Critically examine the architecture, routines, and culture (ARC) framework of organisational design as proposed by Saloner, Shepard and Podolny in Strategic Management.

2282 Words Oct 10th, 2013 10 Pages
The design of an organisation is highly crucial for a firm in today’s world in order for it to achieve and sustain its competitive advantage that will place the firm in a stronger position than its rivals. The firm can manipulate the components of organisation design, fit these elements with one another and with the strategy, to impact the firm’s performance. Hence, the goal for the organisation is to have a good fit between the firm’s design and its competitive advantage in order for the firm to be strategically aligned with the strategy. Any effective design will have to address 2 general problems: the coordination and incentive problems and must do so in a way that supports the organisation’s strategy. The firm can make use of the …show more content…
On the other hand, divisional structure differs as the primary subunits are classified based on business divisions and under each of them are functional sub divisions. This allows for better facilitation of coordination across functions especially as the firm increases in scale and scope. If a retail firm divisions according to the different customer group it serves: Women and Children, both sub-divisions are served by functional groups. The design team could learn quickly about the change in taste of its customer group from the sales team of which will not be possible if the teams did not operate under the same subunit. This supports Alfred Chandler’s claim that divisional structure enhances accountability and communication.
Hierarchy too, is an important factor to consider when structuring a firm to address coordination problem. Since the communication among managers together with the dissemination of information and shared resources to the groups coordinates the actions of the subunits, the level and nature of hierarchy affects the effectiveness of the communication process. Passing information through each level consumes resources, causes delays and degrades the information by introducing noise and distortion. This justifies the allocation of decision-making rights to those who have the most immediate access to the relevant information. However, decision makers may not know how their decisions will affect the other subunits. A way to address this is to
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