Appex Corporation CIS 410-01 Case 2 Spencer Kerber 9/13/2015
Contents 1. Executive Summary... 2 Threat of new entries: Low... 2 Threat of substitutes: High... 2 Supplier power: Low... 2 Buyer power: High... 3 Degree of rivalry: High... 3 2. The Problem.3 3. The Mission..3 4. The Generic Strategy..3 5. Critical Stakeholders... 3 A. Appex Employees 3 B. Appex Shareholders..4 C. Customers.4 6. Available Options... 4 A. Divisional Structure 4 B. Adaptive Structure.4 C. Matrix Structure..5 7. Recommended Option... 5 8. Works Cited.. 5 1
1. Executive Summary Apex Corporation provided management information systems and inter-carrier network services to cellular telephone companies. The company was founded in 1986 from the merger of Appex Inc. and Lynayarch Communications Consultants (LCC). Prior to the merger Appex focused on the management of information systems for the cellular industry and credit scoring systems for financial service companies. LCC had specialized in design and engineering of cellar radio networks for large cellular companies. In 1990, Business Week rated Appex the fastest growing high technology company in the United States. Due to its high growth rate, the company added about 10 new people every month. In 1998, Appex investors recruited a BCG consultant Shikhar Ghosh to improve the organizational structure of the company. During his time as COO, Ghosh tested numerous different organizational structures including circular, functional, and product team designs. The key problem facing Ghosh upon arriving at Appex is the chaotic condition of the company s current organizational structure. Appex started out with a tight knit group of employees that could easily adjust to changes and solve problems rapidly. As Appex grew and new employees were hired, the former business structure began to fail. New employees did not have clear cut job responsibilities and the overall company had no formal communication structure. By 1991 Appex was a larger company which had adopted a divisional organizational structure with each different division responsible for their part of the business. The divisions included Intercarrier settle services (ICS), Information Systems(IS), and two more divisions in charge of operations and human resources, respectively. An analysis with Porter s five forces reveals the following: Threat of new entries: Low The cellular industry is very expensive and difficult for new entries to get into. The majority of corporations in the industry are very large. Threat of substitutes: High The services that Appex provides are not unique to Appex. Any telecom company with the same level of infrastructure could provide equal service. Supplier power: Low Appex does not require raw materials or a large amount of new equipment to conduct business. For this reason suppliers have very little power over Appex. 2
Buyer power: High Appex s customers have a great deal of power over Appex as there is a limited amount of them and they are all high volume buyers. Degree of rivalry: High As a smaller organization Appex was able to quickly outmaneuver the larger competitors, as shown with the ACT system. However, as Appex grows it will be less able to make quick decisions that put it ahead of its competition. 2. The Problem The problem faced by Appex Corporation is as follows; what organizational structure should Appex adopt that would best fit their business needs. From the start of Ghosh s time at Appex his goal was to design and incorporate an organizational structure that would combat Appex s historical lack of structure in the workplace. 3. The Mission Appex s mission was to provide management information systems and inter-carrier network services to cellular telephone companies. 4. Generic Strategy The generic strategy that Appex followed was cost leadership. Appex produced a good that was indistinguishable from competing goods from other companies. 5. Critical Stakeholders A. Appex Corporation (Employees) Appex employees have a large stake in the success of Appex Corporation. These employees include both salary and non-salary employees. 3
B. Appex Corporation Shareholders Appex corporation shareholders hold a large stake in the success of Appex. They are dependent on Appex s financial success. C. Customers The customers of Appex also have a share in the success of Appex Corporation. Appex s customers include large cellular companies such as BellSouth and Southwestern Bell. Though they have a small number of customers, Appex s customer contracts were often multiyear agreements that ranged from $100,000 to over $2 million. 6. Available Options A. Divisional Structure The divisional structure presented numerous advantages to Appex. It created a system of improved accountability by forming to a simpler vertical organizational structure. It also led to improved budgeting and planning. While at first the budgeting was seen as a problem with employees fighting over funding, Ghosh eventually settled on a system that required divisions request funding on a project to project basis. This helped coordinate planning a project with funding it. A large improvement that the divisional structure provided was extensive communication improvements. Unlike other structures where employees did not know who their superior was, the divisional structure created 4 different vertical organizational structures that allowed for easy communication among upper management and inter-division employees. Though the divisional structure allowed for great interdivisionary communication, it fell short when communication between different divisions was required. B. Adaptive Structure 4
One option that Appex has available is to continue Ghosh s strategy of evolving the organizational structure overtime. By changing the structure of Appex every six months or so, it allows them to adjust to the new demands of the market, which being the evergrowing cellular technology market, would be advantageous. C. Matrix Structure The matrix organizational structure was not tested by Appex. It is similar to the divisional structure in that it can benefit from the functional divisions. In a matrix structure employees are grouped by both function and product in a matrix and frequently teams of employees will be assigned to a project to accomplish a specific goal. This type of structure can take advantage of the best parts of divisional and team based structures. One of the disadvantages of the matrix structure is the division of power among managers. Ghosh has shown strengths in dividing power and removing the ego from managers in the past and I believe will be capable to deal with the balance of power that the matrix structure creates. 7. Recommended Option I recommend that Appex permanently use the divisional organizational structure. This model is most similar to the standard vertical business model which has proven itself to be effective. This model combines the benefits of different organizational structures by creating small organizational divisions which create a balance between the desired control of upper management and the desire for more organizational freedom from lower level management. 8. Works Cited Barker, Management of Information Systems, case2-1: Appex Corporation Morgan, Gareth Images of Organizations. SAGE publications, CA, 1986 5