Dealing with Complexity: Infrastructure Decisions

Abstract

The interplay of different strategic decisions such as outsourcing, and the complexity and changing business environment create a strategic context where coordination and collaboration become critical issues in manufacturing. These are infrastructural issues not only about long term strategy related to markets, products and processes but also about planning and development (tactical decisions) and continuous improvement in products and operations. The coordination challenges are functions of the complexity of processes, technology, and so on, but also of the role, number and size of the different units. The degree of autonomy and spatial and cultural distance are but some of the challenges of coordination. In this picture, the outsourcing decisions appear particularly important, and coordination mechanisms and other infrastructure issues need to be integrated as part of the outsourcing decision. Agency theory has been important in facilitating discussions around better coordination. Mintzberg associates coordination mechanisms to organizational factors such as specialization, decentralization, formalization, size, age (maturity), environment, and power. Coordination mechanisms can be grouped into four categories: structure and formal; informal; hybrid; internal quasi-markets and; internal prices.