Hypothetical Company Introduction and Terms

¶ … Hypothetical Company

Introduction and Terms of Reference

This paper examines the problems faced by Megabyte, a hypothetical company that is facing increasing business problems in some measure because of its reliance on a shrinking segment of the traditional communications business and in some measure because of its own internal structural problems. This case study, after summarizing the problems that this company is experiencing, then suggests an important and pervasive structural overhaul that may well solve many of the company's problems.

Background and Main Points of Concern for the Company

Megabyte is a major telecommunications company

The bulk of its strength has historically come from personal telephone business

Within the past 12 months, a new chief executive has taken over the company and, troubled by its current economic state and worried about where it might be heading, has subjected the company to a major strategic review

As a result of this review, the new executive, acting in concert with the company's board, has made three important decisions about the company's future. These include a future focus on major businesses rather than individuals as clients, expansion of data and internet services rather than voice telephony

Expansion of its production, distribution and service areas throughout the United Kingdom and Europe, the United States and Japan

Because of its new focus, the company has decided to divest itself of holdings in several businesses that are no longer central to its missions

Megabyte has invested heavily in the construction of a new global network as well as a number of new "strategic centres"

Each country that is a core country for the company will now serve as the home of a new operation. Previous to the recent strategic review, each of these companies has operated as a completely separate business with its own targets and goals and was not integrated into the overall goals and targets of the company

The new executive of the company has coined the term "Project MG" to describe her goal of integrating the various units and sub-companies of Megabyte into a single entity that, while geographically disperse, is dedicated to accomplishing a unified set of goals

This unified push toward a single set of goals will be accomplished through the institution of a matrix form of organization, with sales and related divisions such as customer services being the responsibility of satellite centres and commonly used services such as finance, research and product development and human resources being managed centrally

Matrix Organization

Matrix organisation is a relatively new concept - and an even newer term - within the business world as is in many ways a recognition of the profound ways in which business in the last decade has been changed by the rapid pace of change in technological developments. Even as businesses find themselves having to work within what is in many ways an almost entirely new world for them, they still maintain the same goals that businesses have had at the forefront since the rise of the age of commerce in the Renaissance: The desire to make as much money as possible for owners and investors while providing a quality service or product in an ethical manner.

Among the new ways in which businesses are organized in whole or in part include "self-organizing, self-directing or self-managing" forms (http://www.mapnp.org).

Even within the new forms of organisation such as matrix organisation or matrix structure there are in general more traditional elements of business organisation as well. For most businesses, and we can assume that this is include the newly restructure Megabyte, include a basic functional element in the overall organisational plan (http://gobi.stanford.edu).

Most business organizations start out with a functional structure, or a small variation of this structure. This is the basic "building block" for other structures. In this structure, there is a central office which oversees various departments or major functions, e.g., human resources, finances, sales, marketing, engineering, etc. (http://www.mapnp.org).

Such a consideration of functionality is obviously something that is being carried over into the new structure of Megabyte because the company is retaining such functionally defined offices as human resources (http://www.brint.com).

We also see in Megabyte some elements of another traditional business structure, which is the divisional structure. While elements of matrix structure will be used in the newly organised company, it will also use some elements of the divisional structure as well. In a divisional structure:

there is a centralized corporate office and under it, are various divisions each of which is dedicated to producing and/or selling a certain type of business or product, e.g., product 1, product 2, etc.. Each division that is dedicated to a certain business or product is, in turn, is organized as its own functional structure. So, for example, the division dedicated to making product 1 has its own sales department, human resources, etc. Basically, the divisional structure is a bunch of functional structures each of which reports to one central office (http://www.mapnp.org).

We can see in the company's reliance on some regional responsibilities an incorporation of some traditional divisional structural ideas (http://web.mit.edu).

In the matrix structure that Megabyte Global is contemplating, the new primarily matrix form of organisation will seek to provide a "new, single, global organisation." This kind of thinking is at the heart of matrix business organisation (http://www.apqc.org).

Members of [a matrix] group stay together until that product is produced or they continue to sell and service it. This overall structure (made up of a functional structure that also has groups assigned to products) is a matrix structure. This structure is useful because it focuses highly skilled people from across the organization to work on a complex product or service. It can be difficult, though, because each person essentially reports to two supervisors: the supervisor of the functional area (e.g., engineering) and the product manager, as well (http://www.apqc.org).

No company that refuses to change with the times will succeed for long, but neither is it wise to embrace new forms of organisation simply because they are new. Megabyte Global is wise to combine new and old ways of structuring a business, taking the best from both.

What advantages and disadvantages will the matrix form of organisation present to Megabyte?

The primary advantage that the matrix form of organisation will provide the company will that it will allow Megabyte to benefit from various economies of scale - both purely economic ones as well as psychological ones. By combining into a single functional unit work that was previously distributed amongst various semi-independent companies, Megabyte Global will be able to avoid unnecessary and costly overlap amongst its different divisions and ensure that all workers are aware of and working toward common goals.