Winter 2018

Moving in the Right Direction
HorizonNEWS
If the
organization
has a flawed
design, it
simply won’t
perform well
The 3 Elements
of Organizational
Structure & Design.
If I were to ask you a random and seemingly
strange question, “Why does a rocket behave
the way it does and how is it different from a
parachute that behaves the way it does?” You’d
probably say something like, “Well, duh, they’re
designed differently. One is designed to go fast
and far and the other is
designed to cause drag and
slow an object in motion.
Because they’re designed
differently, they behave
differently.” And you’d be
correct. How something is
designed controls how it
behaves. (If you doubt this,
just try attaching an engine
directly to a parachute and
see what happens).
But if I were to ask you
a similar question about
your business, “Why does
your business behave
the way it does and how
can you make it behave
differently?” would you
answer “design?” Very
few people — even
management experts —
would. But the fact is
that how your organization
is designed determines
how it performs. If you want to improve
organizational performance, you’ll need to change
the organizational design. And the heart of
organizational design is its structure.
There’s a saying in architecture and design that
“form follows function.” Put another way, the
design of something should support its purpose.
For example, take a minute and observe the
environment you’re sitting in (the room, building,
vehicle, etc.) as well as the objects in it (the
computer, phone, chair, books, coffee mug, and
so on). Notice how everything serves a particular
purpose. The purpose of a chair is to support a
sitting human being, which is why it’s designed the
way it is. Great design means that something is
structured in such a way that it allows it to serve
its purpose very well. All of its parts are of the
right type and placed exactly where they should
be for their intended purpose. Poor design is just
the opposite. Like a chair with an uncomfortable
seat or an oddly measured leg, a poorly designed
object just doesn’t perform like you want it to.
Even though your organization is a complex
adaptive system and not static object, the same
principles hold true. If the organization has a
flawed design, it simply won’t perform well. It
must be structured (or restructured) to create
an design that supports its function or business
strategy. Just like a chair, all of its parts or
functions must be of the
right type and placed in the
right location so that the
entire system works well
together. What actually gives
an organization its “shape”
and controls how it performs
are three things:
1- The functions it
performs.
2- The location of each
function.
3- The authority of each
function within its domain.
The functions an
organization performs are
the core areas or activities
it must engage in to
accomplish its strategy (e.g.
sales, customer service,
marketing, accounting,
finance, operations, CEO,
admin, HR, legal, PR, R&D, engineering, etc.).
The location of each function is where it is
placed in the organizational structure and how it
interacts with other functions. The authority of
a function refers to its ability to make decisions
within its domain and to perform its activities
without unnecessary encumbrance. A sound
organizational structure will make it unarguably
clear what each function (and ultimately each
person) is accountable for. In addition, the design
must both support the current business strategy
and allow the organization to adapt to changing
market conditions and customer needs over time.
Source: Lex Sisney, the creator of Organizational Physics
Examine
your pricing
objectives
to develop
a clear idea
of what
you want
your pricing
strategy to
achieve.
HorizonNEWS
Four Types of
Pricing Strategies
Setting prices for your products or services
doesn't simply come down to a simple
calculation. Prices can be practical tools for
making ends meet or they can be marketing
tactics for communicating something about
the quality of your offerings. To figure out the
best way to set prices, it's worthwhile to take a
step back and examine your pricing objectives
to develop a clear idea of what you want your
pricing strategy to achieve.
Profit-Oriented Pricing
In a sense, all pricing is
profit-oriented because,
even if you set prices
with other objectives
in mind, you still need
to earn a profit to stay
in business. However,
profit-oriented pricing
makes profit the top
priority when figuring
out the ideal price to
set. A profit-oriented
pricing strategy looks
for the sweet spot that
allows you to charge
as much as possible
for your offerings without charging so much
that you alienate potential customers and lose
money through missed sales. This type of
pricing objective can either aim to maximize
profit per unit relative to cost of goods sold
and other operating costs, or it can aim to
maximize overall profit by setting a price that
is competitive enough to increase the overall
number of units you sell.
Competitor-Based Pricing
Competitor-based pricing uses the price you
set to appeal to customers and define your
niche relative to your competitors. It doesn't
necessarily rely on setting a lower price than
other available options, although this strategy
will certainly make your products appeal to
customers who shop on the basis of price alone.
You can also use competitor-based pricing
effectively by setting a price that's in the same
ballpark as other products in the same niche, or
by choosing a higher price to send the message
that your product is superior and worth the
extra money.
Market Penetration
A market penetration pricing strategy is geared
towards getting a foothold in a competitive
market, usually by offering a low initial price.
If you start out by attracting customers on
the basis of price, you can get more people
to try your products, and then start building a
reputation and clientele that will allow you to
eventually charge more.
A market penetration
strategy can be risky
because customers don't
like growing accustomed
to a low price and then
being asked to pay more.
However, this approach
can be successful if your
products really do have
qualities other than price
that will make customers
want to buy them, such
as unique features or
unusually high quality.
Skimming
A skimming pricing strategy uses the opposite
logic from one based on market penetration.
Although market penetration uses low prices
to attract attention, skimming uses a reputation
that has already been built to charge high prices
from early adopters. If customers are passionate
about your products and willing to pay extra to
be the first to have them, you can charge initial
high prices when you first introduce a new
innovation or a new line, and then lower the
prices once you've already attracted the people
who are willing to pay more.
Source: Devra Gartenstein
HorizonNews is published by Horizon Transportation issued every quarter to improve communication in the Produce Industry.
Publisher: Thomas Leal Design: Business Spring Communications - www.b-spring.com, tel (559) 801 2090