Question

1. What role does a firm's strategy play in determining organizational structure? Why are boundaries problematic for firms with international strategies?

Answer 1

Part I

When a technician assembles a machine, each and every nut-bold and the parts are important. The individual roles they play has a lot to do with how the machine functions overall. One part goes missing and the machine might start malfunctioning.

So is the case with organisations. Strategy plays a very big role in determining organizational structure.

For example - A company when expanding might introduce a lot of positions at the senior management roles because, during an expansion, the company might have to make a lot of decisions in order to go about this expansion.

Similarly, a start-up might just want to keep the environment very casual with not many layers, keeping it more or less flat, with a lot of people addressing one boss, or sometimes even the CEO if a business is still small.

Part II

Boundaries are often problematic for firms with international strategies because of the following reasons:

- As a firm's capabilities increase, the firm might want to find and explore a bigger market outside the home country in order to expand.

- Import & Export duties often make their raw materials or finished products very expensive to produce or sell, as the case may be.

- The culture across boundaries differ, so it often becomes very diffucult for a firm to understand it properly.