Course: Management Theory & Practice (9503) Semester: Spring, 2021
Level: PGD Total Marks: 100 Pass Marks: 50
ASSIGNMENT No. 1
(Units: 1–5)
Note: Attempt all questions.
Q. 1 Discuss evolution of management theories in detail. (20)
Ans:
Knowing the story behind the evolution of management thought and the evolution of theories is essential. If you are familiar with them, including the development that brought about the current practices in business, then you will have a better understanding of management principles that can help you to manage people more effectively.
The point is that a lot has changed about management. Emphasis on structure and authority is no longer as strong as it used to be in the past. Now the focus is on employees. However, there are theories on the factors that motivate employees, but understand that knowing how these theories came about can give you the needed knowledge to manage your employees appropriately. Read to understand the evolution of management thought and management theories.
The evolution of management thought is a process that started in the early days of man. It began since the period man saw the need to live in groups. Mighty men were able to organize the masses, share them into various groups. The sharing was done accord to the masses’ strength, mental capacities, and intelligence.
The point is that management has been practiced in one way or the other since civilization began. If you want a good example where advanced management principles were applied, consider the organization of the olden days Roman Catholic Church, military forces as well as ancient Greece. These are all excellent examples. But the industrial revolution brought drastic change. And suddenly, the need to develop a more holistic and formal management theory became a necessity.
The Classical Theory
Prof Babbage, Robert Owens, and other names earlier mentioned can be regarded as the pioneers of management. But their contribution to the evolution of management is little. The beginning of what is known as the science of management started in the last decade of the 19th century. Names like Emerson, F.W. Taylor, H.L. Grant, and others, paved the way for the establishment of what is called scientific management.
During the classical period, management thought was focused on job content, standardization, the division of labor, and a scientific approach towards the organization. It also was closely related to the industrial revolution as well as the rise of large-scale enterprises.
The Neo-Classical Theory
This period of evolution of management thought is an improvement of the classical theory. In other words, it modified and improved upon the classical theory. For instance, Classical theory focused more on the area of job content, including the management of physical resources, while neo-classical theory gave more profound emphasis on employee relationships in the work environment.
The Bureaucratic Model
A German Sociologist called Max Weber proposed this model. And it includes a system of rules, division of labor hinged on functional specialization, legal authority, and power, the hierarchy of authority, and placement of employees based on their technical competence.
The Evolution of Management Theories
Organizations have been shaped and through the writings of several writers. Their write-up consisted of governance of kingdoms and management of humans. And these formed the literature that helped in the development of management theories. And these managemen
models were also offered by the military, political and religious organizations.
Q. 2 Describe the eight steps in the decision-making process. (20)
Describe the decision making process
Ans: “To be or not to be: that is the question.” Hamlet lamented.
“Should I stay or should I go now?” The Clash asked.
“Two roads diverged in a yellow wood,” Robert Frost pointed out.
If you’re struggling to make a decision, you’re in good company. Literature, poetry and pop culture provide plenty of sympathy for your plight. Sadly, while they understand your pain, they don’t always sing you to the correct resolution. When it comes to making a decision, in business or in life, how can you be sure you’re doing the right thing?
Well, we wouldn’t be writing songs about making decisions if it were an easy task. That said, researchers have studied the decision-making process as much as anything else, and they’ve come away with some different ideas and models that help us understand how we can make decisions more carefully and successfully. Let’s take a look at the five best known of those decision making models.
Rational Decision Making
The rational decision making model assumes decisions are based on an objective, orderly, structured information gathering and analysis. The model encourages the decision maker to understand the situation, organize and interpret the information, and then take action. There are eight steps in the rational decision making process:
The Rational Decision Making Process
Bad Hotel REviews
Let’s say that you’re the general manager at a nice hotel. Suddenly, you notice that customers are rating your property two and three stars instead of the customary five stars you and the team are used to earning. You need to make a decision about next steps to solve this issue. Let’s start right at the top of the rational decision making model.
Understand the issue. The issue is clear to you. Customers are rating their experience at your property online, and they’re not happy. This will surely damage your team’s efforts to generate new business. You need to find a way to earn better customer ratings.
Define the problem. You and your team sit down and read the last twenty or thirty customer reviews on three different travel sites. It turns out that customers’ unhappiness coincides with a recent increase in rates. They no longer feel they’re getting good value for their money.
Define the objectives.
What criteria will your solution have to meet? Clearly, you want to start getting better ratings from customers. You don’t want to see customers complaining about anything online. Your objective is 100% happiness, 100% five-star ratings.
Diagnose the problem. This is the stage where you look to determine and understand the root causes of your issue. Perhaps you decide that all customer-facing staff report daily on quality issues. And maybe you consult with operations on additional perks that can be incorporated into the guest experience without giving away too much margin.
Develop alternatives. You ultimately want to create a lengthy list of alternatives and not decide on one too quickly. You look over your employees’ reports on quality. You wait on operations for recommendations on extra perks. You collect all the data. Evaluate alternatives. Once you have all your alternatives on the table, you can start to make a choice. Every employee suggestion, every operations recommendation should be in front of you, and you consider each option carefully.
Select an alternative. One of your employees has suggested two additional members for the housekeeping staff, as the current level of staff is having difficulty keeping up with the increase precipitated by an office building opening up down the street. A member of your operations team has suggested providing a continental breakfast for business travelers in response to the increase in that customer type. Both seem like good ideas. Which will provide the bigger impact?
Implement alternative. You decide to hire the two additional members for the housekeeping staff, understanding that your customers view quality in clean rooms and common spaces. You get the budget approved and post for those two jobs. You make a plan to check in at the thirty day mark to see if customers’ ratings have improved.
The goal of the rational decision making model is to eliminate possibilities for error and biases. It assumes the following:
Managers have all the information about the situation.
Managers are aware of all alternative options and are equipped to evaluate them properly.
Managers are looking to make the best possible decision.
Managers are capable of eliminating misperceptions and biases.
There are no cost or time constraints.
In a perfect world, where all of those assumptions are met, this model is how the decision making process works best. But we know that those assumptions can’t all be met. And that’s why we have the bounded rationality model.
Bounded Rationality Model
The bounded rationality model assumes numerous organizational and individual factors restrict rational decision making. This is the version of decision making that occurs most often in organizations, because the assumptions of this model are much closer to the truth:
Early alternatives and solutions are quickly adopted because of perceptual limitations.
Managers often don’t have access to all the information they need.
Managers are not aware of all the alternatives and can’t predict the consequences of each one.
Organizational goals constrain decisions.
Conflicting goals of multiple stakeholders can force a compromise of a decision.
Because a human being is limited in the amount of information he or she can process, when a complex decision needs to be made, he or she will reduce the problem to a manageable size. By limiting the number of choices and the amount of necessary information, the product is a decision that’s acceptable and satisfactory. This is sometimes referred to as the Satisficing model.
In the bounded rationality model, the same steps are used in the decision making process, only instead of reviewing all information and all alternatives, those aspects are limited to the amount the decision maker is willing to gather.
Q. 3 : Define the nature and purpose of planning. Also classify the types of goals organizations might have and the plans they use.
Ans: What is Planning and its Nature, Importance, and Types
Planning is the first of essential managerial functions. Planning is important as by nature it enquirers about organizational goals and involves decision making about desired ways and means to achieve goals.
Planning is the process by which managers establish goals and define the methods by which these goals are to be attained. Planning involves selecting missions and objectives and the actions to achieve them; it requires decision making, which is choosing from among alternative future courses of action.
It is, therefore, a rational approach to achieving pre-selected objectives.
Planning is thus taken as the foundation for future activities. Newman has thus defined it as, “Planning is deciding in advance what is to be done; that is a plan is a projected course of action.”
So, planning can be thought of as deciding on a future course of action. It may also be treated as a process of thinking before doing it.
Management has to plan for long-range and short-range future direction by looking ahead into the future, by estimating and evaluating the future behavior of the relevant environment and by determining the enterprise’s own desired role.
Planning involves determining various types and volumes of physical and other resources to be acquired from outside, to allocate these resources in an efficient manner among competing claims and to make arrangements for the systematic conversion of these resources into useful outputs.
As it is clear from the above discussion, plans have two basic components: goals and action statements.
Goals represent an end state — the targets and results that managers hope to achieve.
Action statements represent the means by which an organization goes ahead to attain its goals. Planning is a deliberate and conscious act by means of which managers determine a course of action for pursuing a specific goal.
Organizational goals are strategically set objectives that outline expected results and guide employees’ efforts.
3 types of organizational goals are strategic, tactical, and operational goals.
Purposes of organizational goals are to provide direction to employees of the organization.
Strategic goals are set by and for top management of the organization. Tactical goals are for middle managers to focus on the actions necessary to achieve goals. Operational goals are for lower-level managers to tackle shorter-term issues.
Goals are critical to organizational effectiveness as they serve as an objective for the employees and they work to achieve it.
Organizational goals differ in three different criteria; level, area, and time frame. Let’s look at these criteria’s of goals;
Level
Organizational goal differs in the level of the organization structure or hierarchy.
The organization structure consist of there part; top-level, mid-level and lower-level or first-line managers.
For each level, the goals should be different and more specific; suitable for the level.
“Increase profit and market share” is a suitable goal for top-level managers but not for the lower-level managers. “Increase output by 12%” is a suitable goal for lower-level managers.
Area
Organizations set different goals for different areas more specifically different departments.
An organization may have many departments within its structure; marketing, finance, operations, accounts, human resource, legal and more.
Each department should have a different goal; which specifies the departments about their task but is in line with the whole organization’s goal.
Time Frame
Organizations have many goals across different time frames. “Open 500 branch across the country” is a suitable long-term goal for a bank; “LC issue should increase by 50% within six months” short-term goal for a bank.
The difference in goals required because of the organization’s level, area or department, and time frame.
Types of Organizational Goals
Based on 3 three criteria’s goals can be categorized into three types.
3 types of organizational goals are;
Strategic Goals.
Tactical Goals.
Operational Goals.
Strategic Goals
Strategic goals are goals set by and for top management of the organization. These goals are made by focusing on broad general issues.
Strategic goals or strategies are usually long-term and from this goal, other goals are made and set for different time-frames and areas.
Tactical Goals
Tactical goals are set for middle managers. These goals focus on how to operationalize actions necessary to achieve the strategic goals.
Middle managers of various departments are usually responsible for their attainment.
Tactical goals are set by the middle managers, but often top-managers set tactical goals for the middle managers.
Operational Goals
Operational goals are set by and for lower-level managers. Operational goals are usually made to tackle shorter-term issues associated with the tactical goals and lower-managers are responsible for their attainment.
The 3 levels of goals within an organization form a hierarchy of goals, with lower-level goals forming a means-end chain with the next level of goals.
Related: Difference between Leadership and Management
Importance and purpose of organizational goals
Organizational goals, often used interchangeably, are the ends toward which activity is aimed. Goals are the desired outcomes for individuals, groups, or entire organizations.
They represent not only the endpoint of planning but also the end toward which all other managerial functions are aimed.
Objectives are set to a particular time and thus the same objective is not repeated year after year, month after month or day after day.
Goals are critical to organizational effectiveness as they serve several purposes.
Organizations have several different kinds of goals, all of which must be appropriately managed.
4 reasons why goals are important:-
Goals Provide Guidance and Direction.
Goals Intensely Planning and Actions
Goals Motivate.
Goals Help in Control.
These are explained below;
Goals Provide Guidance and Direction
Goals provide guidance and a unified direction for people in the organization.
They show the employees where the organization is going and why getting it is important.
Goals simply define what the organization wants.
Goals Intensely Planning and Actions
Goal-setting does intensely affect aspects of planning. Effective goal setting facilitates good planning and good planning facilitates future goal setting
.Goals are desired outcomes for organizations and plans are the best-perceived ways to reach them. So a proper goal helps set a proper plan.
Goals Motivate
Goals also can serve as a motivational source for employees. Goals should be specific and moderately difficult can inspire people to work harder, especially if attaining the goal is going to result in rewards.
For goals to be a tool of motivation; the organization requires an effective reward system and a friendly work environment.
Related: Goal Setting Theory of Motivation
Goals Help in Control
Goals act as a mechanism for control and evaluation. Performance can be measured and evaluated in the future in terms of how successfully today’s goals are accomplished.
Goals can serve these purposes and much more; if people in charge of setting goals can overcome the barriers and set them properly and effectively.
Q. 4 Describe six key elements in organizational design.
Ans: Management deals with the process that drives the organization towards its performance. The processes which are to be followed to initiate the organizational structure and to create strategies and the steps to be taken by managers are all about management. This assignment is based on two topics, which are; a) Critically analyze the six key elements in Organizational Design, b) Explain what managers do in Strategic Management Process.
With the help of the Organizational Design, a firm can start and to compete into the market and achieve its goal. It has six elements by which this process can be done, which are; Work Specialization; Departmentalization; Chain of Command; Span of Control; Centralization Vs Decentralization; and Formalization.
And with the help of the Strategic Management Process, which includes nine steps, these are; Identify the organization’s current mission, objectives, and strategies; Analyze the environment; Analyze the organization’s resources; Identify opportunities and threats; Identify strengths and weaknesses; Reassess the organization’s mission and objectives; Formulate strategies; Implement strategies; and Evaluate results.
ORGANIZATIONAL DESIGN:
Organizational design is a process of developing and changing the organization’s structure by its managers. It is a chart containing the reporting structure i.e. who reports to whom.
Organizational structure is thus a framework on which an organization is patterned for coordinating and carrying out organizational tasks. (Kumar, A. and Bhat, A., 2008).
Organizational design involves decisions about the following six elements:
Work Specialization:
Work specialization describes to which the overall task of the organization is broken down and divided into smaller component parts. For example, one person would paint a wall and another person fixes a door. So by breaking jobs up into small tasks, it could be performed over and over every 10 seconds while using employees who had relatively limited skills.
The main thought of this process is that the entire job is not done by an individual and it is broken down into steps, and a different person completes each step. The work will be done efficiently and effectively. It saves time and also the employee skills of performing his job successfully increase through repetition.
It also has some disadvantages as well. When specialization is overdone, jobs can become more simplified. And when employees do one single task, they become bored and tired. Also, the scope of the employee’s growth will be limited. Specialization in one task is good but by getting the training for all other tasks too, is better to cop up with other activities in the company.
Departmentalization:
Once jobs have been specified through work specialization process, now they will be grouped in common tasks. There will be formed departments with common activities for effective coordination of effort. There are five common forms of departmentalization:
Functional Departmentalization:
It is the most common forms of departmentalization in which similar tasks grouped together into a common department, such as marketing, finance, human resources, etc as shown in fig. 1.1.
The efficiencies from putting together similar specialities and people with common skills and knowledge could be beneficial and also the coordination with functional areas will be stronger. But cross-department coordination can be difficult and there will be limited views of organizational goals.
Product Departmentalization:
It is grouped on the basis of product line. Each manager will be responsible for an area within the organization depending on his/her specialization as shown in fig. 1.2.
As managers are specialized in that particular area, it will give a broader experience and it will be easier for him to access the work-unit performance. The decision making here will be quite faster than the functional departmentalization. On the other side, the duplication of functions could increase the cost. It will be difficult to coordinate across departments and also there will be limited views of organizational goals.
Geographical Departmentalization:
Big organizations find beneficial in organizing this form of departmentalization so that all activities performed in a region are managed together. It forms sections by the different regions as shown in fig.
It will be more effective and efficient for the managers in handling specific regional issues that arise. It could response and serve better to the demand of different markets. But there could be duplication of functions and resources which will increase cost.
Matrix Departmentalization:
It is a structure where two or more forms of departmentalization are used together; most common forms combine functional and product in which employee reports two bosses, i.e. the functional as well as the product. It will increase cross-functional interactions as shown in fig. 1.4.
It will be beneficial to manage effectively and efficiently large and complex tasks. It will require high levels of management skills and high levels of coordination as well. It will also increase the level of conflicts.
Customer Departmentalization:
This form of departmentalization groups organization’s activities according to its customers. An organization finds it beneficial to organize according to the types of customers it serves as shown in .
It will be helpful to focus and meet the customers’ needs. But again there will be duplication of resources and they may find difficulties to achieve coordination across departments.
Chain of Command:
Another element in an organizational design is defined an order which authority and power in an organization is used and delegated from top management to the lower management. It also ensures clear assignment of duties and responsibilities of every employee at every level.
Span of Control:
The span of control in an organization is defined as the number of employees reporting directly to one supervisor/manager. It is said, the wider the span, the more efficient the organization. It determines the number of employees that a manager can effectively and efficiently manage.
Centralization Vs Decentralization:
Robbins and Coulter describe this very well, “If top managers make the organization’s key decisions with little or no input from below, then the organization is centralized.”
Decentralization can be defined as “the spread of power away from the centre to local branches or governments.”
The environment is stable in centralization and complex, uncertain in decentralization. Also, the lower-level managers are not as capable or experienced at making decisions as upper-level managers in centralization and on the other side in decentralization, they are very capable and experienced at making decisions. In centralization, the company is large and in decentralization, companies are geographically dispersed.
Formalization:
Formalization is the extent to which employee behaviour is guided by rules and procedures. The organizations with high formalization have strict rules and regulations. The low formalization organizations have very few written rules and procedures and are less stable.
STRATEGIC MANAGEMENT PROCESS:
Strategic management is a particular course of action that is meant to achieve a corporate goal. The Strategic Management Process defines the goals and objectives for a business, it creates the action plan so that a company can reach them and then it follows the plan. There are nine steps in Strategic Management Process which managers need to follow; which are defined as under:
Identify the Organization’s Current Mission, Objectives, and Strategies:
It is important to identify the goals and objectives of the company. It defines the present purpose of the organization as a mission and the strategies currently being followed. The mission statement becomes the identification of an organization so it is very much necessary to identify it.
Analyze the Environment:
It is a process of monitoring the organizational environment to identify competitor’s actions and to confirm if it is suitable to let the firm goes to already set directions to reach its goals. It can be performed by using Porter’s five forces, which evaluates; the bargaining power of suppliers and the buyers, the threat of new entrants and substitutes, and the rivalry of competitors.
Analyze the Organization’s Resources:
By analyzing the organization’s resources, a firm can make a pictorial view of the available capabilities and resources inside and outside of the organization. It will help to determine the organization’s competitive weapons i.e. value creating skills, capabilities and resources.
Identify Opportunities and Threats:
It identifies the opportunities and threats outside the organization. It can be defined as SWOT analysis which has its two components i.e. Opportunities and Threats. Opportunities are the positive external environmental factors which need to be analysed for further growth of the organization. The threats are the negative external environmental factors which need to be identified to prepare the organization to compete and convert those threats into the opportunities.
Identify Strengths and Weaknesses:
It identifies the strengths and weaknesses within the organization. It also can be defined as SWOT analysis which has the remaining two components i.e. Strengths and Weaknesses. Strengths are internal activities being done well by an organization which helps an organization to achieve its goal. And the weaknesses are the activities that not being done by an organization which is unfavourable for the organization to achieve its goal.
Reassess the Organization’s Mission and Objectives:
Reassessing the organization’s mission and objectives helps to review the firm’s current performance and also to take better actions for the success of the organization. It defines as SMART which means Specific, Measurable, Achievable, Realistic, and Timeframe.
Formulate Strategies:
Formulation Strategy is the process of determining appropriate courses of action for achieving organizational objectives. It follows the decision making process. It can be further describes by Michael Porter’s generic strategies, which are; a) Cost Leadership, b) Differentiation, and c) Focus.
These generic strategies each have attributes that can serve to defend against competitive forces. The following table (fig 1.2) compares some characteristics of the generic strategies in the context of the Porter’s five forces:
Implement Strategies:
It is the process of distributing resources and putting strategies into an action to achieve its goal and objectives. When the strategies are executed within the organization, it focuses on the process through which strategies are achieved.
Evaluate Results:
It controls the process to determine the effectiveness of a strategy. An organization can evaluate results by reviewing the process, adjusting the mission and objectives and strategies, and by initiating the corrective measures.
CONCLUSION:
In the nutshell, I would like to say the above mentioned topics clearly identify that the organizational design and the strategic management process are the important parts of the management to start a business and to achieve its goals and objectives. All six elements of the organizational design helps in forming a business and all nine steps in strategic management process are essential to achieve a firm’s objectives.
Q. 5 Define team and describe best practices influencing team performance.(20)
Management deals with the process that drives the organization towards its performance. The processes which are to be followed to initiate the organizational structure and to create strategies and the steps to be taken by managers are all about management. This assignment is based on two topics, which are; a) Critically analyze the six key elements in Organizational Design, b) Explain what managers do in Strategic Management Process.
With the help of the Organizational Design, a firm can start and to compete into the market and achieve its goal. It has six elements by which this process can be done, which are; Work Specialization; Departmentalization; Chain of Command; Span of Control; Centralization Vs Decentralization; and Formalization.
And with the help of the Strategic Management Process, which includes nine steps, these are; Identify the organization’s current mission, objectives, and strategies; Analyze the environment; Analyze the organization’s resources; Identify opportunities and threats; Identify strengths and weaknesses; Reassess the organization’s mission and objectives; Formulate strategies; Implement strategies; and Evaluate results.
ORGANIZATIONAL DESIGN:
Organizational design is a process of developing and changing the organization’s structure by its managers. It is a chart containing the reporting structure i.e. who reports to whom.
Organizational structure is thus a framework on which an organization is patterned for coordinating and carrying out organizational tasks. (Kumar, A. and Bhat, A., 2008).
Organizational design involves decisions about the following six elements:
Work Specialization:
Work specialization describes to which the overall task of the organization is broken down and divided into smaller component parts. For example, one person would paint a wall and another person fixes a door. So by breaking jobs up into small tasks, it could be performed over and over every 10 seconds while using employees who had relatively limited skills.
The main thought of this process is that the entire job is not done by an individual and it is broken down into steps, and a different person completes each step. The work will be done efficiently and effectively. It saves time and also the employee skills of performing his job successfully increase through repetition.
It also has some disadvantages as well. When specialization is overdone, jobs can become more simplified. And when employees do one single task, they become bored and tired. Also, the scope of the employee’s growth will be limited. Specialization in one task is good but by getting the training for all other tasks too, is better to cop up with other activities in the company.
Departmentalization:
Once jobs have been specified through work specialization process, now they will be grouped in common tasks. There will be formed departments with common activities for effective coordination of effort. There are five common forms of departmentalization:
Functional Departmentalization:
It is the most common forms of departmentalization in which similar tasks grouped together into a common department, such as marketing, finance, human resources, etc as shown in fig. 1.1.
The efficiencies from putting together similar specialities and people with common skills and knowledge could be beneficial and also the coordination with functional areas will be stronger. But cross-department coordination can be difficult and there will be limited views of organizational goals.
Product Departmentalization:
It is grouped on the basis of product line. Each manager will be responsible for an area within the organization depending on his/her specialization as shown in fig. 1.2.
As managers are specialized in that particular area, it will give a broader experience and it will be easier for him to access the work-unit performance. The decision making here will be quite faster than the functional departmentalization. On the other side, the duplication of functions could increase the cost. It will be difficult to coordinate across departments and also there will be limited views of organizational goals.
Geographical Departmentalization:
Big organizations find beneficial in organizing this form of departmentalization so that all activities performed in a region are managed together. It forms sections by the different regions .
It will be more effective and efficient for the managers in handling specific regional issues that arise. It could response and serve better to the demand of different markets. But there could be duplication of functions and resources which will increase cost.
Matrix Departmentalization:
It is a structure where two or more forms of departmentalization are used together; most common forms combine functional and product in which employee reports two bosses, i.e. the functional as well as the product. It will increase cross-functional interactions as shown in fig. 1.4.
It will be beneficial to manage effectively and efficiently large and complex tasks. It will require high levels of management skills and high levels of coordination as well. It will also increase the level of conflicts.
Customer Departmentalization:
This form of departmentalization groups organization’s activities according to its customers. An organization finds it beneficial to organize according to the types of customers it serves.
It will be helpful to focus and meet the customers’ needs. But again there will be duplication of resources and they may find difficulties to achieve coordination across departments.
Chain of Command:
Another element in an organizational design is defined an order which authority and power in an organization is used and delegated from top management to the lower management. It also ensures clear assignment of duties and responsibilities of every employee at every level.
Span of Control:
The span of control in an organization is defined as the number of employees reporting directly to one supervisor/manager. It is said, the wider the span, the more efficient the organization. It determines the number of employees that a manager can effectively and efficiently manage.
Centralization Vs Decentralization:
Robbins and Coulter describe this very well, “If top managers make the organization’s key decisions with little or no input from below, then the organization is centralized.”
Decentralization can be defined as “the spread of power away from the centre to local branches or governments.”
The environment is stable in centralization and complex, uncertain in decentralization. Also, the lower-level managers are not as capable or experienced at making decisions as upper-level managers in centralization and on the other side in decentralization, they are very capable and experienced at making decisions. In centralization, the company is large and in decentralization, companies are geographically dispersed.
Formalization:
Formalization is the extent to which employee behaviour is guided by rules and procedures. The organizations with high formalization have strict rules and regulations. The low formalization organizations have very few written rules and procedures and are less stable.
STRATEGIC MANAGEMENT PROCESS:
Strategic management is a particular course of action that is meant to achieve a corporate goal. The Strategic Management Process defines the goals and objectives for a business, it creates the action plan so that a company can reach them and then it follows the plan. There are nine steps in Strategic Management Process which managers need to follow; which are defined as under:
Identify the Organization’s Current Mission, Objectives, and Strategies:
It is important to identify the goals and objectives of the company. It defines the present purpose of the organization as a mission and the strategies currently being followed. The mission statement becomes the identification of an organization so it is very much necessary to identify it.
Analyze the Environment:
It is a process of monitoring the organizational environment to identify competitor’s actions and to confirm if it is suitable to let the firm goes to already set directions to reach its goals. It can be performed by using Porter’s five forces, which evaluates; the bargaining power of suppliers and the buyers, the threat of new entrants and substitutes, and the rivalry of competitors.
Analyze the Organization’s Resources:
By analyzing the organization’s resources, a firm can make a pictorial view of the available capabilities and resources inside and outside of the organization. It will help to determine the organization’s competitive weapons i.e. value creating skills, capabilities and resources.
Identify Opportunities and Threats:
It identifies the opportunities and threats outside the organization. It can be defined as SWOT analysis which has its two components i.e. Opportunities and Threats. Opportunities are the positive external environmental factors which need to be analysed for further growth of the organization. The threats are the negative external environmental factors which need to be identified to prepare the organization to compete and convert those threats into the opportunities.
Identify Strengths and Weaknesses:
It identifies the strengths and weaknesses within the organization. It also can be defined as SWOT analysis which has the remaining two components i.e. Strengths and Weaknesses. Strengths are internal activities being done well by an organization which helps an organization to achieve its goal. And the weaknesses are the activities that not being done by an organization which is unfavourable for the organization to achieve its goal.
Reassess the Organization’s Mission and Objectives:
Reassessing the organization’s mission and objectives helps to review the firm’s current performance and also to take better actions for the success of the organization. It defines as SMART which means Specific, Measurable, Achievable, Realistic, and Timeframe.
Formulate Strategies:
Formulation Strategy is the process of determining appropriate courses of action for achieving organizational objectives. It follows the decision making process. It can be further describes by Michael Porter’s generic strategies, which are; a) Cost Leadership, b) Differentiation, and c) Focus.
These generic strategies each have attributes that can serve to defend against competitive forces. The following table compares some characteristics of the generic strategies in the context of the Porter’s five forces:
Implement Strategies:
It is the process of distributing resources and putting strategies into an action to achieve its goal and objectives. When the strategies are executed within the organization, it focuses on the process through which strategies are achieved.
Evaluate Results:
It controls the process to determine the effectiveness of a strategy. An organization can evaluate results by reviewing the process, adjusting the mission and objectives and strategies, and by initiating the corrective measures.
CONCLUSION:
In the nutshell, I would like to say the above mentioned topics clearly identify that the organizational design and the strategic management process are the important parts of the management to start a business and to achieve its goals and objectives. All six elements of the organizational design helps in forming a business and all nine steps in strategic management process are essential to achieve a firm’s objectives.
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