The Organization of Internal Business
The organization of internal business operations is accorded a lot of attention in all organizations. Achievement of organizational goals occurs through hierarchy, supervision and role sharing. Different organizational architectures exist to enable organizations accomplish internal and global business objectives. For instance, structures such as horizontal division, vertical differentiation, network structures and integration mechanisms are used by organizations in the structuring of internal business. Such architectures enhance internal knowledge creation and subsidiary integration among other benefits.
Organizational architecture refers to the arrangement of structures for the working of an organization. The concept involves the interconnection of various work flows and human units for the sharing of resources. Organizational resources such as communication, approvals, information and direction are important in the successful operation of organizations hence the need for organizational architecture. The architectural choices in any organization reflect the organizational values. Additionally, the choice of organizational architecture is influence by the technology, market conditions and government regulations.
The organizational architecture used can enable the organization to maintain its culture, an important aspect for business success. Organizational structure on the other hand involves methods of adaptation to change, communication and task distribution. The key concern of organizational structure is to ensure that information flows effectively throughout the organization through coordination of authority, control and responsibilities. The organizational structure is influenced the organization’s size, the marketing approach and the customer characteristics among other factors. The organization has to adapt to environmental changes through vertical and horizontal differentiation and also through integration mechanisms (Hills, 2013).
These are the key organizational structures available. The vertical differentiation structure involves a multi-level approach to information passing through the organization. The vertical approach involves centralization of power which is considered essential in the operation of any organization. Any company that applies vertical differentiation ensures that decisions are made by the top management without counter claims from lower levels of management. Despite the effectiveness of the structure in decision making, it is limited in that it reduces flexibility. Moreover, it increases the number of individuals who are entitled to high salary rates.
For large companies, the horizontal differentiation structure can be appropriate. The structure focuses on role specialization and regional organizational structures. Due to the dependence on regional structures, the horizontal approach is more flexible. One of the advantages of horizontal differentiation is that in enables merging with other firms. Mergers can be formed through the combination of functional units across regions.
Another advantage associated with the horizontal structure is that it encourages the formation of functional structures where each sub structure has a specific role. Despite the strengths associated with the horizontal differentiation structure, it is limited in that it demands that functional collaboration has to occur. Business operations cannot be accomplished successfully without collaboration across functional units.
On the other hand, the integrated mechanisms involve both product division and hierarchy of power. Understanding integrated mechanisms requires that various factors be considered. The integrated mechanism is associated with factors such as direct roles, teams, matrix structures and liaison roles (Hill et al., 2014). The network structures involve the outsourcing of all functions except the administration function. As such, the network structure involves a core of administration surrounded by a network of partners and contractors.
Various approaches can be taken by organizations seeking to change internal business structures. For instance, any organization desiring to shift should consider the size of the company, matching the firm’s strategies to its situation, changing the management to fit the strategy and changing the organizational structure to fit the needs of the new strategy among other things. Product differentiation, gaining technological advances, flexibility and product pricing are also essential for organizational success (Reeves et al., 2012).
Hill, Charles W. L., Jones, Gareth R., & Schilling, Melissa A. (2014). Strategic Management: Theory & Cases: an Integrated Approach. Stamford, CT: Cengage Learning.
Hill, W. (2013). International business: competing in the global marketplace. New York, NY: McGraw-Hill.
Reeves, M., Love, C., & Tillmanns, P. (2012). Your Strategy Needs A Strategy (Cover Story). Harvard Business Review, 90(9), 76-83.
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