Company strategy and Company size

By: Xi Chen

Overview:

The main point of this article is to establish how company strategy and company size influence to the organization structure. I will briefly introduce the definition of them and separately explain how they influence the organization structure. For company strategy, I will focus on introducing the several key elements. For company size, I will list six organizational structures that companies can consider based upon the company size and the diversity in scope of operations.

Company strategy

Company strategy is the term that is used to describe the combination of policies, processes, and procedures that help a company operate according to its official statement of aims and achieve its short-term and long-term goals. A comprehensive company strategy has many levels, since it coordinates the operations of every department division within the structure of the company. The function of each part of the business is to complement all the other parts, this kind of strategy plan is necessary for an organized structure.

Although there are many different concepts about what counts as effective company strategy, most of them will focus on three key areas. All of the methodologies that combine these approaches together, to run the business, are based on these three key areas. The first of these three is the cost of operation. The idea of every company is to make a profit, so it's important to know how much it will cost to make products that are finally sold to customers. The company will be in a better position to decide the lowest rate or price for the products needed to earn other kind of profit by knowing all of the costs included in this process. Also, the management, which uses the cost most efficiently and keeps high quality products, will make a high profit for the company. Then, by applying the basic laws of supply and demand, retail prices can be decided, and the business will be allowed to offer products at a price that consumers are willing to pay.

A good company strategy also needs the creation and implementation of a possible statement of the aims of the company, in the same way as the cost of operations. The statement should have a wide range and give the company space to set and adjust goals when it's needed, but it also should be narrow enough to give the business the ability to create a character that consumers can recognize easily and come to trust. In order to make the statement a success, it must have some basic parts in reality. Operating from that foundation of reality, then it is possible to imagine a rewarding future for the business and begin to set goals, which will make it possible to fulfill the statement as those goals are achieved.

The last element of company strategy is called differentiation. This is a simple process, which can create an image in consumers’ minds that the company has something to offer that sets it apart from the competition. The purpose of this element is positive consumer perceptions in order to maintain customers and also gets the chance to increase the earning. “There is no one perfect company strategy that works for every type of business. The essentials must be adapted to the circumstances surrounding the company and the market or markets where it will attempt to connect with consumers” (Strategic management, 2013).

Company Size

Company size plays a very important role in determining the ideal structure. As the size of a company increases, it will correlate with the necessity for increasing complexity and divisions in order to achieve synergy. There are six organizational structures that companies can consider, based upon company size and the diversity in scope of operations. The first structure is called pre-bureaucratic and is appropriate for smaller companies. “This is an agile framework aimed at leveraging employees in any and all role to optimize competitiveness” (Liser, 2003). The second structure is called bureaucratic. The functions of this structure are appropriate for large corporations, which have complex operational initiatives. “This structure is rigid and mechanic, with strict subordination to ensure consistency across varying business units” (Liser, 2003). The third structure is called post-bureaucratic. This structure actually is the combination of the first two. This one is appropriate in non-profit companies and community organizations. In this structure, consensus is the driving force behind decision-making and authority. The fourth structure is called a functional structure. This structure works well in large organizations and it focuses on the development of highly efficient and specific divisions, which perform specialized tasks. “The down side is that each division is generally autonomous, limited communication across business units” (Liser, 2003). The fifth structure is called a divisional. This structure is appropriate in large companies, except economies of scale because large companies are in pursuit of economies of scope. Economies of scope simply mean a high variance in product or service. “As a result, different divisions will handle different products or geographic locations/markets” (Liser, 2003). The last one is called a matrix. This one works well in the largest companies, with the highest levels of complexity. This structure creates a product specific and division specific organization.

Knowing which specific structure will fit in each company is an important early step for a management team. Smaller companies best choices are pre-bureaucratic or post-bureaucratic. Larger companies have more choices, those are functional, bureaucratic, divisional, and matrix structures.





References
Strategic management. (2013). In Wikipedia.
Retrieved from:
http://en.wikipedia.org/w/index.php?title=Strategic_management&oldid=549735234
Liser, J. (2003). Chron, issues that influence an organizational structure by company.
Retrieved from:
http://smallbusiness.chron.com/issues-influence-organizational-structure-company-15909.html