Download (direct link):
? USING ALLIANCES WHERE ENVIRONMENTAL FACTORS DOMINATE
In high-tech areas and businesses dominated by IT, such as robotics, semiconductors, advanced materials (ceramics and carbon fibers), and advanced information systems, a single company often does not have all the knowledge necessary to bring new products to the market. Often, the firms with the knowledge are not even in the same country. The organizational design must therefore go beyond the boundaries of the organization into interfirm alliances—announced cooperative agreements or joint ventures between two independent firms. Often, these agreements involve corporations that are headquartered in different nations.109
Alliances are quite common in such high-technology industries, because they seek not only to develop technology but to ensure that their solutions become standardized across regions of the world. In some cases, the fight for a dominant design pits one nation against another. For instance, Zenith joined forces with AT&T to develop one high-definition television (HDTV) system, and Toshiba, Sony, and some 30 other Japanese firms formed a strategic network to develop their own system. After a bitter contest the winner in the United States included the Zenith and AT&T group, who are likely get the lion’s share of the estimated $20 billion HDTV market in North America.
Firms may also develop alliances to explore potentials for future collaboration. One of the largest and potentially most influential strategic alliances is the cooperation between West Germany’s Daimler-Chrysler and Japan’s Mitsubishi. The two companies agreed to share technology and to develop joint ventures,
Section Five ? 237
market-based cooperations, or high-tech consortia, as the need arises. Yet some alliances to share technology date to the turn of the twentieth century.
In more developed industries, interfirm alliances are also quite popular, but they are often known by other names. In Europe, for example, they are called informal combines or cartels: Competitors work cooperatively to share the market in order to decrease uncertainty and improve favorability for all. Except in rare cases, these arrangements are often illegal in the United States.
In Japan, the network of relationships among well-established firms in many industries is called a keiretsu. There are two common forms. The first is a bank-centered keiretsu, in which firms are linked to one another directly through cross ownership and historical ties to one bank. The Mitsubishi group is a good example. In the second type, a vertical keiretsu, a key manufacturer is at the hub of a network of supplier firms or distributor firms. The manufacturer typically has both long-term supply contracts with members and cross-ownership ties. These arrangements help isolate Japanese firms from stockholders and provide a mechanism for sharing and developing technology. Toyota is an example of a firm at the center of a vertical keiretsu.
The network organization is beginning to evolve in the United States as well. Here, the central firm specializes in a core activity, such as design and assembly, and works with a comparatively small number of participating suppliers on a long-term basis for both component development and manufacturing efficiency. Nike is a leader in the development of these relationships.
More extreme variations of this network design are also emerging to meet apparently conflicting environmental, size, and technological demands simultaneously. Firms are spinning off staff functions to reduce their overall size and take advantage of new IT options. With these new environmental challenges and technological opportunities, firms must choose and not just react blindly.
Strategy and Organizational Design
For many firms, size, technology, and environment provide too many challenges and opportunities. Organizational design scholars recommend that the design follow the strategy of the firm and that the strategy take advantage of a combination of advantages offered by size, technology, and the environment.
Organizational strategy is the process of positioning the organization in its competitive environment and implementing actions to compete successfully.110 The study of linking strategy, organizational design, and firm performance has a long tradition in organizational analysis. In the 1960s, Alfred Chandler studied the evolution of major U.S. firms and concluded that structure follows from the strategy established predominantly by senior management. More recent work suggests that the formula for success is much more complicated.111 A winning strategy is more likely when the firm recognizes both the importance of a focus and the unique skills and abilities within the firm. Forming a strategy is an interactive process. Senior managers select those systems goals they believe should define corporate success, form these goals into a vision, select a target position within the general and specific environments, and develop a design to accomplish the vision.