STRUCTURE OF INDUSTRY

Structure of the Industry

Structure of the Industry

Q. How does the structure of the industry explains the conduct and performance of individual companies within it?

Ans.

Nowadays it is commonly said by leaders that structure of the industry explains the conduct and performance of individual companies within it. Structure of industries or organisations encompasses the relationships of performance and individuals, both formal and informal that exist within an organisation, as well as the rules, procedures, routines, norms and other practices that guide and constrain the behaviour of organisational participants (Mathieu, Marks & Zaccaro 2001, 289-313). Structures of industry comprise both social structures and rational-legal structures that are independent of any particular social actor. The latter get passed down from one generation to the next, enabling an organisation to survive despite changes in participation. The way in which organisational structures are designed is important because different designs can either facilitate or impede the ability of an organisation to pursue its goals. Additionally, organisational structures can be highly dependent upon and influenced by their external environments.

Organisational performance is a multidimensional construct to evaluate the position of an organisation relative to internal or external standards (Donaldson & Preston 1995, 65-91). The construct is widely used in academic research for assessing the effects of various structures, cultures, or strategies. In organisational practice, organisational performance evaluations are used to monitor, legitimize, and reinforce current practices; to initiate change; and to define top managerial compensation.

Scholars have conceptualised organisational structure in different ways. The most important is the “hierarchy,” which is generally characterized by a top-down authority structure, centralized coordination, and vertical communication. There are different views about how relationships are organized within a hierarchy. Max Weber described hierarchies in terms of their command and control functions—one person at the top directs and coordinates everyone below. Strati (2000, pp.12-23), on the other hand, conceptualized the hierarchy as a system of interrelated subsystems organized from top to bottom. In this model, each person at any given level is connected to many people within that level, but relatively fewer people between levels. Aside from the hierarchical model, scholars have also conceptualized organisational structure as: mechanistic (characterized by high task specialization, vertical coordination and control, and management by plan and command), organic (characterized by multitasking, lateral coordination, and facilitative leadership), matrix (characterized by project-oriented teams comprising individuals detailed from other divisions), and M-form (characterized by multiple divisions organized according to the type of output they produce).

Regardless of the form it takes, organisational structure consists of both formal organisation (the rules, procedures, and routines that guide and constrain behaviour) and informal organisation (the patterns of social relationships that exist “outside” the formal structure of the organisation) (Mathieu, Marks & Zaccaro 2001, 289-313). The most important types of social structures within any organisation are the authority and communications structures. The former concerns the relationships of authority, both formal and informal, by which organisational leaders exercise control over other participants. Authority structures are commonly conceived as hierarchies, but they can also take other ...