Organisational Structure and Value Chain

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Table of Contents

Introduction
Organisational Structure
Value Chain Analysis
Limitations of the value chain
Conclusion
Reference List

Introduction

Strategic management represents the initiative that is taken by top management on behalf of its shareholders (owners) regarding its performance and resource allocation. It entails plans that are made to ensure that the company achieves its set objectives and goals.

Once in a while, a scorecard is used to evaluate business performance and ensure that the company is still working towards the achievement of its key goals. In order to attain a balanced scorecard, the management of an organisation need to ensure that they emphasize on the objectives of their shareholders (Sadler & Craig, 2003).

Therefore, strategic management ensures that the overall direction is achieved in an organisation. It is an ongoing process that seeks to ensure that the company is in the correct industry. In addition, strategic management evaluates the potential of key competitors in the industry.

Essentially, strategic management is a set of top management’s decisions and actions to identify the purpose of the organisation and determine the plans and actions needed to attain the purpose.

Strategic management depends on the qualities of different organisations including size, organisational structure, and value chain analysis, as well as management policy. However, strategic management is normally considered as a long term approach.

For strategic management to be well implemented, there are some concepts that have to be considered. Strategic management is a very broad concept and can be deduced from various angles. However, the focus of the study will be on organisational structure and value chain analysis.

Organisational Structure

Organisational structure is the formal relationship that dictates workflow and reporting hierarchies. For an appropriate organisational structure to be developed, managers of an organisation have to indulge in organisational design.

This ensures that managers come up with an effective organisational structure. The effectiveness of the organisational structure is determined by its environment, technology, strategy, and the labour force available.

There are various types of the organisational structure. They include the functional structure contingency, matrix structure, network structures, and hybrid structures. However, the variety of the organisational structure is dictated by the fact that there are various determinants of the organisational structure.

There are the reasons why there are different organisational structure models. Hence, as managers make decisions on organisational structure, human resource, environment, strategy, and technology should be adequately considered (Sadler & Craig, 2003).

Once individual tasks are grouped together, managers should then seek to group the jobs. Certain jobs in an organisation can be grouped into a given category. This is known as job design. It is mainly carried out in order to enhance efficiency and effectiveness.

Jobs have certain characteristics that describe them. They include skill variety, task identity, task significance, autonomy, and feedback.

The main reason why the organisational structure is formulated is to ensure that there is sufficient coordination between functions and managers in order to delegate authority efficiently. The organisational structure also depicts the hierarchy of authority in an organisation.

This defines the flow of authority from the top to bottom. It also shows the span of control, which indicates the number of employees that are under the control of each manager.

The organisational structure also includes the line managers. The line managers are the managers in the direct chain of command during the production process.

The chain of command differs according to the level of delegation established in an organisation. It can either be centralized or decentralized. Decentralized organisations put considerable authority on lower levels, and this results in a flat organisation.

There are occurrences when an organisation deems it fit to change their organisational structure. The change is referred to as restructuring, and this may be caused by either internal or external factors.

Restructuring is mainly carried through some strategies that include downsizing, down-scoping, and leveraged buyouts.

Value Chain Analysis

Value chain analysis is a business model that covers the critical issue of resource allocation. It seeks to ensure that, in the competitive business environment, companies utilize their resources in the best way possible. The key step in the value chain analysis is to identify the critical resources in a business that can add value (Rothstein, 1971).

All companies should have an established value system. The linking up of this system is what creates the chain. For instance, the relation between a company, suppliers, and buyers create a chain. Each chain has different levels of competitive advantage.

This can be optimized by coordinating the various activities. This is vital to organisations as their success story is pegged on how well they can create and enhance a competitive advantage in the value chain that has been established (De Bono, 1995).

For example, the value chain in the airline industry would involve several elements. It is a known fact that the product of any airline is not just the seat on the plane. It is a set of interlinked activities that make up the total passengers’ experience.

Therefore, a resource analysis should be made on the value chain in order to identify where savings can be made. The value chain in the airline industry will be a collection of elements which include preparations, pre-flight, in flight, post flight, and follow up.

The elements are then broken down into a number of activities. For instance, after an appropriate resource analysis, many airlines have come to conclude that automatic check-ins cut a significant cost from the value chain (Sparaco, 2004).

For many organisations, the value chain emphasizes on various aspects. These include the firm’s infrastructure, the human resource management, technological development, and procurement. The airline industry is no exception.

Limitations of the value chain

The value chain analysis is well suited for the companies involved in the manufacturing and production sector. In this case, the companies have a set of procedures on how the processes flow within the organisation. Unlike the manufacturing sector, the service sector cannot enact the value chain analysis effectively.

Value chain analysis has been modified due to modernization. Thus, it entails a value chain, value shop, and value network analysis. The new concepts might be encouraged.

However, bearing in mind they come with additional costs, the initial opportunities for cost reduction are utilized. In addition, the new concept is considered to add value to all stages. However, this also increases the vulnerability from competitors (De Bono, 1995).

Conclusion

Strategic management is a set of top management decisions and actions. This is aimed at identifying the purpose of the organisation and determining the plans and actions to attain the purpose of the organisation. Under the strategic management, organisational structure and value chain analysis are critical.

Organisational structure refers to the formal relationship that dictates workflow and reporting hierarchies. On the other hand, value chain analysis is related to resource allocation and utilization within the organisation.

Reference List

De Bono, E 1995, Parallel thinking: from Socratic thinking to de Bono thinking, Penguin Books, London.

Rothstein, M 1971, ‘An Airline Overbooking Model’, Transportation Science, vol. 5, no. 2, p. 180.

Sadler, P & Craig, JC 2003, Strategic management, Kogan Page, London.

Sparaco, P 2004, ‘Value Creation’, Aviation Week & Space Technology, vol. 160, no. 13, pp. 60-62.

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