Competition holds entrepreneurs accountable. If customers value the entrepreneur’s ideas the business will be profitable, if not the entrepreneur will run his/ her business at a loss. The more value an entrepreneur creates, the more he or she is rewarded. Eventually, the entrepreneur will need to build a team to meet the demand of his or her market. How the team is created is highly dependent on the nature of the market. To remain competitive an entrepreneur needs to know the best business design and size supported by the market.
There are two important ways competition shapes an organization's structure:
When the external environment is unstable, an entrepreneur will need to design an organic business structure to stay competitive. This is needed to meet the sudden changes that could arise in its environment. Organic structures usually operate using cross functional teams which may dissolve and reform to meet the challenges posed by the external environment. On the other hand, entrepreneurs in stable environments, will benefit more from highly standardized processes.
Moreover, markets that require highly specialized knowledge can gain a more competitive edge by being decentralized. This is because it is impossible for one person to possess the amount of knowledge required by the market place. For example, doctors operate in decentralized environments.
Size of business
There are instances when the market demands a large size. For example a business that designs airplanes will need to be large to absorb the total costs to design the planes. On the other hand, there are businesses that do not do so well if they appear to be too large. For example, with professional services, consumers like the feeling of smallness because it indicates that the business is able to give them the personal attention they desire at an affordable price. The challenge for a professional service business is scaling while maintaining the personal touch consumers have come to love.
Knowing how to structure your business and maintaining the right size to remain agile in the market place is essential for small business success. Structuring your business too rigidly when your market demands flexibility could be the dead of your business. In the same way, scaling a small business in a disproportional manner could cause your business to suffer. There is a right way to scale a small business without losing customer focus. Knowing the right variables to look at is essential to your business design.
Article written by Evelyn Ivy, CPA, MBA
Article Source : Ezine Articles
Used With Permission