MANAGING ORGANIZATIONS

Session 1: Introduction to Organizations

Sourav Mukherji
PGP 2012-14 Section C & E
Associate Professor of Organization & Strategy
Term 1:June-September 2012 Indian Institute of Management Bangalore, India
WHY DO ORGANIZATIONS EXIST? 2

WHAT PURPOSE DO THEY SERVE?

An institutional arrangement that leverages collective resources
to achieve a specific objective
 Commercial profit seeking organizations : maximize shareholders wealth
by creating / sourcing and selling / distributing products or services
 Not-for-profit enterprises maximizing social / environmental / political
impact, often depending in grants and donations
 Hybrids: Financially sustainable social organizations & commercial
organizations creating social impact

Organizations need to compete for resources to achieve their
objectives
 Both at the input markets and at the output markets
 Deliver product and services at a price that more than compensates for the
cost of production (acceptable return on weighted average cost of capital)

Organizations need to create sustainable competitive advantage
in order survive and grow
 Positions and competencies are two important dimensions for creating
sustainable competitive advantage

S Mukherji
ORGANIZATIONS NEED TO CREATE SUSTAINABLE 3

COMPETITIVE POSITIONS

THREAT OF NEW
ENTRANTS BARGAINING POWER
OF BUYERS
Brand loyalty
Patents, innovations How much are the buyers dependent on us ?
Experience curve How much are we dependent on the buyers ?
Economies of scale Are the buyers consolidated ?

BARGAINING POWER THREAT OF

OF SUPPLIERS SUBSTITUTES

Can the needs be serviced by alternate

Nature of supplier industry products or services ?
-fragmented or consolidated Are there chances of technological
Switching costs breakthroughs that might make our
Ability of buyer to vertically INDUSTRY product less attractive / obsolete ?
integrate RIVALRY
Dependence of buyer on
supplier
Industry structure fragmented or consolidated
Demand conditions increasing or declining
Ease of expanding or contracting operations

Industry analysis needs to be complemented by analysis of the second order environment

- the impact of social , economic, political and technological analysis

S Mukherji
ORGANIZATIONS NEED TO CREATE VALUE 4
SUPERIOR TO THEIR COMPETITORS

SUPERIOR Increase in reliability

QUALITY Creates brand name, reputation
Can lead to greater efficiency

Greater resource leverage

Greater employee productivity

SUPERIOR COST LEADER SUPERIOR

EFFICIENCY INNOVATION
DIFFERENTIATOR
Product , process
Managerial, organizational
Incremental, disruptive
Customize goods and services
to unique demands
SUPERIOR
Can be achieved through
CUSTOMER RESPONSE
superior design, service
and support

Capabilities - the skills of an organization at leveraging its resources -

are a product of on organizations structure and control systems

S Mukherji
 5
A PROCESS MODEL OF STRATEGY FORMULATION
Guerilla Warfare
Franchisee banditry
Stealth
Rob the rich
Fixed transit tax COMPETITIVE
Alliance INNOVATION
ASSUMPTIONS
COMPETITIVE
Strength in numbers
STRATEGY
ORGANIZATION
PURPOSE PERFORMANCE
Kill Sheriff ORGANIZATION Definition
Social Justice DESIGN Measurement
Short / Long Term
ANALYSIS Centralization
Geographic dispersion BUILDING
Functional
Industry Dynamics Second line of command COMPETENCIES
Sheriff
Intelligence
Barons
Training, recruitment
Prince John
Distinctive Competencies Collection process
Community
Leadership
Commitment
Nimbleness, flexibility
S Mukherji
ORGANIZATIONS NEED TO BE DESIGNED TO FACILATE 6

ATTAINMENT OF STRATEGIC OBJECTIVES

COMPETITIVE
ASSUMPTIONS INNOVATION
COMPETITIVE
STRATEGY
ORGANIZATION
PURPOSE PERFORMANCE
ORGANIZATION
DESIGN
ANALYSIS
BUILDING
Industry Dynamics
COMPETENCIES

Distinctive Competencies

S Mukherji
ORGANIZATION DESIGN COMPRISES STRUCTURE, PROCESSES 7
AND THEIR INTERDEPENDENCIES WITH ENVIRONMENT

Sessions 6,7
The introductory case in
Session 2 Session 4 Daft on Xerox Corporation
introduces many of the
STRATEGY following issues:
DEPENDENCY IMPACT OF
ON Organization Culture
TECHNOLOGY
ENVIRONMENT STRUCTURE & Organization Politics
PROCESSES Bureaucracy and size
Impact of environment
Sessions 1. Centralization Innovation
8 - 10 2. Formalization
3. Specialization Session 5 Outsourcing
CULTURE 4. Coordination SIZE Organization restructuring &
POWER 5. Control systems AND turnaround
POLITICS 6. Learning GROWTH Acquisitions
7. Decision Making Sustainable practices
8. Change management

Sessions
3,11 - 16

Caveat: This is not a modular course and

sessions will have cross references and interdependencies

S Mukherji
 8
THERE ARE VARIOUS WAYS OF ANALYZING STRUCTURES

Configurations Dimensions Groupings

Five key parts in organizations Centralization :decision making Functional structure

rights and responsibilities
Line functions, support functions Divisional structures
and managerial functions Formalization: extent of rules
and regulations Matrix structure

Specialization : structural Hybrid structure

differentiation , departments,
Geographic spread Team / Project based structures

Network structures

S Mukherji
 9
CONFIGURATIONS: FIVE KEY PARTS IN ORGANIZATIONS
STRATEGIC APEX Provide direction
envisioning
Board of directors
TECHNOSTRUCTURE President CEO
Helps organizations to
Executive Committee
adapt to the environment
SUPPORT STAFF
Vice Legal Maintains smooth operations
Presidents of the organization supports
Strategic
planning PR / IR the core
General Pricing
Managers R&D Size and importance of
Controller
Payroll parts would vary
Regional/ depending on environment,
Production
Plant Mailroom technology and several
scheduling
Managers other factors
Training Cafeteria
Foreman

Purchasing agents Machine operators Assemblers

MIDDLE LINE
Sales personnel Maintenance Shippers QA
Implementing
strategies
OPERATING CORE
primary transformation from inputs to outputs
S Mukherji