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Appex Corporation
Case Study
Jennifer Ceballos
BUS675
Redlands University
Professor Young

Introduction
Appex Corporation's business is supplying management information systems and intercarrier
network services to various cellular phone companies. In 1986, Appex entered this fast-growing
market as a very small organization. Between 1986 and 1990, revenues grew 1600%. Similar
growth was also seen inside the company as the number of employees rose from 26 to 180
between 1988 and 1990. Due to the relative youth of both cellular phone technology and Appex,
the company faced major difficulties in transitioning to the larger landscape. As it became clear
that the current internal structure needed change, newly hired COO Shikhar Ghosh brought
several ideas to the company in an effort to improve the organizational structure. Ghosh changed
the organizational structure about every six months, with each new structure presenting new
problems to the company. A couple years after Ghosh was brought in, Appex was bought out.
The organization that acquired Appex gave them freedom in choosing a structure to work with,
as long as it fit in with their direction. I recommend that the Appex division adhere to a matrix
(network) structure.

Key External Factors

1. Threat of substitutes: The service that Appex provides is one that could be provided by
other companies. The roam and billing services provided by Appex are intangible and a
well-equipped telecom company could provide these services
2. Supplies power- Appex deals in a business that does not require raw materials and very
little new equipment etc. For this reason suppliers have very little power over Appex.
3. Buyer Power: Appexs customers have a great deal of power over Appex as there is a
limited amount of them and they are all high volume buyers
4. Degree of Rivalry: Appex has been known to beat competitors to the market with its new
innovations in the past when it was a small company; not as quick to respond as a larger
entity giving other companies more of an opportunity to beat Appex to the market with
new ideas.

Key Internal Factors

1. Organizational structure-choose one that best fits their way of doing business. For
some it is a mixture of a functional form and a divisional form called a matrix.
2. Hierarchical functional structure- It took some getting used to by the employees came
around and eventually accepted this new form. This form helped the company grow from
$2 million in sales a year to $20 million in sales.

3. Communication- clearly set those goals and communicate its wants to its employees so
they can work towards these ultimate goal
4. No Plan-Increased demand could not be handled
5. Staffing-Fall behind schedule, miss installation dates, failures in product development

Significant Factors
o Return to a team structure-The team structure could be used to attempt to recreate the
camaraderie and loyalty displayed by the small group of employees that were the driving
force behind Appexs early success.
o Divisional structure- The divisional structure has presented some advantages to Appex,
for instance this structure improved accountability, budgeting, and planning. It kept
employees focused on financial targets and allowed for cooperation between the
divisions.
o Appex was a strong company in 1991 -was positioned in such a way as to be a fairly
strong company with little threat from competition and room to grow.
Financial Factors
o Unable to control the cost structure as well as organizing structures for the organization.
They needed to implement a suitable hierarchy based structure for the organization so as
to avoid management failure
o ICS 60% of the revenue
o IS 40% of the revenues

Summary of Findings
o More people were hired and more clients were signed. Each contributed to the collapse of
the fluid, informal structure that had worked when the company was small.
o Ghosh entered and tried to introduce a circular structure. The circular structure was
intended to create free-flowing information between employees, but it created a multitude
of other problems.
o

Ghosh tried to implement a horizontal structure, but results were mixed and unfavorable.

o Appex began to use a functional structure overlaid with the use of product and business
teams. After complications arose as a result, Ghosh implemented a divisional structure.
o

Appex now must work out a structure that will work within the boundaries of EDS. At
this point, Ghosh had a few options to choose from: * Do not change the structure
permanently. Ghosh could continue to change the organizational structure of Appex every

six months. In the text, he states, "Every six months by design I change the organizational
structure
Critical Issues
o lack of structure
o Office politics, such as official job titles and desk location, came about. Team heads
created sub functions within their team, resulting in more and more layers being added to
the horizontal structure. Teams became polarized and had problems working together.
o Authority was chosen based on functional merit, rather than managerial. The managers
may have been the best functional worker but did not possess the desired management
skills.
o The company grew quickly and they were not prepared

Conclusion
Lays out a basic checklist to decide a matrix structure's effectiveness. First, environmental
pressures are from two or more critical dimensions. The interdependence needed between
divisions proves this, as all projects that Appex takes on are most effectively completed when
teams (whose employees hail from different divisions) work together cohesively and as a unit.
Secondly, a matrix structure is necessary when the environment of the firm is both complex and
uncertain. Given the youth of the industry and the fact that Appex is only 4 years old, the
environment surrounding the company is quite uncertain and complex. Third and finally,
economies of scale in the use of internal resources are needed. As a firm grows, they must make
the cost of production steadily decrease. In the past, Appex experienced problems when taking
on many projects at once. This resulted in a project's completion time being overextended
because employees were overwhelmed.
Resources (i.e. employees) simply cannot be allocated to many different projects. Since the
company is project-based, this creates the need for economies of scale in the allocation of these
workers. The functional and divisional structures that were implemented showed their own
respective advantages. A matrix structure will help internal operations run more efficiently. I
strongly believe that Appex should change their organizational structure to a matrix.