The Effects of Globalization on Companies

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Due to globalization the business people have to interact and manage different people from different cultures. “It is helpful to think of culture as analogous to music:(a)If another person hasn’t heard a particular piece of music, it is impossible to describe.(b)Before the days of written scores, people had to learn informally by imitation.(c)People were able to exploit the potential of music only when they started writing music scores.” (Hall,1973). Culture is a collective phenomenon that is about shared values and meanings. For a successful company a strong connection between organizational structure and culture is very important. Organizing is the process of arranging people and other resources to work together to accomplish a goal. Organization structure is a system of tasks, reporting relationships, and communication linkages. Culture is a collective phenomenon that is about shared values and meanings. Strategic mergers are becoming critical components for today’s global business strategy. The common causes for the failure in mergers are structural and cultural differences. Before merger the firms need extensive preparation, a relationship of trust between negotiators and long period of post-merger consolidation. 1.1. Research questions What are the organizational designs and key dimensions of culture? What are the factors that influence organizational structure and culture? What are the impacts of organizational structure and culture on merger Process? 1.2. Research objectives To describe the organizational designs and key dimensions of culture. To identify the factors that influence organizational structure and culture. To describe the impacts of organizational structure and culture on merger Process. 2. Research methodology 2.1. Data collection and data analysis. 2.2. Case study method.

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‘The structure of an organization is the sum total of the ways in which it divides it’s labour into distinct tasks and then achieves co-ordination among them’ (Mintzberg, 1979) Managers design the organizational structure to influence employees to achieve wider goals.

Organizational design is the process of creating structure that will help to achieve the mission and objectives of an organization. The organizational design consists of 1.Organizational variables, 2.Control variables, and 3.Cultural variables.

Organizational variables:

The organizational variables are designed to achieve organizational effectiveness. They will help the organization to achieve its goals without any confusion in a precise way. The following are the important organizational variables. 1. Decision rights: This Indicating who is having the responsibility to approve an important decision regarding the business and implement necessary technology and control various types of decisions. It designs the proper allocation of decision rights. 2. Business processes: The set of ordered tasks needed to complete key objectives of the business and includes 1) A beginning and an end,2)Inputs and outputs,3)A set of sub processes that transform the inputs into out puts,4)A set of metrics for measuring effectiveness. 3. Formal reporting relationships: The formal reporting relationship reflects the flow of communication and coordination among the units throughout the organization. Effective communication, coordination and cooperation among units in an organization are basic necessities for growth of the organization. 4. Informal networks: Sharing and transferring knowledge within different project unites other than the formal reporting relationships are the key factors for effective function of the organization.

Control variables:

These are the tools which will help the organization to monitor, motivate and evaluate the performance of the organization. 1. Data: Collecting information regarding the progress of all units, evaluating and providing feedback. 2. Planning: It is the processes through which the desired strategic objectives are achieved. 3. Performance measurement and evaluation: To improve the quality of work a set of measures are used to get feedback about execution of plans and the processes. This feed back is used to improve the performance of the organization. 4. Incentives: Incentives are motivating factors within an organization which will help to improve the organizational performance.

Cultural variables:

Set of values and beliefs about what is desirable and undesirable in a community of people. 1. Values: The set of unspoken and clear beliefs that underlines decisions made and actions taken, reflects aspirations about the way things should be done.

 Identifying structural characteristics:

Every firm should have a strategic plan which specifies the future direction of the business. The responsibilities of the managers should be organized to achieve the strategic plan, for this the firm should have their organizational structure that identifies responsibilities for each job position and relationships among those positions. The organizational structure also indicates how all the job responsibilities fit together. The organizational structure affects the effectiveness and efficiency with which the firm produces its product and therefore has an impact on the firm’s value. When choosing a structure that fits its business goals, it is important to understand different types of organizational structures and compare them with each other. Reduce the disadvantages or negative impacts that the chosen structure might have on the business goal. According to my analysis different firms use different organizational structures which are influenced by specific characteristics of its business and can affect the firm’s performance. Organizational structures vary among firms according to: Size of organization Strategic importance Budget and time constraints

 Types of organizational structure:

Organizational structure defines the way work is divided, managed and synchronized. Organizational structure is formed according to the organizations size and strategy. Functional structures, Divisional structures and Matrix structures are the traditional structures. Team structures and Network structures are new directions in organizational structures. The following are the important types of organizational structures.

 Functional organizational structure:

In a functional structure employees are grouped by managers according to their activities and profession or function for example like production, finance or marketing. Functional structure is not only used in business but also in banks and hospitals. Functional structure is effective in small organizations with less problems and limited demand for change and innovation.

Divisional organizational structure:

A divisional structure groups together people working on the same product, in the same area, with similar customers. It is suits more in complex organizations with diverse operations with many products, territories, customers, and work processes.

Matrix organizational structure:

The matrix structure combines functional and divisional structures. It is more precise to use matrix structure in permanent cross-functional teams to support specific products and projects or programs. It is more useful in manufacturing, service industries, professional fields and nonprofit sectors.

Network organizational Structure

Network structure is a modern structure which includes the linking of numerous, separate organization structure to optimize their interaction in order to accomplish a common, overall goal, because it consists of multiple organizations that works together to produce products and services. 4.4. Comparison of organizational Structures: In each type organizational structure there are variations. Each one is unique in its own way. The adaptability of a particular structure depends on the necessity of the organization.

Functional organization structure :

They work best in a stable environment like small organizations with less problems and change.

Advantages of functional structure:

Economies of scale. Task assignments with proper training and guidance. High-quality technical problem solving. Good skill development within functions. Clear career paths within functions.

Disadvantages of functional structure:

Difficulties in indicating tasks for things like cost control, product or service quality, timeliness, and innovation. Lack of communication, coordination and problem solving across functions.

Divisional Organization structure:

They work best in a complex organization with many products, territories, customers, and work processes.

Advantages of divisional structure:

More flexibility in responding to situational changes. Improved coordination across functional departments. Good responsibility for product or service delivery. Focused on specific customers, products and regions.

Disadvantages of divisional structure:

Reduces economies of scale. Increases costs through the duplication of resources and efforts across divisions. Creates unhealthy rivalries as divisions compete for resources and top management attention.

Matrix organizational structure:

The main influence of matrix structures to organizational performance lies with the cross- functional teams whose members work together to share knowledge and information in a timely manner to solve problems.

Advantages of matrix structure:

Good collaboration across functions. Problem solving takes place at team level which will improve decision making. Improved customer service because there is always respective manager informed and available to answer questions. Better strategic management, since top managers are free from un-necessary problem solving to focus on strategic issues.

Disadvantages of matrix structure:

The two-boss system is subject to power struggle. It creates task confusion and conflict in work priorities. Strong team loyalties will cause a loss of focus on larger organizational goals.

Network organizational structure:

A network organizational structure is seen as a more complicated and complex structure than any other structure. A network structure uses IT to link with networks of outside suppliers and service contractors.

Advantages of network structure:

Quality and cost are the best advantages of network structure. The creative use of information technology.

Disadvantages of network structure:

More demand for new management responsibilities. Network of contracts and alliances are more complicated to maintain.

 Importance of organizational structure in merger process:

Effective organizational structure makes responsibility delegation easier and makes it easy to see the organizational change throughout the organizations. It is important to realize the advantage of organizational structure to benefit from a strong framework. Organizational Chart: is a tool that represents employees work responsibilities and reporting relationships. With its reporting structure it shows the structure and hierarchy of employees of their division of work and level of responsibilities in the organization. Distribution of Authority: Organizational structure shows the authority and responsibility distribution throughout an organization. Employees will get awareness of their superiors and subordinates. Communication: Organizational structure makes communication easy between employees in their duties and this enhances information sharing and problem solving. Chain of command: the structure helps employee to know who is engaged in the decision making process. Proper Balancing: Structure helps specific task and activities to be assigned in functional departments which provide a good coordination between departments.

Impact of organizational structure on merge:

In the case of merger, two organizations are required to integrate their organizational structure appropriately. Inappropriate organizational structure can cause failure in integration between firms and reduce benefit of merger. Unclear reporting structure has a great tendency to cause merger failure. Reconstructing organizational structure may take some time after a merger and it may cause uncertainty and anxiety amongst employees. Therefore it is important to declare the new organizational structure with clear roles and reporting relationship of employees (SS Brahma). Good organizational structure facilitates communication between individuals or groups within the two organizations. Incompatible structure becomes obstacle for successful communication and achieving the corporation goal become impossible.

 Factors that influence organizational structure:

The organizational structure can be influenced by different factors, such as the size of an organization, the environment, technology, efficiency of organizational design, etc. The structure of an organization should be developed in such a way that endorses the strategy and plan of management. It is very significant for managers to be aware of the factors which may have an influence on the structure of an organization. Environment Strategy People Technology Size


Stable Environment- Composed of certain and predictable environment. Desires of customers are well known and may remain constant. Few changes take place in such kind of environment and organizations can perform well without frequent change. Bureaucratic organization and mechanistic design fits in such environment. Dynamic Environment- composed of uncertain environment with less predictable elements. The desires of customer are frequently changing. Organizations must be flexible. For such environment, adaptive organizations and organic design is adequate.


Organizational structure should be designed in such a way to fit its strategies. Different strategies need different structure. Organizations may need to change their strategies or mission for better performance and this leads to a change in organizational structure. Stability oriented strategy – only few changes occur in the external environment, Bureaucratic organizations and mechanistic design is adequate for such certain strategy. Growth oriented Strategy – Strategies is likely to change frequently. Circumstances are complex and uncertain. The operation objectives focus on flexibility of frequent change and innovation. Plans changes regularly and there is a need for improvement.


Technology is the way task is done using knowledge, skill, equipment, techniques and human know-how. Advance in technology cause frequent change in an organization. A suitable technology results in high productivity and lower cost for the firm. Technology is a major influence on organizational structure. The right combination of structure and technology are critical to organizational success (Joan Woodward 1960s).

Organizational size

As the size of an organization become larger and older, the structure becomes more complicated. It is very difficult to manage large organizations without a formal organizational structure, whereas in very small organizations structure can be very simple. Employees can carry out their task based on their needs, skill and/or interest. Tasks can be performed without having a formal work assignment and delegation of authority. In large organizations, the structure is more liked mechanistic. Tasks are highly specialized and more level of management. Work procedure is dictated by rules and strategies. Communication flow is from superior to subordinate.5. Organizational culture:

“Organizational culture consists of the behavior, actions, and values that people in an enterprise are expected to follow.”(Pettigrew, 1979) “Organizational culture is a set of values, often taken for granted, that help people in an organization understand which actions are considered acceptable and which are considered unacceptable.”(Moorhead & Griffin, 1992)

Key dimensions of an organizational Culture:

Measuring key dimensions of an organizational culture provides a composite picture of the organization’s culture. This will become the base for the feelings of shared understanding of the members about the organization, how things are done, and the way the members are supposed to behave. The following are the 10 key dimensions of an organizational culture. 1. Member identity: The interpersonal relationship of the employees with the organization to feel a vital part of it. It depends on loyalty of employees to the organization. 2. Team emphasis: Organized group work rather than individual work. 3. Management focus: Identifying the effective outcomes of people within the organization and taking them into account to make important decisions. 4. Unit integration: cooperation and coordination among the units. 5. Control: The extent to which rules and policies used on employees to control their behavior. 6. Risk tolerance: The level up to which the employees are encouraged to be innovative and risk seeking. 7. Reward criteria: A precise system which rewards promotion and salary increase according to employee performance rather than seniority, favoritism or other nonperformance factors. 8. Conflict tolerance: The degree to which the employees are encouraged to talk about the conflicts openly. 9. Means versus end orientation: The extent to which the management focuses on outcomes rather than on techniques and processes used to achieve those results. 10. Open-system focus: Monitoring the changes in external environment.

Identifying cultural characteristics:

“Denison Organizational Culture Model”, indicates the external adaptation, internal integration, flexibility, stability as cultural characteristics of the enterprise which influences the prospective of organization. These four ideal characteristics would be reflected by four features (1) involvement, (2) consistency, (3) adaptability and (4) mission. Involvement: referred to the capacity of workers, ownership and responsibility. In the culture characteristic reflects the company’s training for staff, the communication between workers, the participation of staff and the responsibility of workers. Consistency : to measure whether the company has strong and cohesive internal culture. Whether company has a set of fundamental value, so that employees have immense identity and have clear expectation of future. Adaptability : mainly refer to capability of adapting the change from external environment or whether they have ability to aware the sign of market and response quickly. Mission : is used to determine the company is focusing on immediate interest or has long-term strategy and accurate tactics to approach even bigger goal.

The stages of cultural formation:

As people become more civilized they develop and share some common beliefs and values according to their geographical location which will guide their behaviour.The positive outcome of the beliefs and values makes them strong and will influence on how people should work and relate to each other. The following figure will explain about the stages of cultural formation. Shared values Reinforcing Shared beliefs Outcomes Norms Individual and Group behaviour

Types of culture:

Charles Handy (1993) generalized 4 culture types. Power culture: is one in which people’s activities are strongly influenced by dominant central figure. Role culture: is one in which people’s activities are strongly influenced by clear and detailed job descriptions and other formal signals as to what is expected of them. Task culture: is one in which the focus of activity is toward completing a task or project using whatever means are appropriate. Person culture: is one in which activity is strongly influenced by the wishes of the individuals who are part of the organization.

Multiple cultures:

A key concern in the culture of any organization is diversity. The term multiculturalism refers to pluralism and respect for diversity in the workplace. They value the talents, ideas, and creative potential of all members. Good characteristics of multicultural organizations are, 1) Pluralism: Members of both alternative cultures and majority cultures are important in setting key values and policies. The talents, ideas and creative thinking from different cultures are important for an organization to achieve its goals. 2) Structural integration: Members from multiple cultures are given equal opportunity in all levels and in all functional responsibilities. The integration of all levels of employees, management and all functional unites are important for a successful coordinated progress. 3) Absence of prejudice and discrimination: A proper guidance and task force actions deal with the need to eliminate culture-group conflicts. Prejudice and discrimination will cause difference among work force which will affect the work. So it is important to eliminate the prejudice and discrimination.

Culture and performance:

We can review the effect of organizational culture on employee behaviour and performance with some key ideas. The culture of an organization allows employee to understand both the history of the firm and present methods of operation. This knowledge provides guidance about expected future behaviours. The commitment of Organizational culture to corporate philosophy and values. This commitment generates shared feelings of working towards common goals. The organizational culture, through its norms, serves as control mechanism to channel behaviours towards desired behaviours and away from undesired behaviours. Finally, certain types of organizational cultures may be related directly to greater effectiveness and productivity than others.

Importance of culture in merger process:

The market world today is facing increase competition, in such situation organisations will like merge to have popular strategic tools entering new markets and acquiring new technologies. On the other hand, 80% of mergers do not reach their financial goals and 50% of the mergers fail. (Nahavandi and Malekzadeh 1993) It’s true that most mergers fail because of financial reasons or economic crisis, and management as well, but we must critically look at the importance of culture in the merger process. When two companies merged with different cultures, it will have greater consequences on the organisation. An example for this is merger between US air and America West. The two airlines had extremely different organisation cultures. US Airways had an older workforce with highly structured bureaucracy, whereas America West had much younger workforce with entrepreneurial culture. For a successful merger they must adopt to a common culture that will suit the company. Cultural differences: When employees do not agree with the cultural adaptation it will create problem for the organisation. This will affect their performance in the organisation. Culture play an important role in the way employees will react when they face new business environment, in some situation where merger take place. It’s difficult for some to work with new members within a team. To overcome this problem the organizations need to prepare employees to adapt to the new culture.

Impact of organization culture on merge:

Organization culture is one of the most important factors of success or failure of a company in merger process. Culture will have an enormous impact on the way a company operates today. The culture does not become established until shared understanding achieves dominance in the collective thinking of the members of the organization. The following points below illustrate some important interrelationships that deeply affect the organization culture in merger process.


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The effects of globalization on companies. (2017, Jun 26). Retrieved December 3, 2022 , from

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