Post on 31-Dec-2015
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Chapter 11 – Organizational Structure & Controls
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Agenda1. Introduction to Organizational Structure
2. Simple Structure
3. Functional Structure
4. Multidivisional Structure
5. Network Structure
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Organizational StructureOrganizational structure specifies:
The firm’s formal reporting relationships, procedures, controls, authority, and decision-making processes
The work to be done and how to do it, given the firm’s strategy or strategies
It is critical to match organizational structure to the firm’s strategy!
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Organizational Structure – cont’dEffective structures provide:
Stability
• The capacity required to consistently and predictably manage daily work routines
Flexibility
• The opportunity to explore competitive possibilities
• The allocation of resources to activities that shape needed competitive advantages
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Organizational ControlsOrganizational controls
• guide strategy,
• compare actual with expected results, and
• suggest corrective actions if necessary.
Strategic controls
• Subjective assessment of the fit between what the firm might do (opportunities) and what it can do (competitive advantage)
Financial controls
• Objective assessment of firm performance
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Relationships between Strategy and StructureStrategy and structure have a reciprocal relationship:
Structure follows the selection of the firm’s strategy, but…
…once in place, structure can influence current strategic actions as well as choices about future strategies
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Evolutionary Patterns of Strategy and StructureFirms grow in predictable patterns:
First by volume
Then by geography
Then integration (vertical, horizontal)
And finally through product/business diversification
A firm’s growth patterns determine its structural form
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Evolutionary Patterns of Strategy and Structure – cont’dAll organizations require some form of organizational structure to implement and manage their strategies
Firms frequently alter their structure as they grow in size and complexity
Three basic structure types:
Simple structure
Functional structure
Multidivisional structure (M-form)
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Assessment of Generic StructuresNo organizational structure (simple, functional, and multidivisional) is inherently superior to the other structures
Because no single structure is optimal in all instances, managers have to achieve a match between strategies and organizational structures
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Agenda1. Introduction to Organizational Structure
2. Simple Structure
3. Functional Structure
4. Multidivisional Structure
5. Network Structure
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Simple StructureOwner-manager
Makes all major decisions directly
Monitors all activities
Staff
Serves as an extension of the manager’s supervisor authority
Matched with focus strategies and business-level strategies
Commonly compete by offering a single product line in a single geographic market
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Simple Structure: Growth ProblemsGrowth creates:
Complexity
Managerial and structural challenges
Owner-managers
Commonly lack organizational skills and experience
Become ineffective in managing the specialized and complex tasks involved with multiple organizational functions
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Agenda1. Introduction to Organizational Structure
2. Simple Structure
3. Functional Structure
4. Multidivisional Structure
5. Network Structure
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Chief Executive Officer (CEO)
Limited corporate staff
Functional line managers in dominant organizational areas of:
Manufacturing Marketing Engineering
Accounting R&D Human resources
Supports use of business-level strategies and some corporate-level strategies
Single or dominant business with low levels of diversification
Functional Structure
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Notes: • Operations is the main function• Process engineering is emphasized
rather than new product R&D• Relatively large centralized staff
coordinates functions• Formalized procedures allow for
emergence of a low-cost culture• Overall structure is mechanical; job
roles are highly structured
Functional Structure for CostLeadership Strategy
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Functional Structure for Differentiation Strategy
Notes:• Marketing is the main function for keeping track of new product ideas• New product R&D is emphasized• Most functions are decentralized, but R&D and marketing may have centralized staffs that work closely with each other• Formalization is limited so that new product ideas can emerge easily and change is more readily accomplished• Overall structure is organic; job roles are less structured
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Functional Structure: AssessmentDifferences in orientation among organizational functions can:
Facilitate career paths and professional development in specialized functional areas
Impede communication and coordination
Cause functional-area managers to focus on local versus overall company strategic issues
Increase the need for CEO to integrate decisions and actions of business functions
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Agenda1. Introduction to Organizational Structure
2. Simple Structure
3. Functional Structure
4. Multidivisional Structure
5. Network Structure
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Multidivisional StructureStrategic Control
Operating divisions function as separate businesses or profit centers
Top corporate officer delegates responsibilities to division managers
For day-to-day operations
For business-unit strategy
Appropriate as firm grows through diversification
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Multidivisional Structure: BenefitsThree Major Benefits:
1. Corporate officers are able to more accurately monitor the performance of each business, which simplifies the problem of control
2. Facilitates comparisons between divisions, which improves the resource allocation process
3. Stimulates managers of poorly performing divisions to look for ways of improving performance
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Variations of Multidivisional Structure
Synergies
Competition between units
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Cooperative Form of Multidivisional Structure
Related-constrainedstrategy!
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SBU Form of Multidivisional Structure
Related-linkedstrategy!
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Competitive Form of Multidivisional Structure
Unrelatedstrategy!
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Agenda1. Introduction to Organizational Structure
2. Simple Structure
3. Functional Structure
4. Multidivisional Structure
5. Network Structure
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Network Structures and Cooperative StrategiesStrategic Network
A group of firms formed to create value by participating in multiple cooperative arrangements such as alliances and joint ventures
Network strategy exists when:
Partners form several alliances in order to improve performance of the alliance network itself through cooperative endeavors
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A Strategic Network
StrategicStrategicCenterCenterFirmFirm
Corporate-levelexample:
Business-levelexample:
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Strategic Center FirmIs the foundation for the strategic network’s structure
Concerned with aspects of organizational structure such as formal reporting relationships.
Manages the complex, cooperative interactions among network partners
Engages in four primary tasks:
Strategic outsourcing Competencies
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