ALLAMA IQBAL OPEN UNIVERSITY,

ISLAMABAD

ASSIGNMENT No # 2

Subject: Organizational Theory And Design

(8540)

Topic # 1: “Mintzberg’s Organizational

Types”

Submitted To: Sir, Kamran

Submitted By:
MBA (HRM) -VI

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 Acknowledgment

In the name of Almighty Allah, the most gracious, the most beneficent by help of whom I am
able to complete my Research report. I am grateful to Allah almighty, for enabling me to
fulfill this tiring, but interesting task for the completion of my assignment.

No doubt Allah is the main source of knowledge and wisdom. It is a great blessing of
Almighty Allah, that He enables me because of His Holy Prophet (peace is upon him) I am
presenting my humble contribution for distribution of knowledge. I bow my head before
Almighty Allah who gave me courage, knowledge and confidence and to carry on assignment
and enabled me to accomplish it.

I would not be going to do justice in presenting this assignment without mentioning the
people around me who have been inextricably related with the completion of this assignment.
I would like to express my heartfelt thanks to our course teacher for his support and guidance,
which he rendered throughout the study to peruse this assignment. Finally, for any all too
fallible errors, omissions and shortcomings in the writing of the report only I am responsible
for which we hope that all concerning regards of this assignment will forgive us.

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 Table of contents:

Table of contents...................................................................................................................................3

1. Introduction...................................................................................................................................4

2. Practical aspects with respect to the topic....................................................................................8

3. Review of theoretical and practical situations.............................................................................11

4. SWOT Analysis.............................................................................................................................13

5. Conclusions and recommendations.............................................................................................15

6. Reference....................................................................................................................................16

1. Introduction
Financial services firms are known for having tight procedures and rigorous control
systems. Staff in design agencies, on the other hand, can sometimes seem to operating as free

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agents. Big organizations merge to achieve "synergies", but they sometimes also split
divisions out into separate, more agile companies.

The reason for this variety is that an organization's structure can make a real difference to the
way it performs. That's why some companies achieve success through strict controls and
systems, but others that try to duplicate that structure may suffer terrible results. It's also why
a start-up company has to evolve its structure over time as it grows, and as its strategy and its
environment change.

Successful organizations are those that have figured out the best way to integrate and
coordinate key internal and external elements. And they understand the importance of
reviewing and redesigning their structures on an ongoing basis.

But with so many factors and combinations, how do you determine the best structure for your
company at any given time? According to renowned management theorist Henry Mintzberg's,
an organization's structure emerges from the interplay of the organization's strategy, the
environmental forces it experiences, and the organizational structure itself. When these fit
together well, they combine to create organizations that can perform well. When they don't
fit, then the organization is likely to experience severe problems.

Different structures arise from the different characteristics of these organizations, and from
the different forces that shape them (which Mintzberg's calls the "basic pulls" on an
organization). By understanding the organizational types that Mintzberg's defines, that think
about whether your company's structure is well suited to its conditions. If you start thinking
about what you need to do to change things.

Mintzberg's Organizational Types: The main successful organizational structures that he

identifies are as follows:

1) The Entrepreneurial Organization.

2) The Machine Organization (bureaucracy).
3) The Professional Organization.
4) The Divisional (diversified) Organization.
5) The Innovative Organization (adhocracy).

The Entrepreneurial Organization:

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This type of organization has a simple, flat structure. It consists of one large unit with one or
a few top managers. The organization is relatively unstructured and informal compared with
other types of organization, and the lack of standardized systems allows the organization to
be flexible.

A young company that's tightly controlled by the owner is the most common example of this
type of organization. However, a particularly strong leader may be able to sustain an
entrepreneurial organization as it grows, and when large companies face hostile conditions,
they can revert to this structure to keep strict control from the top.

The entrepreneurial organization is fast, flexible, and lean, and it's a model that many
companies want to copy. However, as organizations grow, this structure can be inadequate as
decision-makers can become so overwhelmed that they start making bad decisions. This is
when they need to start sharing power and decision-making. Also, when a company's success
depends on one or two individuals, there's significant risk if they sell up, move on to new
entrepreneurial ventures, or retire.

The Machine Organization (Bureaucracy):

The machine organization is defined by its standardization. Work is very formalized, there
are many routines and procedures, decision-making is centralized, and tasks are grouped by
functional departments. Jobs will be clearly defined; there will be a formal planning process
with budgets and audits; and procedures will regularly be analyzed for efficiency.

The machine organization has a tight vertical structure. Functional lines go all the way to the
top, allowing top managers to maintain centralized control. These organizations can be very
efficient, and they rely heavily on economies of scale for their success. However, the
formalization leads to specialization and, pretty soon, functional units can have conflicting
goals that can be inconsistent with overall corporate objectives.

Large manufacturers are often machine organizations, as are government agencies and
service firms that perform routine tasks. If following procedures and meeting precise
specifications are important, then the machine structure works well.

The Professional Organization:

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According to Mintzberg's, the professional organization is also very bureaucratic. The key
difference between these and machine organizations is that professional organizations rely on
highly trained professionals who demand control of their own work. So, while there's a high
degree of specialization, decision making is decentralized. This structure is typical when the
organization contains a large number of knowledge workers, and it's why it's common in
places like schools and universities, and in accounting and law firms.

The professional organization is complex, and there are lots of rules and procedures. This
allows it to enjoy the efficiency benefits of a machine structure, even though the output is
generated by highly trained professionals who have autonomy and considerable power.
Supporting staff within these organizations typically follow a machine structure.

The clear disadvantage with the professional structure is the lack of control that senior
executives can exercise, because authority and power are spread down through the hierarchy.
This can make these organizations hard to change.

The Divisional (Diversified) Organization:

If an organization has many different product lines and business units, you'll typically see a
divisional structure in place. A central headquarters supports a number of autonomous
divisions that make their own decisions, and have their own unique structures. You'll often
find this type of structure in large and mature organizations that have a variety of brands,
produce a wide range of products, or operate in different geographical regions. Any of these
can form the basis for an autonomous division.

The key benefit of a divisional structure is that it allows line mangers to maintain more
control and accountability than in a machine structure. Also, with day-to-day decision-
making decentralized, the central team can focus on "big picture" strategic plans. This allows
them to ensure that the necessary support structures are in place for success.

A significant weakness is the duplication of resources and activities that go with a divisional
structure. Also, divisions can tend to be in conflict, because they each need to compete for
limited resources from headquarters. And these organizations can be inflexible, so they work
best in industries that are stable and not too complex.

If your strategy includes product or market diversification, this structure can work well,
particularly when the company is too large for effective central decision-making.

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The Innovative Organization (adhocracy):

The structures discussed so far are best suited to traditional organizations. In new industries,
companies need to innovate and function on an "Adhocracy" basis to survive. With these
organizations, bureaucracy, complexity, and centralization are far too limiting.

Film making, consulting, and pharmaceuticals are project-based industries that often use this
structure. Here, companies typically bring in experts from a variety of areas to form a
creative, functional team. Decisions are decentralized, and power is delegated to wherever it's
needed. This can make these organizations very difficult to control!

The clear advantage of adhocracies is that they maintain a central pool of talent from which
people can be drawn at any time to solve problems and work in a highly flexible way.
Workers typically move from team to team as projects are completed, and as new projects
develop. Because of this, adhocracies can respond quickly to change, by bringing together
skilled experts able to meet new challenges.

But innovative organizations have challenges. There can be lots of conflict when authority
and power are ambiguous. And dealing with rapid change is stressful for workers, making it
difficult to find and keep talent. However, given the complex and dynamic state of most
operating environments, adhocracy is a common structural choice, and it's popular with
young organizations that need the flexibility it allows.

2. Practical aspects with respect to the topic:

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Nike, Inc.  is an American multinational corporation that is engaged in the design,
development, manufacturing, and worldwide marketing and sales of footwear, apparel,
equipment, accessories, and services. The company is headquartered near Beaverton, Oregon,
in the Portland metropolitan area. It is the world's largest supplier of athletic
shoes and apparel and a major manufacturer of sports equipment, with revenue in excess of
US$24.1 billion in its fiscal year 2012 (ending May 31, 2012). As of 2012, it employed more
than 44,000 people worldwide. In 2014 the brand alone was valued at $19 billion, making it
the most valuable brand among sports businesses. As of 2017, the Nike brand is valued at
$29.6 billion.

The company was founded on January 25, 1964, as Blue Ribbon Sports, by Bill
Bowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1971. The company
takes its name from Nike, the Greek goddess of victory. Nike markets its products under its
own brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1,
Nike Dunk, Air Max, Foamposite, Nike Skateboarding, and subsidiaries including Brand
Jordan, Hurley International and Converse. Nike also owned Bauer Hockey (later
renamed Nike Bauer) between 1995 and 2008, and previously owned Cole
Haan and Umbro. In addition to manufacturing sportswear and equipment, the company
operates retail stores under the Nike town name. Nike sponsors many high-profile athletes
and sports teams around the world, with the highly recognized trademarks of "Just Do It" and
the Swoosh logo.

Nike and Mintzberg's Organizational Types:

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The famous management expert, Henry Mintzberg's, proposed a five configurations approach
to strategic management wherein any organization such as Nike can be broken down into five
core elements or parts. The interactions between these parts determine the strategy of the
organization.

The Six parts according to Mintzberg's are:

The Operating Core which consists of those doing the basic work and whose output can be
directly linked to the goods and services that the organization makes and sells. According to
Mintzberg's, this part is common to all organizations since the core work must be done and
hence, the operating element has to be put in place.

The Strategic Apex, which is composed of senior management and the senior leadership,
which provides the vision, mission, and sense of purpose to the organization. Indeed, it can
be said that this part consists of those men and women who shape and control the destinies of
the organization.

The Middle Level Managers who are the “sandwich” layer between the apex and the
operating core. This element is peopled by those who take orders from above and pass them
as work to the operating core and supervise them. In other words, they perform the essential
function of acting as a buffer between the senior management and the rank and file
employees.

The fourth element is the Techno structure that is composed of planners, analysts, and

trainers who perform the intellectual work. This element provides the advice for the other
parts and it is to be noted that they do not do any work but function in an advisory capacity.

The fifth element is the Support Staff who perform supporting roles for the other units and
exist as specialized functions that are responsible for the peripheral services in the
organization.

The final key aspect about these configurations is that it can be used to predict the
organizational structure of any organization and used to model the strategy that the
organization follows as a result of the interaction between these parts.

For instance, in many service sector companies, the organization structure is very fluid and
interchangeable with the result that the middle managers perform crucial tasks and the apex
gets directly involved in running the organization.

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On the other hand, in many manufacturing companies, it is common to find the Techno
structure prevailing as the organizational processes are bureaucratic and have mechanistic
characteristics which makes the organization function like a machine. This is the
configuration in many public sector and governmental organizations as well.

Finally, the start-up have a structure that is composed of the strategic apex and the
supporting staff in their initial years of operation as the organization structure is yet to be
formalized.

The key implications of Mintzberg’s configurations are that it gives us a useful model to
describe how the organizational structure affects strategy. As many theoretical models
depend on external strategy alone, this model is preferred by those who want to understand
how internal dynamics produce strategy.

3. Review of theoretical and practical situations:

Organizations exist to achieve goals. These goals are broken down into tasks as the basis for
jobs. Jobs are grouped into departments. Departments in organizations may be characterized

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by marketing, sales, advertising, manufacturing, and so on. Within each department, even
more distinctions can be found between the jobs people perform. Departments are linked to
form the organizational structure. The organization’s structure gives it the form to fulfill its
function in the environment (Nelson & Quick, 2011). The term organizational structure refers
to the formal configuration between individuals and groups regarding the allocation of tasks,
responsibilities, and authority within the organization (Galbraith, 1987; Greenberg, 2011)
Very early organizational structures were often based either on product or function (Oliveira
& Takahashi, 2012). The matrix organization structure crossed these two ways of organizing
(Galbraith, 2009; Kuprenas, 2003). Others moved beyond these early approaches and
examined the relationship between organizational strategy and structure (Brickley, Smith,
Zimmerman, & Willett, 2002). This approach began with the landmark work of Alfred
Chandler (1962, 2003), who traced the historical development of such large American
corporations as DuPont, Sears, and General Motors. He concluded from his study that an
organization’s strategy tends to influence its structure. He suggests that strategy indirectly
determines such variables as the organization’s tasks, technology, and environments, and
each of these influences the structure of the organization. More recently, social scientists
have augmented Chandler’s thesis by contending that an organization’s strategy determines
its environment, technology, and tasks. These variables, coupled with growth rates and power
distribution, affect organizational structure (Hall & Tolbert, 2009; Miles, Snow, Meyer, &
Coleman, 2011). Henry Mintzberg’s (1992, 2009) suggests that organizations can be
differentiated along three basic dimensions:

(1) The key part of the organization, that is, the part of the organization that plays the major
role in determining its success or failure

(2) The prime coordinating mechanism, that is, the major method the organization uses to
coordinate its activities

(3) The type of decentralization used, that is, the extent to which the organization involves
subordinates in the decision-making process.

The simple structure has as its key part the strategic apex, uses direct supervision, and
employs vertical and horizontal centralization. Examples of simple structures are relatively
small corporations, new government departments, medium-sized retail stores, and small
elementary school districts. The organization consists of the top manager and a few workers
in the operative core. There is no techno structure, and the support staff is small; workers

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perform overlapping tasks. For example, teachers and administrators in small elementary
school districts must assume many of the duties that the techno structure and support staff
perform in larger districts. Frequently, however, small elementary school districts are
members of cooperatives that provide many services (i.e., counselors, social workers) to a
number of small school districts in one region of the county or state. In small school districts,
the superintendent may function as both superintendent of the district and principal of a
single school. Superintendents in such school districts must be entrepreneurs. Because the
organization is small, coordination is informal and maintained through direct supervision.
Moreover, this organization can adapt to environmental changes rapidly. Goals stress
innovation and long-term survival, although innovation may be difficult for very small rural
school districts because of the lack of resources.

4. SWOT Analysis:

 Strength

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 Nike is a very competitive organization.

Phil Knight (Founder and CEO) is often quoted as saying that ‘Business is war without
bullets.’

 Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to
the expense of sponsoring the games. Nike did not.

 Nike sponsored the top athletes and gained valuable coverage.

 Weakness

The organization does have a diversified range of sports products.

The income of the business is still heavily dependent upon its share of the footwear
market. This may leave it vulnerable if for any reason its market share erodes.

The retail sector is very price sensitive.

Nike does have its own retailer in Nike Town. However, most of its income is derived
from selling into retailers. Retailers tend to offer a very similar experience to the
consumer. So margins tend to get squeezed as retailers try to pass some of the low price
competition pressure onto Nike.

 Opportunities

Product development offers Nike many opportunities. The brand is fiercely defended by
its owners whom truly believe that Nike is not a fashion brand.

However, like it or not, consumers that wear Nike product do not always buy it to
participate in sport.

Some would argue that in youth culture especially, Nike is a fashion brand. This creates
its own opportunities, since product could become unfashionable before it wears out i.e.
consumers need to replace shoes.

There is also the opportunity to develop products such as sport wear, sunglasses and
jeweler. Such high value items do tend to have associated with them, high profits.

The business could also be developed internationally, building upon its strong global
brand recognition.

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 There are many markets that have the disposable income to spend on high value sports
goods. For example, emerging markets such as China and India have a new richer
generation of consumers.

 There are also global marketing events that can be utilised to support the brand such as
the World Cup (soccer) and The Olympics.

 Threats:

Nike is exposed to the international nature of trade. It buys and sells in different
currencies and so costs and margins are not stable over long periods of time.

Such an exposure could mean that Nike may be manufacturing and/or selling at a loss.
This is an issue that faces all global brands. and manufacturing workers. This makes a
very lean organization.

 Nike is strong at research and development, as is evidenced by its evolving and

innovative product range. They then manufacture wherever they can produce high
quality product at the lowest possible price. If prices rise, and products can be made more
cheaply elsewhere (to the same or better specification), Nike will move production.

Nike is a global brand. It is the number one sports brand in the World. Its famous
‘Swoosh’ is instantly recognizable, and Phil Knight even has it tattooed on his ankle.

5. Conclusions and Recommendations:

Nike is the clear cut leader in the sporting goods and apparel industry. They have created a
stronghold on the market that no one can seem to take from them. They have excelled in the

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market because of innovation and being the first to market. The area that has propelled Nike
to the top is their ability to create an elastic.

The market for sports shoes and garments is very competitive. The model developed by Phil
Knight in his Stamford Business School days (high value branded product manufactured at a
low cost) is now commonly used and to an extent is no longer a basis for sustainable
competitive advantage. Competitors are developing alternative brands to take away Nike’s
market share.

As discussed above in weaknesses, the retail sector is becoming price competitive. This

ultimately means that consumers are shopping around for a better deal. So if one store
charges a price for a pair of sports shoes, the consumer could go to the store along the street
to compare prices for the exactly the same item, and buy the cheaper of the two. Such
consumer price sensitivity is a potential external threat to Nike.

Nike has no factories. It does not tie up cash in buildings product through endorsement deals.
Nike continuously attracts and signs the top athletes in each professional sport to lucrative
deals to endorse their products. Sponsoring world sporting events like the Olympics and the
World Cup has also propelled Nike to the top of their industry. Nike does an outstanding job
of relating products to the needs and wants of its consumers and delivering a product that
they have been longing for.

The only recommendation for Nike would be for them to remain aware of small upstart
companies who enter the market and rocket to near the top of the market quickly. Under
Armour became a serious competitor to Nike by perfecting the technology that they
introduced to the market. Under Armor was able to do this personal interaction of
professional athletes and having them introduce the product to the market instead of through
an advertising campaign. Nike should remain cognizant of competitions willingness to risk
everything to take a piece of their market share. Nike should also monitor the personal
conduct and lives of the athletes the tenders their product. With Tiger Woods scandal Nike
chose money over morality and ethics. The company did not take a serious hit from this
scandal but might not be so lucky next time. Perception is everything in the marketplace and
Nike must remain aware of ethical values and corporate social responsibility when their
athletes misbehave or break the law.

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6. Reference:

  "Company Overview : History : 1970s". Nikebiz. Retrieved March 4, 2010.

  "Nike's 'Just Do It' slogan celebrates 20 years". OregonLive.com. July 18, 2008.
Retrieved March 4, 2010.
 Peters, Jeremy W. (August 19, 2009). "The Birth of 'Just Do It' and Other Magic
Words". The New York Times. Retrieved September 30, 2009.
 Porter, Jeff; Harris, Mark; Yeung, Gavin (December 11,
2002). "Nike" (PDF). Management 296 – International Business Management.
Archived from the original (PDF)on December 5, 2003. Retrieved February 6, 2013.
 Brettman, Allan (February 2, 2013). "As Nike looks to expand, it already has a 22-
building empire". The Oregonian. Retrieved February 6, 2013. The first phase of the
Nike World Headquarters campus opened in 1990 and included eight buildings. Now,
there are 22 buildings.
 Brettman, Allan (October 27, 2011). "NikeTown Portland to close forever [at its
original location] on Friday". The Oregonian. Retrieved 2016-12-23.
 Wightman-Stone, Danielle (July 1, 2015). "Nike chairman Phil Knight to step down in
2016". FashionUnited. Retrieved July 1, 2015.

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