Management and Organization

What organizational structure the corporation should apply to accommodate different structures?

Most of the corporations will seek to raise and expand their businesses by expansion into new products and new markets. However, some of the corporations retain on the original organizational structure when the businesses are expanded, then those corporations are failed to accommodate and eventually make loss even though the businesses are expanded in terms of market shares, number of employees and number of stores. In this essay, “What organizational structure the corporation should apply to accommodate different structures”, will be examined in the attempt to avoid the side effects of business expansions. Theories and real-life examples will be provided for the following analysis. 4 dimensions will be examined respectively, namely, size and franchising, expanding to overseas market and technology-oriented corporations, retailing company and cost minimization, innovation-oriented corporations.

The corporations’ merge by different methods to gain advantages, however, they neglect the importance of change of organizational structure meanwhile. Corporations may apply horizontal integrations merging competitors to enlarge market shares; vertical integrations merging suppliers or distributors to reduce average costs and conglomerate merging unrelated firms to diverse risks (Chang, 2013). On the other hand, according to Kristina McElheran (2012), neither centralization nor decentralization can be completely applied to help adapting the enlargement of businesses since one organizational strategy can hardly fit all. For example, in 2001, Indigo, the largest bookstore chain in Canada formed by Heather Reisman, integrated Chapters, another largest bookstore chain, to be a combined company, Indigo Books & Music. Yet, Reisman failed to handle new businesses originally held by Chapters such as online shops and Indigo recorded lost in 2002. Therefore, the management of organizational structure should be examined in order to tackle the problems of unaccommodating enlarging businesses.

Different organizational structures are selected under different factors of business strategies. There are 2 types of management, which are organic and mechanistic. Also, there are different organizational structures, namely, wide or narrow span of control, centralization and decentralization, formalization, specialization, chain of command, so on and so forth. Different organizational structures have their own advantages and disadvantages. In this essay, we are going to examine the use of organizational structures under different situations.

First of all, the franchising businesses applied mechanistic structure since the sizes of corporations grow in a fast speed. The franchisors offer the franchisees rights to make use of their brand names, patents, exclusive distribution of products and services, rights to use the technology and form of business management (Silva et.al, 2007), in order to utilize their brands. With the franchising strategy, the franchisors can spread their brands rapidly and become large-size businesses. Large deals of restaurants apply franchising strategy to expand their businesses without making their brand names more infamous, but more famous and well reputed. As the franchisors have to pack their technology, brand names, patents for the franchisees, a strict formalization should be applied. Meanwhile, the franchisors offer almost entire centralization, which means the franchisees, managers and employees have to completely follow the core strategies, for the management. This results in high efficiency of a franchise restaurant operation system and stable expansion for the catering corporations (Lee et.al, 2010). For instance, McDonald, the most successful MDCs over the globe, were undergoing expansion in France by franchising since 1972. In France, McDonald transferred the knowledge and assisted technically or commercially to the franchisees. On the other hands, the franchisees, managers and employees needed to follow the core strategies such as advertisements, images, methods and services very strictly and had low span of control and rights of speech on companies’ policies. From 1972 to 2001, McDonald reached 914 outlets, was present in more than 660 towns, generated over 35,000 jobs and made a profit of €1.9 million (Silva et.al, 2007). Simultaneously, formalization and specialization help labors more ambiguous and raise the quality and profit (Rand & Torm, 2012). In the attempt to gain a large extent of expansion and extend the good reputation, restaurants make use of franchising, and hence apply mechanistic structure, such as entire centralization, high formalization and narrow span of control.