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Importance of Organizational Structure

Question:

Write an essay on Organizational Structure.
 

The idea of organizational structure can be defined as how the job or the specific tasks are officially allocated, grouped, and synchronized. It is important for a company to follow and develop a pragmatic and strategic organizational structure. Without the appropriate structure in the workplace, a company may fail to operate efficiently, or even fall down. It is an internal variable, which is typically responsible for the success of a company. As opined by Fan et al. 2013, There are six key fundamentals that the leaders need to concentrate on while designing their organizational structure. These are: departmentalization, span of control, chain of command, centralization and decentralization, work specialization and formalization. On the other hand, the business environment can be described as the internal and peripheral factors that influences the the organizational functions. As opined by Craig and Campbell 2012, the political, economic, social and technical issues those are being instrumental in the operation of the company can be designated as the four key factors of the business environment of a company.

Wal-Mart is a multinational retail company that is operating a chain of hypermarkets, department stores and grocery stores internationally. Established by Sam Walton in the year of 1962, now, it operating with 11,527 outlets and clubs allover 28 nations (Alcacer et al. 2013). Behind such an enormous growth and worldwide eminence, there are a number of strategic issues, which are typically instrumental. One of them is the well-defined organizational structure of the company. To attain the mission and values of the organization, it is following a general formal and bureaucratic arrangement within the company. However, in the recent years it has made some crucial changes within the organization, which has helped them to augment their organizational success. On the other hand, the internal features and strengths and the situational and environmental factors are also influential in the operation of Wal-Mart, in the USA and worldwide. Sometimes it is being helpful for the company, and sometimes it is being restrictive for the growth of the company. 

Key Elements of Organizational Structure

There are multiple types of organizational structures or designs adopted by an organization based on the particular business and its environment. These designs critically fall into two different categories, such as the traditional and contemporary structures (Day 2014). Simple, functional, and divisional structures are the part of the traditional designs; whereas the team structure, project structure, and the matrix structure majorly belongs to the contemporary design of the organization.

Considering the organization for the paper selected as Wal-Mart, both the traditional and contemporary organizational design structure is followed by the business to cope up with the constantly changing needs of the environment effectively. Based on the investigation, it is determined that Wal-Mart uses a Divisional Organizational Structure at its top level while a Matrix Organizational Structure is utilised at its different store level within the particular market (Engel 2012). Further investigation suggests that four principle divisions help to compose the divisional structure of the organization, which are “Wal-Mart Reality”, Wal-Mart Speciality Stores”, “Wal-Mart International”, and “Super-Centres and Sam’s Club”. Each of these identified divisions of the company has its distinct workforce, and the centre of operation has provided these divisions with the adequate resources and independence in terms of the activities (Goetz, Rupasingha and Loveridge 2012). Based on the particular environment of the business, the individual business strategy of Wal-Mart can be acknowledged behind the selection of this particular organizational structure. The application of the specific organizational structure provides benefits to the company in the form of specialising the business activities through the self-contingent divisions. In order to define the structure, six distinct elements associated with the organization chart will be considered and discussed in the following paragraph.

Key Fundamentals of Organizational Structure

Considering the structure of the selected organization, a chain of command is one of the most fundamental elements defining and aligning the overall corporate design. In Wal-Mart, a line of control is the strict guidance of the authority stretched throughout the operational chain of the organization (Grant 2012). From the top level of management structure to the bottom stage of the organization, chain of command expands critically with relevance to the identified corporate design. In Wal-Mart, a chain of command is responsible for monitoring and controlling the internal information related to the different areas of business, as it determines the chain of reporting the overall information within the organization.

(Figure 1: Chain of Command)

The span of control is another important element of the organizational structure of any organization. The effective span of control guides the business to allocate and utilise its workforce to the proper direction for achieving the common aims and objectives, as identified. In case Wal-Mart, a span of control determines the number of subordinates that should be guided by a superior or manager in the relatively top position of the organization (Igan and Suzuki 2012). Apart from that, the particular span of control for Wal-Mart is wide due to the stretch of its global retail operations.

(Figure 2: Span of Control)

Centralisation provides vital impact in the organizational decision making process. As part of the organizational structure, a certain company must need to determine whether the decision-making process is concentrated at a single point in the chain of command, or it is spread out within the line of command. Concentrating the decision refers to the centralisation, where spreading the process is known to be the decentralisation. In order to promote the democratic decision-making process, Wal-Mart adopted the decentralisation element into its corporate structure. However, in some critical cases, it also follows the centralisation of the decision in a mean to take efficient decisions promptly (Smith 2012).

(Figure 3: Centralisation and Decentralisation of Decision-Making Process)

Specialisation is also known as the division of task, which suggests the degree of breaking down the individual jobs to promote the efficiency within the work functions and activities. In case of Wal-Mart, it concentrates on a high specialisation for its employees to become a master in their specifically identified areas, whereas the multiplied benefits can be gained by the organization from its global retail market (Xu, Yasinzai and Lev 2013). However, considering the operations of its different divisions, it emphasis on a low specialisation to maintain the flexibility.

(Figure 4: Specialisation of Tasks)

Formalization is similar to the specialization to some extent, where structuring the job within the organization is done. Formalization is strictly included within the organizational structure of Wal-Mart to ensure the tasks and activities of its employees are governed by the proper rules, regulations, and mechanisms. Amongst the formal and informal organizational structure, an informal process is followed by Wal-Mart to provide more value to its individuals based on their skills and preferences.

 

Traditional and Contemporary Organizational Designs

(Figure 5: Formal and Informal Structure of the Organization)

Grouping the job together for developing the suitable relationship between the common tasks and activities is known as departmentalisation. Wal-Mart follows a rigid departmentalisation as part of its organizational structure, as the different divisions of the company work autonomously without interacting with each other (Grant 2012).

(Figure 6: Rigid and Loos Departmentalisation of Organizational Structure) 

The four factors those are being instrumental in the shaping organizational environment of the company named Wal-Mart.

Wal-Mart concentrates on the political factors in the retail industry, usually related to the government policies. Wal-Mart is presently operates its maneuver worldwide. In this operation, it needs to follow definite rules and guidelines of the host nations. They are facing big confrontation from the Chinese government and are being forced to operate with the local firms (Alcacer et al. 2013). On the other hand, Wal-Mart's global operations have superior impact on host nations’ laws and guidelines, for example, the Indian government has opened the gate for foreign investment. As opined by Barberá Marcilla 2014, this global scenario of globalization has helped the company to grow. It is also being helpful for the future growth of Wal-Mart’s business.
 

(Source: Alcacer et al. 2013)

As rightly mentioned by Breaâ€ÂSolís et al. 2015, the economic situation of host nations has an immense impact on any business organization. In the US, Wal-Mart is confronting challenges of high interest rate, rise in petroleum and power cost, price rises, high unemployment, rise in customer debt level, inaccessibility of consumer credit, increased tax rate, financial slow-down and other fiscal factors. It is adversely affecting customer demand of the offerings of Wal-Mart (Alcacer et al. 2013). This economic trend can be considered one of the important contingency factors for the Wal-Mart’s business environment. 

The worldwide change in the social pattern due to the globalization is being helpful for the Wal-Mart. Now the busy life of the people globally is opening the gate for the operation of the retail stores like Wal-Mart. On the other hand, as opined by Barberá Marcilla 2014, the world is gradually concentrating on the trend of Healthy lifestyle. Wal-Mart should concentrate on that. However, the socio-cultural issues of the global field are of immense importance. The Wal-Mart is concentrating on introducing eco friendly processes. 

The increased trend in the online marketing is being an opportunity for the Wal-Mart. The company has responded to this opportunity by integrating the online shopping strategy for the customers. As mentioned by Breaâ€ÂSolís et al. 2015, the introduction of the mobile shopping app by the company has also helped the customers and thus increased the growth opportunity of the company. In addition to this, it has introduced a voice and video communication that smoothed the organization’s communication and helped the flow of trade and account information. However, in this volatile world of global business, Wal-Mart must focus on the R&D for gaining the competitive advantage.  

Conclusion

Based on the investigation to the business structure and the particular business environment of Wal-Mart, it can be observed that the particular corporate design adopted by the company is ideal to cope up with the changing needs of the global environment as well as capturing the market opportunities to promote the business advantages. However, there are areas of improvement within the organizational structure for Wal-Mart. One of the most significant factors is enhancing the application of its corporate beliefs and values in the context of its organizational culture (Igan and Suzuki 2012). It will help the company to avoid various criticisms it had experienced throughout its operational period in the competitive global environment. On the other hand, the increasing employees’ engagement can also be achieved by the company. 

References:

Alcacer, J., Agrawal, A. and Vaish, H., 2013. Walmart around the World.

Barberá Marcilla, L.A.U.R.A., 2014. Business analysis for Wal-Mart, a grocery retail chain, and improvement proposals (Doctoral dissertation).

Breaâ€ÂSolís, H., Casadesusâ€ÂMasanell, R. and Grifellâ€ÂTatjé, E., 2015. Business model evaluation: quantifying Walmart's sources of advantage. Strategic Entrepreneurship Journal, 9(1), pp.12-33.

Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.

Day, G. (2014). The market driven organization. [Place of publication not identified]: Free Press.

Engel, D. (2012). Wal-Mart statt Wall Street. Media Spectrum, 32(1), pp.46-46.

Fan, J.P., Wong, T.J. and Zhang, T., 2013. Institutions and organizational structure: The case of state-owned corporate pyramids. Journal of Law, Economics, and Organization, 29(6), pp.1217-1252.

Goetz, S., Rupasingha, A. and Loveridge, S. (2012). Social Capital, Religion, Wal-Mart, and Hate Groups in America*. Social Science Quarterly, p.n/a-n/a.

Grant, R. (2012). Contemporary strategy analysis. Hoboken, N.J.: Wiley.

Igan, D. and Suzuki, J. (2012). The “Wal-Mart effect” in central and eastern Europe. Journal of Comparative Economics, 40(2), pp.194-210.

Smith, P. (2012). Lead with a story. New York: AMACOM, American Management Association.

Xu, J., Yasinzai, M. and Lev, B. (2013). Proceedings of the sixth International Conference on Management Science and Engineering Management. London: Springer.

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