1. MANAGING ORGANIZATIONS
Session 1: Introduction to Organizations
Sourav Mukherji
PGP 2012-14 Section C & E
Associate Professor of Organization & Strategy
Term 1:June-September 2012 Indian Institute of Management Bangalore, India

2. WHY DO ORGANIZATIONS EXIST? 2
WHAT PURPOSE DO THEY SERVE?
An institutional arrangement that leverages collective resources
to achieve a specific objective
Commercial profit seeking organizations : maximize shareholders wealth
by creating / sourcing and selling / distributing products or services
Not-for-profit enterprises maximizing social / environmental / political
impact, often depending in grants and donations
Hybrids: Financially sustainable social organizations & commercial
organizations creating social impact
Organizations need to compete for resources to achieve their
objectives
Both at the input markets and at the output markets
Deliver product and services at a price that more than compensates for the
cost of production (acceptable return on weighted average cost of capital)
Organizations need to create sustainable competitive advantage
in order survive and grow
“Positions” and “competencies” are two important dimensions for creating
sustainable competitive advantage
© S Mukherji

3. ORGANIZATIONS NEED TO CREATE SUSTAINABLE 3
COMPETITIVE POSITIONS
THREAT OF NEW
ENTRANTS BARGAINING POWER
OF BUYERS
• Brand loyalty
• Patents, innovations • How much are the buyers dependent on us ?
• Experience curve • How much are we dependent on the buyers ?
• Economies of scale • Are the buyers consolidated ?
BARGAINING POWER THREAT OF
OF SUPPLIERS SUBSTITUTES
• Can the needs be serviced by alternate
• Nature of supplier industry products or services ?
-fragmented or consolidated • Are there chances of technological
• Switching costs breakthroughs that might make our
• Ability of buyer to vertically INDUSTRY product less attractive / obsolete ?
integrate RIVALRY
• Dependence of buyer on
supplier
• Industry structure – fragmented or consolidated
• Demand conditions – increasing or declining
• Ease of expanding or contracting operations
Industry analysis needs to be complemented by analysis of the second order environment
- the impact of social , economic, political and technological analysis
© S Mukherji

4. ORGANIZATIONS NEED TO CREATE VALUE 4
SUPERIOR TO THEIR COMPETITORS
SUPERIOR • Increase in reliability
QUALITY • Creates brand name, reputation
• Can lead to greater efficiency
• Greater resource leverage
• Greater employee productivity
SUPERIOR COST LEADER SUPERIOR
EFFICIENCY INNOVATION
DIFFERENTIATOR
• Product , process
• Managerial, organizational
• Incremental, disruptive
• Customize goods and services
to unique demands
SUPERIOR
• Can be achieved through
CUSTOMER RESPONSE
superior design, service
and support
Capabilities - the skills of an organization at leveraging its resources -
are a product of on organization’s structure and control systems
© S Mukherji

5. 5
A PROCESS MODEL OF STRATEGY FORMULATION
• Guerilla Warfare
• Franchisee banditry
• Stealth
• Rob the rich
• Fixed transit tax COMPETITIVE
• Alliance INNOVATION
ASSUMPTIONS
COMPETITIVE
• Strength in numbers
STRATEGY
ORGANIZATION
PURPOSE PERFORMANCE
• Kill Sheriff ORGANIZATION • Definition
• Social Justice DESIGN • Measurement
• Short / Long Term
ANALYSIS • Centralization
• Geographic dispersion BUILDING
• Functional
Industry Dynamics • Second line of command COMPETENCIES
• Sheriff
• Intelligence
• Barons
• Training, recruitment
• Prince John
Distinctive Competencies • Collection process
• Community
• Leadership
• Commitment
• Nimbleness, flexibility
© S Mukherji

6. ORGANIZATIONS NEED TO BE DESIGNED TO FACILATE 6
ATTAINMENT OF STRATEGIC OBJECTIVES
COMPETITIVE
ASSUMPTIONS INNOVATION
COMPETITIVE
STRATEGY
ORGANIZATION
PURPOSE PERFORMANCE
ORGANIZATION
DESIGN
ANALYSIS
BUILDING
Industry Dynamics
COMPETENCIES
Distinctive Competencies
© S Mukherji

7. ORGANIZATION DESIGN COMPRISES STRUCTURE, PROCESSES 7
AND THEIR INTERDEPENDENCIES WITH ENVIRONMENT
Sessions 6,7
The introductory case in
Session 2 Session 4 Daft on Xerox Corporation
introduces many of the
STRATEGY following issues:
DEPENDENCY IMPACT OF
ON • Organization Culture
TECHNOLOGY
ENVIRONMENT STRUCTURE & • Organization Politics
PROCESSES • Bureaucracy and size
• Impact of environment
Sessions 1. Centralization • Innovation
8 - 10 2. Formalization
3. Specialization Session 5 • Outsourcing
CULTURE 4. Coordination SIZE • Organization restructuring &
POWER 5. Control systems AND turnaround
POLITICS 6. Learning GROWTH • Acquisitions
7. Decision Making • Sustainable practices
8. Change management
Sessions
3,11 - 16
Caveat: This is not a modular course and
sessions will have cross references and interdependencies
© S Mukherji

8. 8
THERE ARE VARIOUS WAYS OF ANALYZING STRUCTURES
Configurations Dimensions Groupings
Five key parts in organizations Centralization :decision making Functional structure
rights and responsibilities
Line functions, support functions Divisional structures
and managerial functions Formalization: extent of rules
and regulations Matrix structure
Specialization : structural Hybrid structure
differentiation , departments,
Geographic spread Team / Project based structures
Network structures
© S Mukherji

9. 9
CONFIGURATIONS: FIVE KEY PARTS IN ORGANIZATIONS
STRATEGIC APEX Provide direction
envisioning
Board of directors
TECHNOSTRUCTURE President CEO
Helps organizations to
Executive Committee
adapt to the environment
SUPPORT STAFF
Vice Legal Maintains smooth operations
Presidents of the organization – supports
Strategic
planning PR / IR the core
General Pricing
Managers R&D Size and importance of
Controller
Payroll parts would vary
Regional/ depending on environment,
Production
Plant Mailroom technology and several
scheduling
Managers other factors
Training Cafeteria
Foreman
Purchasing agents Machine operators Assemblers
MIDDLE LINE
Sales personnel Maintenance Shippers QA
Implementing
strategies
OPERATING CORE
primary transformation from inputs to outputs
© S Mukherji