IT411: Organization of a Shipping Company

Transcription

1 IT411: Organization of a Shipping Company Arunee Tanvisuth Thammasat Business School June 11 (1/2009) Agenda for Today Different Types of Organizational Structure Implications of a Firm s International Operations for Organizational Structures 2 Airbus Superjumbo Started in Dec 2000, a 8.8 billion project Airbus 380 Double-Decker (73m length, 79.8 wingspan, 24.1m height), the largest after Hughes H-4 Hercules and Antonov An-225 The development cost had grown to 11 billion when the first aircraft was completed in April 2005 Delivery Delays June 2005 (1 st delay), June 2006 (2 nd delay) 26% drop of share price of EADS, the departure of EADS CEO, Airbus CEO, and A380 Program Manager October 2006 (3 rd delay) First commercial flight on October 25, 2007 from Singapore to Sidney 3 1

2 Airbus s Mistake Configuration Management Problem, incompatible design software CATIA version 4 (German and Spain) VS. version 5 (France and UK), two-dimension (German) VS. 3-D (France) Cost to Airbus Loss in earnings from production delays, 4.8 billion Slow down the plan to develop a new midsize widebody plane to compete with Boeing 787 Dreamliner What went wrong? Inability to establish close and effective working relationships between its various factories operating in four countries (Germany, France, U.K., Spain) 4 Organizational Structure The formalized patterns of interactions that link a firm s tasks, technologies, and people It specifies the firm s formal reporting relationships, procedures, controls, and authority and decision-making processes It provides a means of balancing two conflicting forces a need for the division of tasks into meaningful groupings a need to integrate such groupings in order to ensure efficiency and effectiveness 5 Organizational Structure (2) It specifies the work to be done and how to do it It influences how managers work and the decisions resulting from that work It is a critical component of effective strategy implementation processes Performance declines when the firm s strategy is not matched with the most appropriate structure and controls 6 2

3 Traditional Forms of Org. Structure Firm s strategy and structure change as it increases in size, diversifies into new product markets, and expands its geographic scope Simple Structure Functional Structure Divisional Structure Strategic Business Unit (SBU) Holding Company Matrix Structure 7 Simple Structure The owner-manager makes most of the decisions and controls activities, and the staff serves as an extension of top executive The oldest and most common organizational structure Highly informal and the coordination of tasks is accomplished by direct supervision Decision making is highly centralized, few rules and regulations, informal evaluation and reward system Foster creativity and individualism 8 Simple Structure (2) Informality may lead to problems employees may not clearly understand their responsibilities (lead to conflict and confusion), employees may take advantage of the lack of regulations and act in their own self-interest Flat structures may limit opportunities for upward mobility recruiting and retaining talent may become very difficult 9 3

4 Functional Structure The major functions of the firm (such as production, marketing, R&D, and accounting) are grouped internally The coordination and integration of the functional areas becomes one of the most important responsibilities of the chief executive of the firm Common in firm with a single or closely related product or service, high production volume, and some vertical integration Source: Dess, Lumpkin, and Eisner (2008) Functional Structure (2) Enhance coordination and control within each of the functional areas Provide more efficient use of managerial and technical talent since functional area expertise is pooled in a single department Career paths and professional development in specialized areas are facilitated Communication and coordination problems between departments (different in values and orientations) Short-term thinking based largely upon what is best for the functional area, not the entire organization 12 4

5 Functional Structure (3) Different Views from Different Functions Sales Offer a wide range of customized products R&D Overdesign products and components to achieve technical elegance Production Favor no-frills products that can be produced at low cost by means of long production runs Overburden the top executives Difficult to establish uniform performance standards across the entire organization 13 Divisional/ Multidivisional Structure (M-Form) Products, projects, or product markets are grouped internally Each division includes its own functional specialists who are typically organized into departments The operating divisions are relatively independent and consist of products and services that are different from those of the other divisions GM was among the earliest firms to adopt the divisional structure 5 major product divisions of Cadillac, Buick, Oldsmobile, Pontiac, and Chevrolet Source: Dess, Lumpkin, and Eisner (2008) 5

6 Divisional Structure (2) A separation of strategic (corporate officers) and operating control (divisional managers) The problems associated with sharing resources across functional departments are minimized The development of general management talent is enhanced Can be very expensive (duplication of personnel, operations, and investment) Dysfunctional competition among divisions Divisional managers are often evaluated on ROA, sales growth if goals are conflicting, there can be a sense of zero-sum game discourage sharing ideas and resources among divisions for the common good of the corporation 16 Divisional Structure SBU Divisions with similar products, markets, and/ or technologies are grouped into homogeneous units to achieve some synergies Make the task of planning and control by the corporate office more manageable Greater decentralization of authority enable individual business to act more quickly to changes in environment may be difficult to achieve synergies across SBUs Increase the number of personnel and overhead expenses Additional hierarchical level removes the corporate office further from the individual divisions 17 Divisional Structure Holding Company/ Conglomerate Most appropriated when the businesses in a corporation s portfolio do not have much in common (firm with a strategy of unrelated diversification) Corporate office provide a great deal of autonomy to operating divisions and rely on financial controls and incentive programs to obtain high level of performance from the individual businesses Corporate staffs at these firms tend to be small because of their limited involvement in overall operation of their various businesses 18 6

7 Holding Company Structure (2) Cost savings associated with fewer personnel and lower overhead costs Autonomy of holding company structure increases motivational level of divisional executives and enables them to respond quickly to market opportunities and threats Inherent lack of control and dependence that corporate-level executives have on divisional executives problems when key divisional executives leave the firm 19 Charoen Pokphand Group Holding Company Structure Divisions have a high degree of autonomy both from other divisions and from corporate HQ Agro-industry and Food Business Marketing and Distribution Business Telecommunications Business Crop Integration Business Seeds, Fertilizer, and Plant Protection Business Pet Food Business International Trading Business Plastic Business Automotive and Other Industrial Business Real Estate and Land Development Business 20 Matrix Structure A combination of the functional and divisional structures Product-function matrix Product-geographical unit matrix Functional departments are combined with product groups on a project basis There are multiple lines of authority and some individuals report to at least two managers 21 7

8 22 Source: Dess, Lumpkin, and Eisner (2008) Matrix Structure (2) Facilitates the use of specialized personnel, equipment, and facilities Uses resources more efficiently and to respond more quickly to changes in competitive environment Provides professionals with a broader range of responsibility Dual-reporting structure can result in uncertainty (accountability) Intense power struggles may lead to increased level of conflict Working relationships become more complicated AREVA and its Matrix Structure Plants Fuel Services Equipment France Germany North America 8

9 International Operations: Implications for Organizational Structure Contingencies that influence the chosen structure Type of strategy Product diversity Extent to which a firm is dependent on foreign sales Primary types of structure International division Geographic-area division Worldwide functional Worldwide product division Worldwide matrix 25 Structure for Multidomestic Strategy International Division Local managers are provided with high level of autonomy to manage their operations within the constraints and demands of their geographic market Geographic-area Division As firm s foreign sales increase as a percentage of its total sales Worldwide Matrix Structure As firm s product and/or market diversity becomes large 26 Structure for Global Strategies Managers view operations in different geographic areas to be managed for overall efficiency Firms with relatively low levels of product diversity Worldwide product division structure Firms with significant product-market diversity Worldwide holding company structure 27 9

10 Assignment #1 Form a team of 4 persons. Select any liner shipping company of your choice. Describe its organizational structure and suggest the pro (advantage) and con (disadvantage) of that form of organizational structure. 10 points Due Thursday June 18, 2009 (in class) 28 10