Organization Structure and Strategies - Essay Example

Organization structure and strategies: Vision and mission ment: A mission ment defines what the company intends to do in the future, the vision statement on the other hand states what a company will become in future. A vision statement should show the company's image and how it positions itself in the market, it should be short in order for the organization members to easily remember, studies have shown that company's whose employees tend to understand the vision of the company will have higher returns. Finally the vision statement should promote priced among employees and also make them feel that they belong to something big. The mission statement is aimed at improving the activities in the company; it is aimed at promoting best practices and also encourages improvements in these practices. The mission statement therefore should contain information about what the company intends to do; this communication ensures that the organization achieves the set goals and objectives. Organization structure: There are various types of organization structures and they include the hierarchy structure, the matrix structure and the hybrid structure. The choice of the organization structure needs to take into consideration some factors which will help the choice of the best organization structure that will help to achieve common objectives and goals in the organization. Size of the organization: The size of the organization will be a factor to consider when choosing the structure to adopt, the size of the organization will be determined by the number of employees, the number of departments and the output levels and number of processes. Appropriate structures adopted in large organizations will help in gaining competitive advantages over rivals because the structure helps to coordinate activities in a more efficient way. Function: A firm has to consider its function when choosing an appropriate structure, if the organization has various process then it would be advisable for the organization to structure according to the functions of each department. Region and geographical: The structure will also depend on the nature of the organization, organization whose activities are based upon different regions then it is best to adopt structures that distinguish the various regions. Consumer needs: There is also a need to consider the needs of the consumer when choosing the best structure; in this case the market will influence the optimal choice of structure. Organization processes: The organization processes will also be considered when making decisions about the structure, the structure in an organization where products have to pass through various processes need a structure that clearly identifies these activities in a distinctive manner. The structures: An organization needs also to consider the various advantages and disadvantages associated with each structure before deciding on which structure to adopt, through this consideration a business is able to make optimal decisions. Example the hierarchy structure has been criticized for making waste and also organization failure, all the advantages and disadvantage of this structure must be taken into consideration. Organization strategy: Cost leadership strategy: This strategy is appropriate where an organization has established a good relationship with suppliers and it is possible to acquire raw materials at a lower cost than its rivals and therefore the firm can sell its products in the market at a low price. This is also possible when the firm adopts an efficine tproduction process that minimizes the cost of production, finally this strategy could be used when other firms are unable to minimize their cost. The product differentiation strategy: This strategy can be used if the firm has reputation in the market, it can also be used when the products in the market are not highly differentiated. For this reason therefore this strategy will work if there is high competition and that consumers prefer unique goods from the organization, however this strategy will only be effective if the company has enough funds to undertake research. Focus strategy: This strategy is possible if a firm has strong sales teams that will communicate with consumers about existing products and convince them to buy, it is also possible if the above strategies have failed. High competition in the market will force a firm to adopt this strategy where the firm has experienced a decline in its market share and therefore will concentrate on a certain market segment. Porter generic strategy: Porter generic strategy includes the cost leadership strategy, the differentiation strategy and the focus strategy. Porter states that the profitability of an organization will depend on the industry, an attractive industry means that firms will have an opportunity to gain higher profits, however he states that a firm in an unattractive industry can still make optimal decisions that will help in realizing superior returns. The cost leadership strategy: This strategy focuses on the ability of a firm to record high returns through low cost production, the firm will sell at the industry's average price or the firm may decide to sell below the industry average price as a way of increasing market share in the industry. The firm that adopts this strategy will remain profitable if it can produce at low cost. The cost advantage strategy according to porter will be realized if the firm can produce in an effective way, gain inputs at low costs, introduces optimal outsourcing and avoid certain costs; the strategy will also be effective if the other firms in the industry are unable to avoid these costs. Success of this strategy will also depend on whether the firm has access to capital, the firm's ability produce effectively and also its ability to distribute effectively. Differentiation strategy: This strategy focuses on production of unique products in the market; a firm that adopts this strategy by producing unique products must add value to these products. The products have unique attributes and therefore the firm aims at increase prices for these products as a way aimed at meeting the extra costs incurred. In order for a firm to succeed a firm must have a lead in science and research, creative production design team and a successful sales team Finally the firm must have good reputation in the market for the consumers to accept the new differentiated products. Focus strategy: This strategy focuses on a narrow market segment that a firm can adopt in order to gain competitive advantage over its rivals, the firm concentrates on the market segment with the aim of gaining consumer royalty, from various studies undertaken it is evident that when there is consumer royalty then the rival firms are less likely to compete in the market segment. Therefore a firm that adopts this strategy will concentrate on the market segment and it may introduce the differentiation focus strategy that may enable increase of prices in the market segment and therefore high profit levels. Value chain: The value chain concept describes chains of activities in the productions process of an organization, production in a firm undergoes an ordered chain where each activity adds value to the product, this concept states that value is created through product differentiation in these activities and lowering of activity costs. Every organization has its own primary and secondary activities, primary activities are those activities that are physically involved in the production of the products, and the secondary activities on the other hand are those activities that facilitate the physical activities. Physical activities include: Inbound logistics Outbound logistics Sales and marketing Services and maintenance The secondary activities include: Administration Information and technology that include advertising Human resource management Research and development The five force model: The five force model was coined by Porter, according to him an industry is influenced by five forces; these forces include rivalry, supplier power, substitutes, and barriers to entry and buyer power. According to him these forces determined the nature of the industry as firms adjust to gain competitive advantages over their rivals. The five forces are discussed below: Rivalry: The industry is shaped by the degree of rivalry, competition in an industry drives the profits of the firms to zero and therefore it is evident that the final nature of the industry will be determined by competition in the industry. However in non competitive market forms the firm is the price maker and therefore less rivalry is evident. Firms will tend to gain competitive advantage through changes inn price levels, product differentiation where improving products features will increase the competitive advantage of firms. Established relationship with suppliers and creating distribution channels, the degree of rivalry will change as follows: Rivalry will intensify if firms have equal market share, market growth will also influence the degree of rivalry where a slow growth in the market will make firms to increase effort to acquire larger market share. Product differentiation will also determine the level of rivalry where the lack of product differentiation among firms will lead to increased rivalry. Substitutes: The existence or the emergence of substitutes will influence the industry, in cases where the substitute price changes then this will definitely affect the industry. In most cases substitute will emerge from other industries and may influence the prices and the demand in the industry. Buyer power: The buyer power will; also influence the industry, when the buyer power is strong then the industry assumes a monopsony and the buyers will set prices, therefore the buyer power will influence and industry. Supplier power: Firms in an industry depend on raw material in the production process; these raw materials are supplied to them by other firms and organization. For this reason therefore if suppliers increase the prices of the raw materials then the industry will change and for this reason the supplier power will influence the industry. References: Michael Porter (2000) Competitive Strategy: Techniques for Analyzing Industries and Competitors, McGraw Hill Press, New York Read More