Question

ABC COMPANY

Products: Producing heating equipment for the construction industry in Turkey.

Manufacturing: Computerized production are used for manufacturing. Manufacturing process is dominated by robots and there is a small team of engineers and technicians monitor the process and intervene if necessary.

Customers: Customers are the construction firms in Turkey. They are looking for new and innovative products, which can be input for low-cost, efficient and user-friendly buildings and facilities.

Environment: Number of competitors is increasing, and big companies want to enter the market. Sales teams of the competitors develop strong relationships with the customers through offering them new products.

It is said that main supplier will make an agreement with a competitor, and will produce for only that competitor in the next year. As there is no alternative for the main supplier in terms of product quality and price, ABC faces a serious problem.

1. Analyze uncertainty sources for ABC’s environment. (15 POINTS)
2. Which type of structure (organic or mechanistic) is suitable for ABC company? Why? (20 POINTS)

Answer 1

a. Uncertainty occurs at a number of levels in a business environment. The following are some of the levels at which it can happen:

• At an economic and political level- the uncertainty could be in the form of an economic crisis or a change in the rule. This may lead to adoption of new rules and measures which may hamper the demand for such products and the feasibility of working for companies in the country as well. For example, a new government comes to power and decides to make local purchase more attractive by providing reliefs. If ABC is a foreign company, this may prove to be a blow to the company's business prospects. Or the economy is in a crisis and the customer demand declines or there is a change in demand as a result(adverse in this case).
• At a technological level, If there are new technologies in the market it could make the existing products redundant. For instance, a new product that replaces the current heating equipments.
• Competitors- Competitors can also contribute towards uncertainty. For instance, if new competitors enter the market, you may never know how they are going to impact the market. If new competitors with more resources or creative new products enter the market it can prove to be a threat to the company.
• Suppliers- Suppliers can stop providing supplies to the company(as we have seen in the case itself) anytime. Also, the quality of the suppliers could be uncertain, especially, those provided by new suppliers. Also, the suppliers could go bankrupt or stop trading and this may lead to a lack of suppliers of materials.

b. As ABC company works in a changing, dynamic environment they need to adapt to the changes as quickly as possible. There are a number of competitiors entering the market and looking to enter it as well. The competitors are introducing a lot of new products, too. Moreover, the main supplier is going to make an agreement with a competitor and produce only for them. This means that company runs in a rather uncertain business environment

Therefore, as it is vital that the company has to adapt to the unpredictable changes as quickly as they can, it is better to go for an organic structure. An organic structure is characterised.by a decentralised working environment, power to the employees and easier communication and procedures. The structure is horizontal and flat. Employees are encouraged to work together and in teams, rather than to adopt a top-down structure which creates bureaucracy and thus delay in decisions. Communication is more transparent and the decentralised approach helps the organization to make quick decisions

A mechanistic approach on the other hand requires a stable environment. There is a centralized structure with jobs delegated to the employees underneath them and employees do not work in teams. Everything(including communication is rather formal. It is best in organizations with a huge number of employees. It is rather bureaucratic in nature and will not help an organization to react to changes very quickly.