Firm Structure: Microsoft - Essay Example

Firm Structure: Microsoft Introduction Perhaps, American IT Company Microsoft is the only company in the world, which enjoys absolute monopoly in the market. No other companies in the operating system market are strong enough to challenge the supremacies of Microsoft. Organizational structure plays an important role in determining the success of a company and the case of Microsoft is not an exception. Divisional structure, matrix structure, hierarchical structure, bureaucratic structure, functional structure, etc are some of the prominent organizational architecture in the current business world. It is widely believed that one of the major success factors of Microsoft is its divisional organizational structure. I have been approached by the Board of Directors of Microsoft recently, to discuss the merits and demerits of the organizational architecture of Microsoft. This paper assesses the appropriateness of the current organizational architecture of Microsoft. Divisional organizational architecture of Microsoft Under the able leadership of Bill Gates, Microsoft is following a divisional organizational structure in which different divisions of the company are managed by different people (See Appendix for more details). In other words, different divisions of Microsoft such as Sales, Production, Finance, Logistics, R & D etc are functioning as independent divisions. Moreover, Microsoft has different divisions for its operations in different regions. Different divisions in Microsoft are self-managed organizational entities with autonomy to take independent decisions for the betterment of the organization as a whole. It should be noted that software needs of the European people could be different from that of Asian people. Microsoft’s divisional organizational architecture helps the regional heads to implement business strategies suitable for each region. In other words, with the help of divisional organizational structure, Microsoft is able to cater the needs of diverse people all over the world. Gillikin (2011) pointed out that “Divisions work well because they allow a team to focus upon a single product or service, with a leadership structure that supports its major strategic objectives” (Gillikin, 2011). Divisional structure is helpful to reduce the workloads of the employees. Microsoft managers are getting freedom to focus fully on the operations of the divisions they manage. It is not necessary for them to both much about the operations in other departments. Thus, the regional head in Asia look after the operations in Asia alone whereas the regional head in Europe is looking after the operations in Europe alone. In most of the other organizational structures, it is the duty of the managers to manage the organizational functions as a whole. Increased accountability, departmental cooperation, skill development, operations in unstable environments etc are some of the major strengths of divisional structure. Since Microsoft managers are accountable only for limited responsibilities, they cannot stay away from their responsibilities citing silly reasons like over workload. Moreover, divisional structure helps a company to respond quickly and meaningfully when a problem arises. According to Daft & Willmott (2010), Divisional structure is suited to fast changes in unstable environment (p.111). Current business world is undergoing rapid changes. No business pundit can predict what is going to happen in the next day. In such rapidly fluctuating markets, divisional structure would help Microsoft to adapt properly to the changing needs of the market. Even though divisional structure has lot of advantages, it has many disadvantages also. “A company comprised of competing divisions may allow office politics instead of sound strategic thinking to affect its view on such matters as allocation of company resources”(Gillikin, 2011). When a company follows divisional structure, competition between different divisions may increase. For example, the competition between Microsoft’s Asia division and Europe division may cause problems to the company as a whole. Bao & Wang (2012) have pointed out that “divisional structure within an organization may cause bargaining between the potential divisional managers”(p.81). It should be noted that for a company, the development of the company as a whole is more important than the development of a particular division alone. In short, divisional structure may cause problems to the integration of the company as a whole. Divisional structure eliminates economies of scale in functional departments, leads to poor coordination among different product lines and makes integration and standardization across different product lines difficult (Daft & Willmott, 2010, p.111). For example, the social connector developed by Microsofts business-software division was incompatible with Microsoft SharePoint and Windows Live earlier. This was happened, purely because of the noncooperation among different divisions of Microsoft. In short, internal politics may develop in an organization because of divisional structure. Assessment of the current architecture The success of divisional structure depends on how well the executive leadership manages each division. The top executives should visualize the needs of the company as a whole and give instructions to each divisional heads with respect to the changing business climates. The leadership should educate the divisional leaders that the company is more important than a particular division. “In addition, the executives should have a solid grasp of resource use. Having a shared pool of centrally-managed resources like administrative support or office equipment can reduce costs and organizational complexity”(Gillikin, 2011). Divisional structure is suitable to large organizations with several products (Daft & Willmott, 2010, p.111). Unlike Apple like companies, Microsoft has limited product lines. Microsoft should increase its number of products to exploit the potentials of divisional structure more effectively. Business is becoming global, especially in the current era of globalization. It is difficult for an organization like Microsoft to remain competitive in the market without catering the needs of the global community. Recent recession has caused huge problems in America and in other western countries. It is often said that global wealth is slowly shifting from west to east at present. Under such circumstances, Microsoft like organizations should give more emphasize to their business strategies in Asian region. Divisional structure would definitely help Microsoft to implement strategies suitable for each region or geographical area. Conclusions Divisional structure helps Microsoft immensely in implementing customized business strategies at different parts of the world. At the same time, it increases the internal politics within Microsoft among employees of different divisions. Top executives should take enough precautionary measures to force each division to work for the integration and development of the company rather than the development of the division alone. References 1. Bao T. & Wang Y. 2012. Incomplete contract, bargaining and optimal divisional structure. Journal of Economics. Sep2012, Vol. 107 Issue 1, p81-96 2. Daft D.R.L. & Willmott, J.M.H. 2010. Organization Theory and Design. Cengage Learning EMEA, 02-Apr-2010 3. Directions on Microsoft. N. d. [Online] Available at: http://www.directionsonmicrosoft.com/sample/DOMIS/orgchart/sample/orgchart.html[Accessed on 14 August 2012] 4. Gillikin J. 2011. Advantages & Disadvantages of Divisional Organizational Structure [Online] Available at: http://smallbusiness.chron.com/advantages-disadvantages-divisional-organizational-structure-611.html [Accessed on 14 August 2012] Appendix (Directions on Microsoft, n. d) Read More