Appunti primo parziale Organization theory and design

SHOPIFY AMAZON

Specialized ecommerce platform, Online marketplace, which lets you

which gives the tools to build your sell your products through its

own online store marketplace alongside other online

sellers

Selling with Shopify = rent a building Selling through Amazon = have a stall

to set up your business in in a fair.

Have your own space and customers Thousands of people come to browse

come looking for your store once they and buy, most of them aren’t looking

know your brand for your business in particular, but still

make a lot of sales

Shopify ideal for every kind of Amazon serves for individual sellers

business (from small businesses up to up to small and medium businesses.

larger brands)

Team structure at Shopify; growth team divided into pillars:

Growth marketing team = group of channel managers aiming to acquire

 new customers

Product growth team = cross-functional group of product managers,

 engineers, designers who are responsible for activating new users

Growth operations team = helps with business analytics, user research

 among other things

These teams drive Shopify’s merchant growth

Taylor and the Scientific Organization of Work

“The Principles of Scientific Management” was published in 1911, based on 5

fundamental pillars:

1) Scientifically study each part of a task and develop the One best way to

perform it

2) Select the best person to do the job

3) Train, teach and develop the worker

4) Provide financial incentives for following the methods

5) Divide work and responsibility so that managers are responsible for

planning the work methods and workers are responsible for executing the

work accordingly

The more the environment is uncertain and complex, the more organization

flexibility fits in order to create a successful business

Environment = all actors and activities outside the boundaries of the

organizations (public administration systems, universities, research centres,

competitors, suppliers, clients, …)

Environment can be described according to its uncertainty:

Volatility (in terms of time) = how fast environment configuration can

 change

Complexity = how much diverse are the activities and actors external to

 the organization, how they interact

Contingency Model Design Rule: Organization-Environment Fit

If low organization flexibility and environmental complexity, then fitted

 company is mechanic system

If high organization flexibility and environmental complexity, then fitted

 company is organic system

In fact, low HD (division of labour and specialization), low formalization and

standardization, decentralized and team-based communication, horizontal

cooperation, flat structure and high span of control have all high efficacy and

efficiency in a highly complex and dynamic environment.

On the other hand, high HD, high formalization and standardization of processes,

hierarchy-based relationships and tasks, low span of control, high number of

hierarchical levels, top-down communication and low reliance on team-based

working have all high efficacy and efficiency in simple and stable environments.

Lesson 3 Dimensions of Organization Design: Contingency Factors

Rowe case

Rowe Furniture Company is a furniture company, manufactures sofas, armchairs,

seats.

How does Rowe’s environment change? How does Rowe’s strategy change? How

does Rowe’s organization change? (structural dimensions)

Environment:

At the beginning, there was a stronger stability with respect to the

 situation we find at Charlene’s (new Head of Manufacturing) arrival. During

period of more than 40 years, customer demand was standardized and

there were no technological shocks to affect the business (buyers chose

among what was available in the shops)

At Charlene’s arrival, the demand has changed, showing higher volatility

 and complexity. The customer wanted to have a more personalized offer,

manufactured and delivered in a faster way

Strategy:

At beginning, cost-leadership strategy, offering a standardized product

 (competence based, exception for some personalized goods, which took

very long to be manufactured and delivered)

With Charlene, shift from mass production and cost-leadership to product

 differentiation and extreme personalization, with customers intervening

directly in designing and ordering the products

Technology:

Thanks to Charlene, ‘a computers’ network within the showrooms, which

 allowed customers to select fabrics and furniture designs based on their

preferences to be delivered within one month’

Organizational design before Charlene’s arrival:

Mechanic structure

 Employees do what supervisors want (similar to central offices in BUROC

 case)

Traditional assembly line, each employee does fix, repetitive, alienating

 and boring tasks (high specialization)

Mass production (same kinds of furniture produced and sold in shops)

 Custom-made products available after months



Charlene Pedrolie’s actions as new Head of Manufacturing to keep Rowe

competitive on the market:

1. Removed most of supervisors to stimulate collective intellectual abilities of

the workers (reduced vertical differentiation)

2. Implemented employee’s training on several activities to provide them

with a proper knowledge to perform different tasks required to make a

single piece of furniture (remove specialization)

3. Asked employees to create horizontal work groups (cells) and design new

production system (decrease centralization)

4. Each group selected its members from various functional areas (lower

specialization)

5. Worked on processes, timing, procedures for particular product line (less

specialization)

6. Employees switched from one semi-finished product to another,

performing larger variety of tasks (lower specialization)

7. Members of group have instant access to current information regarding

order flow, output, productivity and quality. So now data is a common

property of the company (before only accessed only by managers)

8. Join unplanned meetings to discuss issues, progress or new ways to

accomplish tasks (less formalization, less centralization)

At very beginning it was chaos. In fact, completely innovative idea takes time in

order to be effective and successful.

After a few weeks, levels of productivity and quality increased, factory was able

to deliver custom-made furniture within 30 days, after a few months within 10

days. Thanks to efficiency improvement, drying services have started to be sold

to external companies, creating new business for Rowe

Move from mechanic to organic system was difficult but effective, because now

employees work in an environment where they continue to learn, solve problems

and create new and better ways to run business.

Environment = elements outside the boundary of the organization (government,

customers, suppliers, financial community, competitors, other organizations,

potentially able to influence the uncertainty and context)

Ex. Disney

COVID-19 crisis has influenced plenty of key tenets (principles) of Disney’s

business (closure of theme parks, stop Broadway production, …). However,

popularity of Disney+ helped cushion the situation. Pandemic challenged

Disney’s status quo and made managers introspective about lot of things.

Winemakers

2020 the frost has damaged 80% of vineyards in France’s primary wine growing

areas (together with beets and rapeseed), causing drop of exports of French

wine. So French Ministry of Agriculture and Food activated “agricultural

calamities” program, lowering taxes and other financial support measures for

farmers.

Goals and strategy = a strategy is a plan of action that describes resource

allocation and activities for dealing with the environment and for reaching

organization’s goals

Ex. Walmart, which is preparing to go big on the metaverse (meeting its

customers there), with its own NFTs (non-fungible tokens) and cryptocurrencies.

Metaverse is a virtual world that can link several aspects of digital technologies

Nordstrom

50% of its sales come online

Nordstrom has long been known for evening wear and tailored suits, but after

partnership with Fanatics clientele will be able to shop another category of

merchandise, licensed sport team products, which rather won’t be delivered

directly from Nordstrom, but rather by Fanatics. This strategy is called “drop-

shipping” in retail parlance.

This strategy brings benefits:

To buyers, because they will have more selection and variety

 To Nordstrom, because firm doesn’t directly ship the inventory, but rather

 it will buy the product from Fanatics and then it will be delivered directly to

the customer by the third part (Fanatics). Moreover, this strategy removes

risk to Nordstrom’s profits if items go unsold or have to be discounted

Examples of Burger King and McDonalds

Deliver same product, but with very different strategies:

Burger King wants to make product more genuine and with top quality

 ingredients

McDonald’s launches innovative way to make burgers that will reduce

 customers’ waiting times of 30% (resulted from 70 thousand hours of

employees’ training to teach them how to speed burgers preparation)

Traditional link between strategy and competitive advantage (Michael Porter).

According to Porter, strategy is a positioning process. The theory of competitive

advantage establishes that thanks to industry and strategy choices some

companies can outperform other ones.

Position in an industry explains the competitive advantage (not all industries

offer equal opportunities). Industry position explains a portion of the company

competitive advantage (nearly 20%).

According to Porter, the relative position within an industry explains the

competitive advantage (in most industries, some firms are much more profitable

than others). Cost leadership or differentiation? Relative position explains a

portion of the company competitive advantage (nearly 25%).

However, this theory explains only 45% of the success of the company

(competitive advantage is partially determined by industry position and

company’s position within an industry).

So, the relationship between strategy and competitive advantage is mediated by

other elements.

What are mediators?

Most difficult process is not the formulation of the strategy, but rather its

implementation. In fact, in competitive contexts, strategies become more and

more similar, so the difference is produced by execution.

Execution is the relevant mediator between strategy and competitive advantage

and Organization Design makes Execution possible.

Organization design = set of choices regarding the allocation and combination

of resources and activities. Based on:

Allocation of the activities to the units (structure as labour divisio