In the past, businesses typically adhered to a functional or line structure. However, the rise of multi-product and multi-brand enterprises has led to the popularity of divisional structures. Given the constantly changing and dynamic business landscape, companies now need to engage external partners to execute crucial business activities. These partnerships often give rise to intricate business frameworks.
What constitutes a Complex Business Structure?
While there is no universally agreed upon definition or definitive list of complex business structures, a business structure is considered complex if it possesses one or a combination of the following features:
Diluted control; or
Shared objectives; or
Pooled resources; or
Connected virtually; or
Collaboration of different cultures, interests; or
Diverse business environment.
Prominent complex business structures are shown below:
Specific issues pertaining to particular form of complex business structures.
1. Strategic Alliance
A strategic alliance is an arrangement between two or more enterprises to undertake a mutually beneficial project while each retaining its independence.
Since independence is retained, it is difficult to put common performance measures in place and to collect and analyse management information for the same because the security of confidential information is a concern.
Eg: AlphaTech and BetaSoft form a strategic alliance to co-develop an AI-powered healthcare application. AlphaTech specializes in AI algorithms, while BetaSoft excels in user interface design and software integration.
Since AlphaTech and BetaSoft are independent entities, establishing common performance metrics for the alliance project can be challenging. Each company may have its own internal metrics and goals that may not perfectly align.
Gathering and analyzing management information (such as project progress, resource allocation, and financial data) becomes complex due to concerns about sharing confidential information. Both companies need to balance transparency with the need to protect proprietary data.
2. Joint Venture
A joint venture is a combination of two or more parties that seek the development of a single enterprise or project for profit and share the risks associated with its development.
Therefore, in simple words, a joint venture is a separate business entity whose shares are owned by two or more business entities; this results in the following specific difficulties apart from those stated above.
Joint Venture are of different types, such as Project based, Vertical, Horizontal, and Functional. Since the purpose of each sort of joint venture is different, hence assigning accountability for performance to joint venture partners in light of the distribution of resources and work (which is usually not equal) is always a critical aspect.
Eg: Two construction companies, BuildRight Inc. and ConstructCo Ltd., decide to form a joint venture to build a high-rise residential complex in a booming urban area. BuildRight Inc. specializes in structural engineering and project management, while ConstructCo Ltd. has expertise in architectural design and construction logistics.
BuildRight Inc. handles project management and structural integrity, while ConstructCo Ltd. oversees architectural design and construction execution. Assigning accountability for specific aspects of performance, such as meeting project milestones or adhering to budget constraints, can be challenging due to the unequal distribution of resources and work responsibilities.
Managing the allocation of resources and balancing the workload to ensure equitable contributions towards the project’s success requires careful coordination and negotiation.
3. Multinationals
Multinationals are enterprises that have subsidiaries or operations in a number of countries.
Places (countries) have their own culture, language, precedents, notions, conventions, apart from differences in time zone, legal and reporting framework, and more importantly, currency
Therefore, ensuring that subsidiaries or operations are aligned with the overall mission and objectives can be challenging. This challenge is exacerbated by increased uncertainty caused by fluctuations in exchange rates, shifts in government taxation, or alterations in foreign trade policy.
Eg: Windfall tax on export of refined crude-imposed w.e.f. 1st of July 2022; impact of policy rates decided by the central bank's Monetary Policy Committee on Exchange Rates; etc.
Measuring and reporting performance may become more difficult if common systems don't exist at all the subsidiaries or offices.
4. Complex Supply Chain
A supply chain is a network of enterprises which are connected to each other while involved in creating a product and delivering it to the consumer.
In the dynamic modern business environment, the supply chain is becoming more complex than earlier. Issues including logistical communication barriers, incompatible technology, and high levels of pressure in modern supply chains can prevent the trust and efficiencies on which effective trading partner relationships should ideally rest, which in turn leads to poor performance management.
Collaboration among supply chain partners can only be a solution to the above issues. Coordination among the supply chain partners can be ensured and enhanced through the free flow of information.
Eg:Imagine a global supply chain for a popular consumer electronics company, TechGadgets Inc., which manufactures and distributes smartphones. The supply chain includes suppliers of raw materials, manufacturers of components, assembly factories, distribution centers, and retail stores.
Different stakeholders in the supply chain may use disparate communication systems or platforms, making it difficult to exchange critical information such as inventory levels, production schedules, and delivery timelines accurately and promptly
Suppliers, manufacturers, and distributors may use different technologies or software solutions that are not fully compatible. This can lead to inefficiencies in data sharing and integration, hindering real-time visibility and decision-making across the supply chain.
The high levels of pressure to meet customer demand, reduce lead times, and control costs can strain relationships among supply chain partners.
Solutions can be :
Improved Communication Channels for sharing data and information among all supply chain partners.
Providing suppliers and distributors with real-time access to relevant data such as sales forecasts, inventory levels, and production schedules to enable better planning and decision-making.
Collaborating closely with key suppliers and distributors to develop shared forecasts and production plans, ensuring alignment of resources and capabilities to meet fluctuating demand effectively.
5. Virtual Organisations
A virtual organisation is one that has little or no physical premises but where employees and managers work remotely and are connected using IT.
Collecting reliable performance related data from widespread sources is difficult, especially where the control that can be exercised over these sources is limited.
Eg: Imagine a digital marketing agency called DigitalConnect that operates as a virtual organization. DigitalConnect specializes in providing online marketing services such as social media management, SEO, and digital advertising campaigns. The company has a team of remote employees and managers who work from various locations around the world, connected through IT and communication technologies.
Since there are no physical premises where all employees gather, collecting reliable performance-related data such as project progress, client satisfaction metrics, and individual productivity can be challenging.
DigitalConnect has limited direct control over the IT infrastructure and systems used by its remote workforce. Different team members might use different tools or methods to track their work and report on their performance, leading to inconsistencies in aggregating and analyzing data uniformly.
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(Disclaimer: The views expressed in this article are strictly personal opinions of the author and do not necessarily reflect the views or opinions of the company or organisation they may be associated with. This article is intended for informational purposes only . It should not be construed as legal or professional advice and no legal or business decision should be based on its content. Readers are encouraged to seek professional guidance or consult relevant experts for specific legal or professional matters.)
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