Masurement of factors affecting organizational streucture design an empirical study on vietnams electronic retailers in vietnam

the authors have identified 5 main factors affecting the design of the organizational structure of e-retailers in vietnam, they are: size of organization, strategy of organization, busin

MEASUREMENT OF FACTORS AFFECTING ORGANIZATIONAL STRUCTURE DESIGN - AN EMPIRICAL STUDY ON VIETNAM’S ELECTRONIC RETAILERS IN VIETNAM

TS Chử Bá Quyết 1* , ThS Nguyễn Bình Minh 2

2 Trường Đại học Thương mại, Thuongmai University

*Corresponding author: quyetcb@tmu.edu.vn

Keywords:

Organizational structure,

influencing factors,

e-retailer, vietnam

This study aims to identify and evaluate the influence of factors affecting the organizational structure design of electronic retailers in vietnam from the review of related studies on factors affecting the organizational structure designing, the authors proposed model of factors affecting the organizational structure designing to test the hypothesis of factors affecting the organizational structure designing, the study investigated 417 respondents the authors have identified

5 main factors affecting the design of the organizational structure of e-retailers in vietnam, they are: size of organization, strategy of organization, business process of organization, information technology, and environment of organization

Introduction

Organizational structure is critical to the success of a business The right organizational structure enables efficient business operations On the contrary, an inadequate organizational structure can make it difficult to compete Establishing a sound organizational structure depends

on many factors

Vietnam’ e-commerce is developing grown vigorously in the current time According

to the Vietnam e-commerce association’s report (Vecom, 2019), the growth rate of e-commerce

in 2018 was more than 30 percent and the value of the domestic e-retail market in 2018 reached

$7.8 billion E-retail sales accounted for more than 10 percent of all retail sales in Vietnam in

2020 (Vecita, 2020) Revenue in the e-retail market is projected to reach more than US$ 10 billion in 2021 In a new environment, traditional Vietnamese retailers have renewed their business models, redesign structure to save costs, to serve customers better, and be appropriate

in the rapidly changing environment

There is an influence between organizational structure and business performance (Shabbir, M S, 2017) Estalaki (2017) explained that there is a positive and significant influence between efficiency in industrial units with organizational structure The good organisational structure will enable the business to compete effectively while the wrong organisational structure could make it difficult for the business to survive Designing the sound organizational structure for a business depends on many factors The purpose of this paper is to find which factors affecting the organizational structure design of two e-retailers in Vietnam

Literature review

An organizational structure is the framework in which an organization's activities are divided, resources are organized, people and divisions are coordinated to achieve planned

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objectives An organizational structure is an internal structure of an organization, expressing formal or informal relationships between people in the organization An organizational structure is a central factor determining organizational behavior According to Rezayian (2005),

an organizational structure was created to coordinate the activities of the organizations and to control the actions of the members of the organization According to Monavarian et al (2007),

an organizational structure is a set of methods of division of tasks for defining common tasks and coordination An organizational structure is also a key factor in determining organizational performance and how people work together in organizations (Richard M Burton & Borge Obel, 2018) The structure of an organization represents the decentralization of responsibility and management of the organization The design of the organizational structure should be based on the organization's strategy, be consistent with trends, and must adhere to scientific principles The organization structure must indicate the suitability of division of tasks within the organization with coordination, and how the tasks work in harmony These tasks can be interdependent and uncertain

Organizational structure includes three main categories, they are: Functional organizational structure, divisional organizational structure, and matrix organizational structure (George and Jones, 1999)

Functional organizational structure: This structure starts with positions with the highest levels of responsibility at the top and goes down from there Primarily, though, employees are organized according to their specific skills and their corresponding function in the company Each separate department is managed independently

Divisional organizational structure: Company’s divisions have control over their own resources, essentially operating like their own company within the larger organization Each division can have its own marketing team, sales team, technical team, IT team, etc

Matrix organizational structure: This structure looks like a grid, and it shows cross-functional teams that form of special projects For example, an engineer may regularly belong

to the engineering department (led by an engineering director) but work on a temporary project (led by a project manager) The matrix organisational chart accounts for both of these roles and reporting relationships

A company can transfer from one type of organizational structure to another Whether

a particular organizational structure approach works depends on the relevance of the environmental, resource, technology, strategy and cultural contexts Nahavandi and Malekzadeh (1999) argued that the organizational structure should be environmentally appropriate, the deployment of the organization's resources, including technology in an effective and strategic way of the organization Adalton Ozaki and Eduardo (2011) argued that the information society and knowledge-based business does not suit with Weberian or Taylorist's production model This is because the nature of information-oriented workflow doesn't operate in the same way as the previous commodity manufacturing standard Information technology enables organizations to operate and this allows them to choose between centrally structured organizations or decentral structured organisations Corbitt (2000) also argued that e-commerce makes the organizations that apply it have to transform more, not merely establishing e-commerce departments Symon (2000) identified organizational structures closely related to new business technology deployment Strebinger and Treiblmaier (2006) emphasized that the application of e-commerce and the development of e-commerce has caused companies to adjust their organizational structure E-commerce changes the way business conduct their business E-commerce can be seen as a new method to conduct business and interact with consumers (Soliman & Youssef, 2003) Development of e-commerce, clearly changed the way companies made business, business process, and developed new forms of strategic markets

Companies may form a single e-commerce department; or form an e-commerce group

in some functional departments The problem is how to manage, coordinate, and share resources and information to reduce waste and get optimal business results Form an e-commerce department and equip or facilitate that can exploit the expertise of staff, but share organizational resources with other departments less effective On the contrary, an e-commerce team formed

in a few functional departments (for the example sales department, technical department) may not be able to attract human resources with deep expertise, no specialization, lack of cooperation

Identify hypothesis and research model

Designing the organizational structure of a company depends on many factors Related research introduced some factors as business process, information technology and business strategy

Business processes may be defined as a set of related, ordered activities that contribute

to the production of goods or the delivery of any service Business processes are the central building blocks of the relationships between individuals, organisations and industries (Malone

et al., 2003) Human-operated business processes fundamentally depend on the roles and positions (and in some cases, the individuals) that carry them out So, any change to the organisational structure will change business processes, even if only by changing those responsible for them (Darren Wright, 2015) Changing business processes requires the organization and the personnel management are also changed For the successful business process improvement, the business processes are not only improved, but the organizational system and the operating system are also reformed (M Hammer and S Stanton, 1999) The existing processes and structures that are designed for traditional operations are not suitable for e-commerce (Julia et al., 2002) Transformation in business requires significant redesign of business processes and alignment of these redesigned processes with information systems and technologies (Barua et al., 2004) Business processes are especially important in the implementation of e-commerce (Barua et al., 2004) The business processes of a company have

to fit with strategy, and structure (Lex Donaldson & Greg Joffe, 2014) Interactions between business processes and organizational structure are critical to achieve the goals within a company’s expectations Organizational structure needs to appropriate for business processes performed in an organization (Seongcheol et al., 2012) In line with extant literature on business process and its effects on organisational structure design, the following hypothesis is proposed:

H1 Business processes has a significant impact on organizational structure design

Information technology (IT) is the use of computers, internet, networking and other physical devices, infrastructure and processes to create, process, store, secure and exchange all forms of electronic data Information technology is an element in an e-commerce business model The use of information technology plays an important role in business It is used as an enabler and a tool for redesigning business processes Information technology can serve as a significant catalyst for organizational change (Maryam Alavi & Youngjin Yoo, 2012) Information technology impacted on the organisational structure design and business process redesign Information technology and organizational structure influence one another Information technology must be aligned with the organization’s functions and operations The organization must be aware of and open itself to the influences of information technology in order to benefit from new technologies Information technology enables changing organizational forms and structures The relationship between information technology and organizational structures is dynamic Whisler (1970) described how information technology has impacted on the organisational structures through increased vertical relations of information resulting in a greater centralization of information at the top of the hierarchy He hypothesized that information technology would have a tremendous influence upon the structure of the organization, resulting in fewer employees, a narrower span of control, a reduction in the

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organizational levels Applying information technology in organization, people did not need to

be in the same room, or even the same building, to be efficient Information technology can create or eliminate positions or functions in the company For example, when selling is done electronically, the number of sales person will reduce Dibrell and Miller (2002) argued that advances in information technology have enabled managers to adapt existing forms and create new models for organizational design that better fit than requirements of an unstable environment Information technology will continue to change the function of jobs in the workplace, organizational structure also changes to landscape In fact, Dibrell and Miller (2002) asserted that information technology is a catalyst in the development of new forms of organisational structure Saleh A Khawatreh et al (2006) suggested the implementation of information technology produced change in an organization and its structure because the relationship between information technology and organizational structures is dynamic Information technology can have an impact on how organizational structure is designed and how the work flows Ali Akbar Farhanghi, et al., (2013) described information technology is a predictor of organizational structure In line with previous literature on information technology

and its effects on organizational structure design, the following hypothesis is proposed: H2

Information technology has a significant impact on organizational structure

Strategy can be defined as determining the basic long-term goals and objectives of an organization and adopting a program of actions and allocation of resources needed to carry out the objectives A business strategy is an outline of the actions and decisions an organization plans to take to reach its business goals and objectives Organizational structure and business strategy are related because strategy helps a company define and build its organizational structure A company's organizational structure is based on the result of the analysis of organizational strategy Organizational structures enable strategic change and improve business performance Chandler (1962, p 314) declared “unless structure follows strategy, inefficiency results” Strategy must continually drive structure and people decisions, andthe organizational structure must reflect and enable effective leadership Ajagbe et al., (2015) Organisational structure is followed differing strategies at General Motors, Ford and Chrysler (Thomas G Marx, 2016) Strategy as an internal factor effect to organizational structure (Unam & Akinola, 2015) In line with previous literature on business strategy and its effects on organizational

structure design, the following hypothesis is proposed: H3 Business strategy has a significant

impact on organizational structure

Organizational size is the structural property of the organization and can be defined in terms of space volume, sales volume, net assets, customers, or the number of persons employed

in the organization Organizational size denotes the number of employees, sales volume and managers employed in organizations The size of an organization affects its organizational structure which subsequently impacts the levels of the structure and its departmentalization Right-sizing can help organizations achieve their goals There is considerable evidence than an organization’s size significantly affects its structure There are several researches supporting the idea that organizational structure is impacted by the size of the organization Large organizations tend to have more specialization, departmentalization, centralization, and rules and regulations than do small organizations (Robins & Coulter, 2005) The larger an organization becomes, the more complicated its structure When an organization is small — such as a single retail shop, or a hair salon — its structure can be simple In reality, if the organization is very small, it may not even have a formal structure Instead of following an organizational chart or specified job functions, individuals simply perform tasks based on their likes, dislikes, ability, and/or need Small organizations are very often organic systems As an organization grows, however, it becomes increasingly difficult to manage without more formal work assignments and some delegation of authority Therefore, large organizations develop formal structures The size of organizations directly affects their number of structural levels,

which can be determined by the following relationship - the larger the organization, the greater the specialization, the more complicated the procedures, including a more extensive hierarchy (Adam Kalowski, 2015) Moreover, a well-designed structure can dominate the development

of an organization or a poor structure; can conversely seriously degrade the performance of the organization In line with extant literature on organizational size and some above explains, the

following hypothesis is proposed: H4 Organisational size has a significant impact on

organizational structure

Additionally, organizations or companies, like humans, tend to progress through stages known as a life cycle or organizational age Like humans, most companies go through the following four stages: birth, youth, midlife, and maturity Each stage has characteristics that have implications for the structure of the firm Mintzberg (1983) listed other elements as the age of the organization and relationships of power in the organization as impacted factors to organizational structure As the life‐ cycle concept implies, a relationship exists between an organization's size and age As organizations age, they tend to get larger; thus, the structural changes a company experience as it gets larger and the changes it experiences as it progresses through the life cycle are parallel Therefore, the older the organization and the larger the organization, the greater its need for more structure, more specialization of tasks, and more rules As a result, the older and larger the organization becomes, the greater the likelihood that

it will move from an organic structure to a mechanistic structure Therefore, based on the literature review, this study fulfills the aim of exploring the relationship between organizational

age and organizational structure by hypothesizing the following statement for testing: H5:

Organisational age has a significant impact on organizational structure

Environmental condition is the impacted factor in organizational structure (Burns and Stalker, 1961) The environment is the world in which the organization operates, and includes conditions that influence the organization such as economic, social‐ cultural, legal‐ political, technological, and natural environmental conditions The environments are often described as either stable or dynamic The more certain the environment is, the more centralized hierarchy the firm’s organizational structure may have, with formalized rules and procedures (P.R Lawrence and J.W Lorsch, 1967) Esther Kimanzi & David Kiarie Mburu (2015), a good organization structure helps companies to launch new products more frequently, to explore and enter new markets faster, and to seek new distribution channels To meet the needs of customers and suppliers, companies will change their organizational structure accordingly From these

literatures, the following hypothesis is proposed: H6: Environment has a significant impact on

organizational structure

Organizational culture and organizational structure impact each other Organizational culture can be defined as “a system of assumptions, values, norms, and attitudes, manifested through symbols which the members of an organization have developed and adopted through mutual experience and which help them determine the meaning of the world around them and the way they behave in it” (Janićijević, 2011: 72) Organizational culture influences the dominant leadership style, organizational learning and knowledge management, company strategy, and also the preferred style of changing the management, employee reward system, commitment, and other aspects of connections between individuals and the organization Organizational culture generates its impact on organizational structure both through its design and its implementation Organizational culture affects the design and implementation of organizational structures Organizational culture legitimizes the behavior and decisions imposed on employees and management by the organizational structure within the context of valid values and norms of behavior (Nebojša Janićijević, 2013) From these literatures, the

following hypothesis is proposed: H7: Organisational culture has a significant impact on

organizational structure

This study tests 7 hypotheses, as shown in Figure 1

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Figure 1: Proposed research model Research method

This research is deductive in nature It is based on a theory-then-research approach in which hypotheses are set and developed, and then tested through empirical research In order

to either reject or accept the hypotheses, specific data must be collected

Quantitative data were collected using a questionnaire, which was designed by the authors For the purposes of this study, a questionnaire was developed which was mostly referenced from existing literatures and questionnaires on organisational struture, business process, business strategy, technology information, organisational size and age, and environment of organisation

All respondents were employees from 50 Vietnam's e-retailers Questionnaires were distributed to 600 respondents of 50 e-retailers A total of 417 respondents returned usable questionnaires A five-point Likert scale was used in the questionnaire to gauge the respondents’ perceptions of the factors that impacted on the organisational structure design The scale is as follows: 1) Strongly Disagree, 2) Disagree, 3) Neither Agree nor Disagree, 4) Agree, and 5) Strongly Agree The five-point Likert scale has been adjudged one of the most appropriate and often used measurement scales in quantitative studies (Creswell, 2009)

The amount of data to be processed and analyzed by factor analysis approach is 417 samples of measurement results Guilford recommended a minimum number of samples required to perform factor analysis is 200 Cattel also suggested the number of samples that good and acceptable is minimal 200 Likewise, according to Comrey, the number or size of the sample 200 can also be acceptable Therefore, the amount of the sample size in this study is considered adequate and meets the requirements (> 200)

Descriptive Statistics

The descriptive statistics of the data collected for this study are shown in Table-1 The percentage of female participation in this study was slightly higher than male participation at 57.4% and 42.6% respectively Further, 10 percent of respondents aged between 25 and 29 years, 70 percent of participants are between 30 and 45 years old and 20 percent of respondents ages above 45 years old The results also indicate that, 80 percent of participants have university degrees and 20 percent respondents have post graduate Finally, 27.3 % of respondents were

Business strategy

H3

Business process

H1 Information technology

H2

Organisational size H4

Environment

H6

5

Organisational structure

designing

Organisationalculture

H7

executives or senior executive, 60% of respondents were middle manager, and the remains were junior manager

Table 1

Sample profile

Gender

Age

Education level

Table 2

Construct dimentions of variables

Variable

name

Variable code

have to fit with structure (BP1)

Lex Donaldson & Greg Joffe (2014), M

Hammer and S Stanton (1999), Darren Wright

(2015) Expert interview

Changing in operational processes fit organizational structure (BP2)

Changing in management process fit organizational structure (BP3)

Changing in supporting processes fit organizational structure (BP4)

Information

technology

aligned with the organization’s functions (IT1)

Youngjin Yoo (2012) Whisler (1970)

Ali Akbar Farhanghi, et

al (2013)

Information technology must be aligned with the organization’s opeartions (IT2)

changing organizational structures (IT3)

organizational structure (IT4) Information technology is a predictor

of organizational structure (IT5)

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based on the result of the analysis of organizational strategy (BS1)

Chandler (1962) Thomas G Marx, (2016) Unam & Akinola, (2015) Expert interview, Eric Feigenbaum

Organisational structure is followed differing strategies (BS2)

Strategy as an internal factor effect to organizational structure (BS3) Strategy helps a company define and build its organizational structure (BS4)

Organisational

size

organizational structure (OS1)

Adam Kalowski (2015) Expert interview Robins & Coulter, (2005) Lex Donaldson & Greg Joffe (2014),

Right-sizing can help organizations achieve their goals (OS2)

The larger an organization becomes, the more complicated its structure (OS3)

An organization is small, its structure

is simple (OS4) Organsational

Age

also dictated by the life-cycle stage of business (OA1)

Expert interview Sampson Quain (2018)

The older the organization, the greater its need for more structure (OA2) Many companies at beginning stage don’t have a formal design (OA3) Organisational

Environment

organizational structure (OE1)

Esther Kimanzi & David Kiarie Mburu (2015), Expert interview

Organizational structure depends on legal regulations (OE2)

Design organizational structure has to fit customer's demand (OE3)

Design organizational structure has to support supplier's requests (OE4) Organisational

Culture

organizational structure both through its design (OC1)

Expert interview Nebojša Janićijević,

2013 Organizational culture impacts on

organizational structure both through its implementation (OC2)

Organizational culture legitimizes the behaviour and decisions imposed on employees (OC3)

Organizational culture legitimizes the behaviour and decisions imposed on managers (OC4)

Organisational

structure design

for business strategy (OSD1) The current organisational design

(OSD2) The current organizational design is efficiency (OSD3)

Expert interview

Reliability test of the variables

In order to evaluate the internal consistency of the multiple item scales associated with the particular factors, the Cronbach alpha model was used Using Cronbach’s coefficient alpha,

a reliability analysis was conducted on the 30 items of the survey instrument This research applied SPSS.22 to determine reliability within the range of 0.00 ‒ 1.00 Variables with correlation coefficient is less than 0.3 are excluded The alpha threshold 0.7 or higher is suggested by various researchers (Nunnally, 1978) for measuring the reliability of constructs The acceptable α value in social science the acceptable is 60 (Ghazali, 2008) Table 2 presented the detailed analysis of reliability of variables

Table 2

Summary of Constructs Reliability

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

150

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean

if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Reliability Statistics

Cronbach's

Alpha

N of Items

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted