Theory of the Firm

Masters
Essay
Miscellaneous
Pages 11 (2761 words)
Download 0
Sloman (Sloman 2004, p. 196) states that there are various operating structures that are adopted by firms for their internal operating structure. The decision about which structure should a firm adopt depends on its size. Small firms tend be centrally managed, with decision making operating through a clear hierarchy…

Introduction

Although it is very difficult to suggest which, out of these two is a better structure, but one can clearly identify the merits of each structure. In the U-Form or Unitary form, organizations are broken up into separate departments for each process, for example, separate department for marketing, finance and production. The manager or head of each department reports to the chief executive of the organization, whose function is to co-ordinate the activities of each department, relaying the firm's overall strategy to them and being responsible for inter-departmental communication. Although, this structure is very efficient till the firm is of certain size, but it can lead to inefficiencies as the organization grows. These inefficiencies are: communication difficulties, coordination and control and it become difficult to manage the entire organization from the centre.
Another structure which results in the firm being able to overcome these problems is called M-Form or multi-divisional form of internal structure. In this structure, the firm is divided a number of divisions. Each division could be responsible for particular group or group of products or a particular market. The day to day running and even certain long term decision of each division would be the responsibility of the divisional managers. ...
Download paper
Not exactly what you need?

Related papers

Theory of the Firm
Although it is very difficult to suggest which, out of these two is a better structure, but one can clearly identify the merits of each structure. In the U-Form or Unitary form, organizations are broken up into separate departments for each process, for example, separate department for marketing, finance and production. The manager or head of each department reports to the chief executive of the…
The Nexus between agency theory and corporate governance
This essay tries to explain the agency theory and corporate governance in the present day environment. Economists recently are more diverted to the phenomenon of organisation. The recently formulated organisation theory agency theory is different from the ones which existed in the past. Fama (1980) focused at the possible managerial labour market to restrain and guide individual decision-making…
Criticism of Neoclassical Theory
However, many behavioral economists argue that since a corporation is an organization with various groups such as the employees, managers, shareholders and customers, they may likely have different objectives or goals. The dominant group at any moment in time can give greater emphasis to their own objectives - for example the main price and output decisions may be taken at local level by managers…
Why do different theories of the firm exist?
This paper examines a couple of firm theories with the objective of examining their fine and major points and in an attempt to discover what factors have prompted existence and development of multiple theories of the firm. This is achieved through a literature review that incorporates a wide ranging discussion on the main issues as outlined above. In addition, this paper extends the literature…
Why do different theories of the firm exist
It is also not easy to adopt all the theories but it is necessary to learn about all the theories. As it helps in making a firm progressive.…
Stakeholder Theory
Stakeholders include shareholders, employees, suppliers, customers, and the communities in which the firm operates-a collection that Freeman terms the "big five." The very purpose of the firm, according to this view, is to serve and coordinate the interests of its various stakeholders. It is the moral obligation of the firm's managers to strike an appropriate balance among the five interests in…
Firm Performance
Arguments for and against are presented to make the reader aware of the issues surrounding the topic. In the end, a synthesis shall be made of the ideas presented and a conclusion on whether firm performance is indeed path dependent or not is made.…