017) and workforce nearing 11, 6000. The launch of iPhone 8 helped the company soar high in the market, and it is expected that it may soon join the trillion club. The company has many products in software and hardware industry. Given its growing boundaries, the company has hierarchical structure with centralized decision-making giving the full control at the top management. Though it will exert more working pressure at the top most managerial level, it gives a clear and transparent job responsibilities to the employees. The organizational structure is rigid and provides less flexibility to turn the line of authority and responsibility.
Technology: Apple is a technologically sound company with a large consortium of advanced hardware and software solutions to improve customer services as well as internal business operations. Given its huge leaps made in continuous innovation, the company has created a niche for itself in the global marketspace. The technologies are sound enough to integrate communication across the organizational structure. It helps in improving the relationship between the managers and employees across the hierarchical structure.
Strategy: Apple continue to come out with new strategies to meet the dynamic needs of consumers. As the company’s product portfolio expanded, the company has to change the product strategies to change the hierarchy to achieve the intended business objectives. However, the company’s internal structure is rigid, thereby discouraging too much of flexibility. Nevertheless, the company encourages clear line of authority and responsibility to manage its product portfolio.
Environment: Apple’s corporate environment encourages employees to make continuous efforts to innovate and improve the value of products and services for better market results. The company believes in maintaining secrecy in all of its business ventures to keep the confidential development under wrap (England, 2015). This is precisely one of the prominent reasons that Apple’s loyal consumers wait with baited breath about the latest offering. The company believes in collaboration amongst the working groups to innovate like never before (Corpas, 2009). Whilst the employees are given free hand to work, they have strong corporate values in line to encourage innovation.
Formalization sets the tone of the working environment of an organization. It is defined in terms of written rules, regulations, employee policies, and job duties of an organization (Price and Mueller, 1986). Formalization defines the nature of working bond between managers and employees to attain common business goals. It is the degree or extent to which employees abide by the rules and regulations imposed by the leadership (Chen, 2013). Most of the business leaders forge clear rules for each and every employee to follow so as to make them part of the strategic goals. If the rules are loosely formed, then indiscipline is likely to cause diversion from the business goals. However, if all the working procedures are well defined, then employees would be engaged in the process of achieving strategic goals.
Small companies or startups with informal structure depict low level of formalization as formulation and documentation of such processes is not a priority. Extremely low degree of formalization could result in confusion, poor performance and could result in indiscipline setting in the corporate environment. Sivadas and Dwyer (2000) stated that companies with low formalization are likely to witness ineffectively defined job behavior and employees have liberty to astray from their expected behaviour for the job assigned.
On the other hand, large companies with a more organized structure are bound to have proper well laid down working processes and structures. However, formalization in such companies is way too high with multiple layers of communication and decision-making procedures. For instance, many public and old companies have high formalization for employees to follow strict norms. Thus, the formalization should be optimized for organizations to strike a balance between the business-law and working capital. However, another factor influencing the quantum of formalization is the response of the companies towards these activities. For instance, many large companies have bulk of office manuals and rule books to formalize the internal processes whereas many new companies keep it flexible for the employees. It can get tiresome for employees to grasp the tonality of the formalization and then adhere to the same to achieve the organizational objectives. However, formalization brings clarity in job roles and functioning, thereby improving the relation between managers and the employees across the hierarchy.
LA Gear is a US-based lifestyle company which deals in shoes for men, women and kids. The company was created in 1979 and over the years, it has expanded to different consumer markets to explore the growth opportunities. It has adopted slow business growth strategy whilst introducing shoes in different consumer markets. The company has hierarchical organizational structure with product departmentalization. With a workforce of merely 314 employees (Bloomberg, 2017), the company doesn’t have tall organizational structure. It has average number of management layers with clearly defined roles and responsibilities for the employees. With product departmentalization, the company aims to organize the business into different strategic units. It displays average level of formalization to make the organizational structure less rigid and constrained.
There are factors impacting organizational structure of LA Gear. The four factors are explained below:
Size: LA Gear is a mid-level organization with a workforce of more than 300 employees. Found in 1978, the company has slowly expanded to achieve product diversification. Given the average employee size and the market competition, the company has gone with the conventional product-based hierarchical structure. It helps the company project a sorted look across the multiple managerial levels of the organization.
Technology: Technology has been leading the battle for the companies to improve the communication between the employees. It influences the way employees behave and render their services across the organizational structure to achieve the business goals. LA Gear has been late in adopting the advanced tools of communication. It is slowly developing IT infrastructure to improve its business operations and other customer processes. The inclusion of softwares and other IT solutions could potentially improve the relationship between the management and the employees.
Strategy: LA Gear has adopted business growth strategies to expand to varied consumer markets. It was once making shoes only for women and teen girls and gradually entered into sports and men market (Barringer and Ireland, 2008). Though the company has had seen a rough patch due to poor strategies, it remained focused on market expansion in other consumer segments. This called for basic hierarchical organizational structure to run business functions.
Environment: Corporate environment represents the work ethics and values inculcated by the leadership of the management. If managers and employees are trained in same set of principles and moral values, they are likely to collectively work to meet business goals (Lefifi, 2015). It improves the relationship between the leadership and employees, thereby encouraging them to work towards organization’s profitability. La Gear is an old organization with traditional approach to manage the business operations. It has ingrained strong work ethics and values for the employees to continue work in the direction of increasing its product portfolio to increase profitability. The roles and responsibilities of the employees are well defined as guided by their supervisors.
Organizational structure and design are integral part to define the roles and responsibilities of employee across the different managerial hierarchies. There are six essential elements completing organizational structure. There are companies with varying organizational structure depending on their employee size, market size and business nature. Companies such as Tata Motors, Starbucks, LG, Google, and Apple have demonstrated different organizational structure to meet their strategic objectives. For instance, Tata Motors has flat organizational structure whilst LG has hierarchical structure depending on their business needs and wants. However, there are four common contingency factors influencing the shape and design of organizational structure. The factors define their role in modifying the type of organizational structure so as to meet the intended business objectives. All these elements are integral to define the influence of organizational structure on the business objectives.
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