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The formation and operation of modular organization: A case study on Haier’s “market-chain” reform

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image of Frontiers of Business Research in China

The concept of modularity can be applied not only to complex product system design, but also to business system interpretation and design. However, the amount of literature on modular organization is much less than that on product modularity. Based upon a case study on Haier’s reengineered business-process system after the “market-chain” reform, this paper examines the course of its process decomposition to form a prototype of modular organization, and further analyzes the evolution of the three key factors in the design rules, which make the independent modules interact with others to form a complex system. The study shows that a system will gain strategic flexibility when more business units in service supplying and product manufacturing are treated as modules of the firm. Meanwhile, a system will become more complex when the number and variety of modules increase, which in turn induces the evolution in the process of the modular organization’s decomposition and integration.


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