Discuss the advantages or disadvantages a global firm might experience if it wer

Question

Discuss the advantages or disadvantages a global firm might experience if it were to decentralize the decision making process through the assignment of teams according to geographic location. Address the following questions:

What organizational changes might a firm be obliged to consider, if it makes geographically based divisions?

Do you believe the complexity of global decision making has become easier, or more complex, in the last twenty years?

What examples of companies successfully or not-so-successfully implementing such an organizational structure can you find?

Are there examples where a firm would have performed better by using such an organizational architecture?

Explanation / Answer

Decentralization:

Decentralization is the break down of this style of organization, where the power is given to the small sectors of the business

The Advantages of Decentralization

1. More Input, Better Results:

By allowing more people to be involved in the decision making process, you are opening up more input for solutions and innovative ideas. This is a wonderful benefit for companies because you are able to diversify the way that the business is ran in many ways.

2. Time for Bigger Things:

The top people in the company much often have bigger fish to fry, rather than spend their time making smaller decisions. By distributing the responsibilities down the chain in the company, they are able to focus on more pertinent issues and projects.

3. Accelerated Decisions:

With a decentralized organization structure, a business can make decisions and implement them much quicker than if they operated underneath a centralized structure. This is because, often times, the issues and decisions that must be handled involve lower areas of the business. If the power is placed directly into these lower areas hands, then the upper management doesn’t have to deal with the issue and a response can be reached much faster.

4. Spotting the Problem Is Easy:

Many times, people can fly under the radar when they are not doing their job, simply because the problems that they cause will fall onto upper management. Decentralizing a business allows a company to pin point the weak links in their chain and, as a result, run the company more efficiently.

The Disadvantages of Decentralization

1. Inexperience Is A Problem:

One of the biggest issues when dealing with a decentralized business is sheer inexperience. If employees are not trained and experienced in the types of things that they will be responsible for, then the business is greatly harmed. Rather than looking at things from a company wide perspective, they look at it from their own perspective.

2. The Big Picture is Blurred:

When too much focus is put on the smaller sections of a business, the overall objective and goals of the business as a whole can be skewed. This is the main reason that many companies choose against decentralization.

3. Not A Good Choice For Some:

If a company or business hasn’t completely established it’s way of doing things, their main objective, and are still building a name for themselves, then decentralization is typically not the best choice. Only businesses that are well established should consider this type of organization structure.

4. Promotes Unhealthy Competition:

When you place power in lower management’s hands, they take it to heart. They feel as though the success of their sector falls directly on them, and in many ways it does. This causes these managers to begin competing with each other, and possibly doing things that are unethical in order to pull ahead and look better in front of upper management.

Advantage: With a decentralized organization structure, a business can make decisions and implement them much quicker than if they operated underneath a geographically based structure. This is because; often times, the issues and decisions that must be handled involve lower areas of the business. If the power is placed directly into these lower areas hands, then the upper management doesn’t have to deal with the issue and a response can be reached much faster.

Disadvantage: Flow of communication plays a major role. Geographically based divisions don’t directly have an access to decisions taken at lower levels. Hence in the absence of adequate communication, this system may lead to geographically based divisions knowing things in delay, leading to adverse results

The complexity of global decision making has undergone a wide change over the past 20 years. With increased globalization and technological development, global decision making has been made not only easier, but also efficient and flexible. Hence it can be rightly said that global decision making has become easier in the last twenty years

Starbucks Coffee Company is the largest coffeehouse chain in the world. The firm’s industry leadership is partly attributed to the appropriateness of its organizational structure. A company’s organizational structure influences management and leadership, communication, change, and other variables critical to business success. Starbucks has evolved to have an organizational structure that matches current business needs. This organizational structure is unique to Starbucks, although it can be characterized based on a conventional typology of organizational structures. Starbucks succeeds because its organizational structure grows with the business, enabling the company to optimize processes and the quality of its goods and services.

Starbucks Coffee’s organizational structure also involves geographic divisions. At present, the company has three regional divisions for the global market: (a) China and Asia-Pacific, (b) Americas, and (c) Europe, Middle East, Russia and Africa. Also, in the U.S. market, Starbucks Coffee’s organizational structure involves further geographic divisions: (a) Western, (b) Northwest, (c) Southeast, and (d) Northeast. Each geographic division has a senior vice president. In this way, each Starbucks manager reports to two superiors: the geographic head (e.g. President of U.S. Operations) and the functional head (e.g. Corporate HR Manager). This feature of Starbucks Coffee’s organizational structure supports closer managerial support for geographic needs. Each division head is given a high degree of flexibility in adjusting strategies and policies to suit specific market conditions.

Starbucks has reformed its organizational structure over time. By 2007, the company was expanding rapidly, such that it shifted focus away from customers toward strategic global expansion. However, Starbucks experienced significant decline in sales in 2007. This decline was worsened because of the lack of focus on customer experience. When Howard Schultz resumed the CEO position in 2008, he changed Starbucks Coffee’s organizational structure to bring back focus on customer experience. New regional divisions were created, and teams at Starbucks cafés were given better training. Thus, the current organizational structure of Starbucks is a result of this reform to improve customer experience and the firm’s financial performance

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