Organizational Theory


Organizational theory can be defined as the study of the whole organization, the various strategies which are used by the organization, how these organizations adapt and the various structures that guide this organization towards its success. Most of the organizations are seen as complex, goal oriented and dynamic and hence the need to understand this organizational structures and the various strategies which are used by this organization different from the other organizations which lead to its success. It is the study of these organizations which lead to the benefit of identifying the various common themes for the purpose of solving so many organizational problems, maximizing the organizational efficiency, increasing its productivity and lastly meeting the needs of its stakeholders. It is the role of the company to follow the organizational theory to ensure that most of its goals have been achieved. It is under the organizational structure whereby the organization can differentiate itself from the other companies by use of the different organizational structures. (Clegg, Hardy, & Nord, 1997).

Various organizational structures

Many organizations have so many structures which are so much different from the other organizations. It is these structures which make these organizations indifferent from the others. Organizational structures occur in many forms some of which include the horizontal structure and vertical structure, formation, mechanisms of the organizational coordination and its centralization of its power. Many classical theorists argue that many organizations vary considerably on their structural attributes. This is used to explain what makes some of the organizations to be more effective than others, more perfect as when compared with the other organizations despite these organizations having the same structures. There is no any best way whereby these organizations can best organize themselves but what is important is how this organization can fit between the environmental factors, technology, the size of this organization and its organizational structure. The organizational structures include. (Clegg, Hardy, & Nord, 1997).

Organizational Theory

Vertical structure whereby Under the vertical differentiation, you find that a market has several goods and these goods that are present can be ordered according to their objective quality say from the highest good to the lowest good. With vertical differentiation, we can say that one good is better than the other hence making that particular organization to be more effective than the others. The preference or the need of the different tests of these consumers will actually play a big role on the purchasing decision of that particular good. For example, the potential consumers can be biased on that particular good say they can be pleased on that particular product because of the advertising methods which were used by that particular organization. (Clegg, Hardy, & Nord, 1997).

Horizontal differentiation can be said to prevail in the market when the different goods according to their different features can not be ordered in the market. A good example in this case is seen in the ice cream market. You find that ice cream is offered at different tastes in that market.

Hence in this case, you find that horizontal differentiation will be depicted since it is offered at different tastes at this market. Another way to differentiate these products is according to their colours. You find that most of the goods can be offered in the market but with different colours hence making these goods to be indifferent from the others. In most cases, the suppliers of these products usually set different prices for these products. For example in the case with chocolate, you find that this supplier since he has so many different tastes of these products, he can have differentiated tastes for these products hence making this supplier to be quite indifferent from the other producers. As a result, you find that this supplier can result to success since most of the customers will purchase these products depending on their different tastes. This is because their prices are varied so the consumer will go for either the cheapest or the most expensive depending on the income of the consumer. (Clegg, Hardy, & Nord, 1997).

Organization of its powers and the way power is organized in any organization matters a lot. This is because leadership is one of the basic driving forces for nay organization. When the organizational leadership is not good, then you find that this organization will lack the correct direction and decision to make when doing most of the organizational activities. A leader can be defined as person who gives direction to a group. So if this organization does not have a good leader, then you find that it will automatically fail in its activities. So organizations can differentiate themselves on the issue of centralization of power. You find that in this case, if the organization has centralized its powers, you find that work in this case will be differentiated and every one has a role to play in the development of this organization. (Clegg, Hardy, & Nord, 1997).

Organizational Theory

A profile of the organizational process of Wal-mart

A Wal-mart store, Inc is one of the largest stores in the United States. It operates many different stores in most of the industrialized countries of the world. It operates super centers, Wal-mart discount stores, Sam’s club locations and neighborhood markets in the United States

. The major countries whereby Wal-mart operates its stores include countries like Brazil, Argentina, China, Canada, Guatemala, Japan, Mexico, Costa Rica, El Salvador, Honduras, Nicaragua, United kingdom and Puerto Rico.This company uses the organizational theory which have led to its success. It is the use of the organizational theory whereby the company has been in a position to utilize its resources effectively hence increased production. The company can be seen as a leader in this category when compared to the other companies. For example, Wal-mart uses the decentralized structure in most of its stores and as it can be seen, decentralized structures is one of the structure which leads to improved performance of a company. There are several ways that make Wal-mart different from the other companies. (DeSanctis & Fulk 2000).


Wal-mart sees its business as its ecosystem whereby the whole chain encompasses both the suppliers and its distributors.wal- mart forges relationships with its suppliers that are much closer than the classic manufacturer-retailer relationship and has actually positioned itself at the center of an ecosystem that is more stable and stronger. Economists argue that markets exist in both social and cultural contexts. A far reaching economic change in the wal- mart is the rise in big box retailing. The adverse impact with this chain is the mom and pop type retail outlets which are said to be well documented. Most of the organizations that are highly formalized use this technology in most of its organizational activities. With the rise in technology, this organization has been in a position to succeed in most of its activities. For example it uses the internet when advertising its products. It is by the use of this technology that this company is in a position to advertise its products to all people since everybody can access these products hence leading to its growth. It has differentiated itself from the rest of the companies since it is an innovator in this case. (DeSanctis, & Fulk 2000).

Organizational Theory


Organizational structure is said to affect the performance of any organization. In this case, Wal-mart is said to be an innovative company hence leading to its great success in its activities. There seems to be more trade-offs which is associated with the decentralized structures. Wal-mart has a decentralized structure whereby it gives the managers the opportunity to implement better ways of doing things that they discover as a byproduct of operating a store. The decentralized structure in this company is combined with an effective procedure and this is to identify attractive ideas and also disseminating them throughout this chain. It’s argued that a decentralized structure will make organizations to improve the store efficiency since it’s argued that it is a powerful engine which most organizations follow to perform its activities effectively.Wal-mart uses the sears principle of decentralized company’s organization. It is now the cornerstone of this organization since it uses this policy hence leading to its greater success. It uses this policy to overcome some of the company’s difficulties such as local overpricing of goods, poor services, out of stock conditions and unbalanced inventories. This innovation has intensively led to the company’s success since it has differentiated itself from the other organizations which do not have this structure. (DeSanctis & Fulk 2000).

The company is also planning to inspire innovation in the various chemicals which are used in product selection. It will implement its preferred chemical principles and this is to establish a chemical characteristic for product ingredients. The importance of this innovation is to drive more development on the sustainable products for children, mothers and the entire environment. The goal of this company is to sell products that sustain the company’s entire resources and its environment. (DeSanctis & Fulk 2000).

Cost leadership strategy

Wal-mart uses the cost leadership strategy when operating its stores. In this case, the producer in this case is called to be the lowest producer as when compared to its other competitors. The producer becomes the lowest producer but at a given quality of product. This producer sells its products at an average industry price as compared to the other producers so as to get higher profits or even sell its products at a lower price and this is towards getting the largest market share. This is because many customers will tend to go to the cheap products hence leading to higher profits. During price wars, a Wal-mart can still maintain its profitability while on the other

Organizational Theory

hand, its competitors suffers huge losses. As this company still matures, you find that even when prices decline, this company is in a position to make profits since it sells its products cheaply as when compared to its competitors. This strategy is applied by many organizations like the wal-mart since it can target large markets leading to huge profits. (Ruggles, & Holtshouse, 1999).

In this strategy, there are relative pressures which are required so that the company can have cost advantage leading to huge profits. One of the relative pressures is improving process efficiencies. This company in order to achieve its cost advantage, it is supposed to improve on its efficiency. Efficiency in any organization is quite important since it leads to greater output hence leading to higher profits in return. By gaining a unique access to a large source of lower cost materials, avoiding some of the costs which are faced by this organization. This company is supposed to forgo some of the costs which might lead to higher costs during production and some of the extra costs might be reduced by reducing the total number of employees in your company. A firm that has cost advantage has the following internal strengths. This company is supposed to have a high access to capital which is required to make significant investments in production. If this organization has a huge capital, then it can have high investments in its production hence leading to cost advantage. With this investment, it can act as a barrier to entry by many of its competitors to overcome. The necessary skills are also required by this company in order to have efficiency in its production, high level of expertise is also required to ensure that quality products are produced by this company and lastly should have efficient distribution channels so that it can realize the cost advantage in this case. (Ruggles, & Holtshouse, 1999).

Differentiation strategy

Wal-mart still uses the differentiation strategy which makes this company to get higher profits. Differentiation strategy can be defined as a set of integrated actions and are designed in a way which leads to improved deliverance and production of these goods and services and customers are supposed to perceive the goods and services as quite different in ways that are important for these customers. For this wal-mart to be more productive, the company is supposed to be unique in their goods and services far beyond many years ago when the services were provided. It is also argued that the key to successful and competitive advantage is differentiation. Differentiation can well be explained in the case of global marketing services. What used to be local competing organizations or businesses has now turned to be global marketing. Differentiation is supposed to target your customers. Differentiation in this case can be seen when improved products are provided different from the old system of providing these

Organizational Theory

services. In order to keep a successful customer base, it’s important to consider positioning and differentiation strategies. You find that the value added by the uniqueness of these products may lead to lowering of their prices hence leading to competitive advantage in return. (Ruggles, & Holtshouse, 1999).

Adaptation to the environment

Wal-mart has been in a position to succeed because it has properly adapted to the environment. This is because company’s that face complex environments differentiate themselves so that each company can face a smaller problem. So in this case, Wal-mart adapts to the environment by ensuring that it has produced products which suit the varying demands of people. This is because people have different tastes and in order to succeed, a company should consider the varying tastes with its customers. For example the Japanese cars are so much different to the United States car. As a result, Wal-mart should ensure that when selling these products since it’s situated in different parts of the country, all needs of its potential consumers are met. It is due to the adaptation in the environment that the company has experienced a tremendous growth. (Ruggles, & Holtshouse, 1999).

What I would suggest to help the company further succeed?

Most companies are supposed to gravitate towards their success. It is one of the major objectives which are set by any company before it starts its operation. When these goals are not attained, you find that this company is said to be incompetent. The best cooks make the meals for the family and the plants lover tends the garden. So in this case, I would advise Wal-mart to improve on its management strategies. It is a leader in the market but should redefine their management strategies. It is through redefining its core competence that this company will get competitive advantage. In defining its core competencies, it involves underlying skills, functions and systems of knowledge which will help the company to achieve its competitive advantage as when compared to its competitors. The company should gravitate towards its strengths. The company should also identify and redefine its core competencies. It is in this case that Wal-mart will be in a position to solve its smaller difficulties. (Ruggles, & Holtshouse, 1999).

Organizational Theory

The company should also take the initiative of reaching the unreached. It should diversify its products to so many countries but not only restricted to a small number of countries. It should make sure that it has opened so many branches to the developing countries to ensure that these people can also get the same services. It is through this initiative that it will be in a position to expand in growth. Another area of improving is by studying the various strategies it uses in these stores. For example there is the problem faced by this company in the store located at Germany. This is due to the lack of good knowledge of the German retailing and its regulatory environment. This company should take the initiative of analyzing the different markets on where to locate these stores. Other areas of improvement are the various entry strategies, cultural problems since most of the people have different cultures and when establishing these stores, the management is supposed to consider the cultural problems. This is because there are several cases which are faced by Wal-mart concerning culture. So in this case, it’s good to make strategies which are supposed to lead this company to realize its set goals and objectives. (Ruggles, & Holtshouse, 1999).


Organizational theory is important in any organization. It is in this organizational theory that a company can study its organizational processes, its competencies and production activities. After analyzing the organizational theory, then this company can then realize its desired goals since it will have identified the various structures and areas of competencies to use so that it can achieve its desired goals. It is the role of every organization to make use of the organizational theory since it’s through the studying of the organizational theory that this company can be I a position to succeed. A good example is the case of Wal-mart. It has used the organizational theory hence leading to its diversified level of success.

Organizational Theory

Organizational Theory


DeSanctis, G., & Fulk (Eds.). (2000). shaping organizational form. Sage Publications: Thousand

Oaks, CA


Ruggles, R., & Holtshouse, D. (1999). The knowledge advantage. Capstone US, Dover, NH.

Clegg, S., Hardy, C., & Nord, W. (Eds.). (1997). Handbook of organization studies. Thousand

Oaks, CA                                                                                                                                                                                                   :