Question

The term “organizational architecture” refers to the totality of a firm’s organization, including formal organizational structure, control systems and incentives, organizational culture. Provide a clear detailed explanation of this. In your explanation identify the links with the international economics.

Answer 1

The term “organizational architecture” refers to the totality of a firm’s organization, including formal organizational structure, control systems and incentives, organizational culture.

Conditions for profitibility for an organization:

(a) Internally consistent architecure (b) Consistancy between strategy and architecture (c) Consistancy among strategy, architecture and the competitive environment of the firm

Organizational structure can be referred as the unitization or divide into formal small parts for better function as well as assigning the decision making responsibility (both centralized and decentralized). It also inculcates and establishes the integrating mechanisms to coordinate among various units. Control systems are the integral part of organizational architecture as they measure and develop evaluative tools to rank the performance of various units of the organization (structures). Incentives are integral part of control system and organization structure that follow and align the individual employee’s goal to the strategic objectives of the organization, linking them with the human resource management.

When the firm seeks international presence and expand their operation & production boundaries, they fall into international divisional structure. The firms expand more than just selling their products in international markets but open their local production units with head quarter at both domestic and international level but with same strategic objectives. Most of the firms follow functional structure on the basis of product quality and requirement after assessing the local demand and behavior. Considering the example of Unilever, Google, Alibaba, Microsoft, Boeing and many such organizations, these have been able to create value in coordination with other units and have successfully realized the cost economy and location economies.