In order for us to examine the proposition set forth by Simon in his article, being that organizations,

rather than markets, are the reason for the motivation and coordination of market activity, let us first
set a common ground of what is economic activity.

Economic activity, as defined by the financial dictionary, is concerned with producing and distributing
goods and services. Due to its close interrelationship with factors like corporate profits, it has influence
on prices.

In other words, economic activity is the act of buying and selling (on all levels), and its level depends on
how much buying and selling goes on over a given period of time.

Here, we now need to tap into the definition of an organization. An organization, according to child
(2005: 3-5), is an entity that carries out a collection of organized activities to produce the goods and
services we consume. Those produced services – such as political or religious, for example, may also be
ones that shape the way we live. He also curves the idea that a good formulation and execution of an
organization strategy comes from the motivation and coordination of the inputs feeding it, that are
originally driven by the by the market.

Simon entails that the purpose for the existence of organizations is to provide several factors, which in
turn govern economic activities. For the sake of this assignment, I will argue two of them: motivation
and coordination.

In terms of motivation, Simon’s theory implies that motivational factors are very important to human
nature, and that the organizational structure in itself is capable of extending such important factors and
therefore people choose to become part of that structure. He paints that concept by exploring the inner
motivations exercised within a company starting from attractive contracting to the extrinsic forms of
motivation, and ending with some intrinsic forms like the emotional identification and relation of
employees to their workplace, job, company and department.

However, Simon has not examined other motivational factors that have strong effects on economic
activity besides the existence of organizations. These factors are considered not only vital for the
examination, but their influence cannot go by ignored. Factors such the intrinsic needs for
environmental safety, culture satisfaction, and inner desires to follow trends and tastes (fashion), all
bombard economic activity and have significant effect on it. According to Roberts (2004: 12), there are
three elements influencing high performance and achieving results: firm’s strategy, organizational
design, the environment in which it operates - this includes economical, legal, social and technological
factors. For example, at a certain stage of my life, I used to liv in Kuwait (a very hot country in the Gulf
region). Kuwait is a very small and very rich country due to its oil production. As part of the demand
specific to the gulf region (Kuwait and Saudi Arabia), Toyota used to produce air-conditioned cars with
stronger engines to endure the high temperatures of those countries specifically, that it did not supply
anywhere else in the world – that was a market demand due to environment, and Toyota had to comply
to win that “rich” market. Culture, as well plays a role in influencing organizational directions like for
example, fashion houses may come up with micro-skirts for the summer season. Such a fashion will not
be accepted culturally in the gulf or Middle East, and in order to win this market, fashion houses amend
their designs to suit the culture of that part of the world.
When Michael Jackson first came out with the curly hairstyle and one-gloved hand, all teenagers
followed his trend of fashion and went out to buy a similar glove.
As for coordination – According to a combined definition from NSF-IRIS and Holt, coordination is the
joint efforts of actors to compose purposeful actions toward mutually defined goals. To achieve
coordination, basic processes (like, but not limited to, for example, managing shared resources, or task
assignments, or managing producer/consumer relations) need to be put in place.

I can harmonize with Simon’s view – an organization has visibly defined hierarchical structures, its
decision making processes are well established and roles, rules and procedures well defined. These traits
provide a level coordination between groups unachievable by markets. Therefore, we cannot deny the
role of the organization, in our modern economy, in having some control over the behavior of economic
activity. The amount of control and coordination exerted by an organization on its workers will influence
the degree of quality with which they work, control chaos on the road, and punish robbers for stealing.
Governmental organizations will/can stabilize/regulate the prices of a certain good, like medicine for
example, to be affordable by its consumers.

However, Simon did not explore for example, a process like producer/consumer relations as an
important process and basis of coordination. Here, there is a dependency managed by standardization,
that must often be managed in a producer / consumer relationship - that whatever is produced should
be usable by the activity that receives it in a form that users already expect.

The role of the organization is undeniably significant in terms motivating and coordinating economic
activity, and contributes to the total well-being of economic progress. A practical example would be that
explored by Child (2005: 395) being Southwest Airlines who first focused on creating a coordinated and
motivating relationship first with its workers, then started to expand its culture to customers, leading to
a 60% market domination.

However, the strong existence of market economies and the factors explored above, has equalized the
force of influence. “Capital markets, too, are increasing the performance pressures on firms” Roberts
(2004: 3).

As a Management student, it is vital to grasp crucial organizational instruments and their impact on
society and markets. Executives are a major piece of this process and strive to achieve strategic
objectives by earning the loyalty of workers, using rewards and incentives to motivate productivity and
efficiency, encouraging organizational identification and coordinating all factors together. This
understanding of our roles and how they affect economic activity will better groom management
students to face the challenges that will emerge in course of our career.

References:

Child, J. (2005) Organization: contemporary principals and practice. Malden MA: Blackwell Publishing

Roberts, J. (2004) The modern firm: organizational design for performance and growth. Oxford: Oxford
University Press.

Simon, HA 1995, 'Organizations and markets', Journal of Public Administration Research & Theory, 5, 3,
p. 273, Business Source Premier, EBSCOhost, viewed 22 January 2011
http://financial-dictionary.thefreedictionary.com/Economic+Activity (accessed: 26 January 2011)

Holt, A. W. (1988). Diplans: A new language for the study and implementation of coordination.
ACM Transactions on Office Information Systems, 6(2), 109-125.

NSF-IRIS. (1989). A report by the NSF-IRIS Review Panel for Research on Coordination
Theory and Technology. Available from NSF Forms & Publications Unit.