Strategic Management: Formulation and Implementation

Factors That Influence Organizational Structure

Numerous internal and external forces affect an organization. There are seven main factors of the design and effectiveness of an organization structure:

  1. Strategy
  2. Size and complexity of organization
  3. Technology
  4. Environmental turbulence
  5. Top management's attitudes
  6. Attitudes of personnel
  7. Geographic consideration.

These seven factors are not mutually exclusive. Their interdependence has made scientific analysis difficult but not impossible.

Strategy And Structure

Strategy and strategic choices affect the total organizational structure. Moreover, changes in strategy often require changes in the way an organization is structured for two major reasons:

  1. structure largely dictates how objectives and policies will be established;
  2. structures dictates how resources will be allocated.
The choice of structure appears contingent on the strategy of the firm in terms of size, diversity of the products / services offered, and marked served.

Whether this is due to inertia, organizational politics, or a realistic assessment of the relative costs of immediate structural change, historical evidence suggests that the existing structure will be maintained and not radically redesigned until a strategy's profitability is increasingly disproportionate with increasing sales.