Exam 13: The Structure of the International Firm

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A firm must also evaluate the benefit trade-off between mechanistic and organic structures. Mechanistic structures are those that are focused on stability and hierarchical decision making. Such structures are appropriate in low-technology domains where decisions are made in a hierarchical fashion; major decisions (and some minor ones) come from the top and work their way down through the organization. In a business with a low-cost strategy, such a mechanistic structure is desirable, because most parts of these businesses focus on keeping costs as low as possible. Minimal variation in product and innovative processes are things that consume the firm's financial resources. Thus, in this situation, it is desirable to have a mechanistic structure. However, firms working in high-speed production often also employ a mechanistic structure, with their human resources and other functions given narrow ranges of flexibility.
Alternatively, a firm may choose to have an organic structure, one that is more flexible, innovative, and able to adapt to its environment. In environments where change is rapid, an organizational structure needs to be able to adapt and respond as quickly as the environment. An outcome of this need to adapt is the flat organization, one frequently discussed type of organic structure that has few layers of management. Organic structures need highly skilled and motivated employees, which leads to a particular type of organic structure that has come to be called the learning organization.