Strategy & structural dimensions--a comparative study of four industries.

AuthorGupta, Bindu
PositionBy Contribution - Abstract


Organization Structure is a dynamic element which can change over time as a consequence of new organizational and environmental conditions. It reflects the way in which information and knowledge are distributed within an organization and it substantially influences the distribution and coordination of the company's resources, the communication processes and the social interaction between organizational members (Chen & Huang, 2007). It can be frequently customized so that staff could have access to and acquire new and varied knowledge that would help them to overcome a range of problems, fluctuations and diverse situations (Lloria, 2007). Studies (e.g., Dodgson, 1993; Fiol & Lyles, 1985) also have suggested that structures have an influence on the organization's learning ability. Researchers further suggest that organizational personnel are meaningless unless some type of structure is used to assign people to tasks and connect the activities of different people or functions (Denison, 2000; Drucker, 1974).

Organizational structure may obstruct or support the capacity of the organization to adapt, innovate or improve its ability to add value for its customers and to its performance. One of the purposes of the study was to understand the organizational strategy and structure in Indian organizations belonging to different industry segments. It also examines the relationship between strategy and structure. Although, there have been rich theoretical and empirical descriptions about structure and strategy (e.g., Schaffer & Litschert, 1990; Tse, 1991), this study intends to examine it further in the Indian context. The rationale behind are that the Indian culture is different from the western culture. Research suggests that when national and organizational cultures come into conflict, the national culture is likely to dominate (Hofstede, 1980; Pang et al., 1998).

Peters and Waterman (1982) and others reported that organizations in the United States (US) are influenced by national cultural values: there have been focus on open and honest communication and teamwork and staff are being empowered to make decisions (Mwaura et al., 1998). Hofstede (1980) found that in cultures with high power distance relationships, employees have limited expectations for participation in decision making. Given such cultural considerations, the findings pertaining to the relationships between strategic orientation, organization structure and performance may not apply in the Indian cultural context, as Indian culture has been rated high on power distance and also differ on other value dimensions from US culture.

Organizational Structure

Child (1972) defined organizational structure as "the formal allocation of work roles and the administrative mechanisms to control and integrate work activities including those which cross formal organizational boundaries". Daft (1998) stated that organization structure determines the formal reporting communications and represents the levels which exist in administrative hierarchy and also specifies the extent of the managers' control. The people's formal communications, job status in an organization, the extent of accessing information, job descriptions, resource allocation, rules and regulations, compliance and implementing the rules, co-ordination between the activities, depend on designing organizational structure (Ergenli et. al., 2007). To understand the organizational structure, number of structural dimensions has been identified in various studies. Among the many structural dimensions, formalization, integration, centralization and complexity are commonly used in describing structural characteristics.

Centralization is the degree to which employees are empowered to make decisions. When decisions are kept at the top, an organization is centralized, whereas in decentralized organizations, decisions are delegated to lower organizational levels (Daft, 1998). Formalization can be defined as the extent to which an organization uses rules and procedures to prescribe behavior such as the details on how, where, and by whom tasks are to be performed (Fredrickson, 1986). In the organization with higher level of formality, there are many bureaucratic and rigid rules and set procedures, and little individual freedom of action (Ahmed, 1998).

Complexity describes many, usually interrelated, parts of an organization (Fredrickson, 1986). Structural integration refers to the coordination of activities among the different specializations within the firm (Miller, 1987). The more the complexity increase, higher is the need for structural integration in the organization which can be in the form of vertical or horizontal linkages. Vertical linkages are used to coordinate corporate activities between the top and the bottom of the organization. Top management controls planning, problem solving, decision-making and directing (Hyden, 1994; Hankinson, 1999). Horizontal linkages help to integrate the different functions, units and expertise in the organization.

These structural dimensions influence firms' ability to perform efficiently or effectively. Studies indicates that members in highly centralized organizations had less motivation to learn, and were less efficient and slower in making decisions (Duhaime & Schwenk, 1985; Slevin & Covin, 1995). An organization with higher degree of formalization and centralization may make it easy to avoid chaos, inconsistency, and duplicated efforts, especially within a large, complex organization (Adler, 1999). Chen et al., (2009) reported that formalization and centralization of organizational structure would affect staff's absorption capacity, and further affect organizational innovation performance.

An innovative organization needs open channels of communication, decentralization and informal decision making, and flexibility in processes and procedures. Loosely coupled decision linkages and loosely identified job descriptions are conducive to greater entrepreneurial and innovative activity (Mintzberg, 1979). Azadegan, (2008) opined that an organization with lower centralization has better capabilities for organizational innovation. Chen and Chang (2012) reported that the higher the degree of organizational centralization, the lower the absorptive capacity of the organization, and then the lower the degree of organizational innovation.

Organizational Strategy

Organizational strategy can be defined as a plan for interacting with the competitive environments to achieve organizational goals (Daft, 1998). Through its strategy, an organization selects and interprets its environment, and adapts its strategy to the requirements of the environment (Porter, 1985). Miles and Snow (1978) classified strategy types as defender, analyzer, prospector, and reactor. Defenders are internally oriented organizations. They stress efficiency, and are tightly organized firms focused on maintaining a niche with a limited range of products or services (Miles...

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