Hitt, Ireland and Hoskisson, 2007 7e Edition Daniel Degravel
Chapter 11 Competitive Rivalry and Competitive Dynamics Hitt, Ireland, and Hoskisson.
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Transcript of Chapter 11 Competitive Rivalry and Competitive Dynamics Hitt, Ireland, and Hoskisson.
Chapter 11
Competitive Rivalry and Competitive Dynamics
Hitt, Ireland, and Hoskisson
Copyright © 2008 Cengage
Organizational structure and controls Organizational structure
The firm’s formal reporting relationships, procedures, controls, authority and decision-making processes.
It specifies the work to be done and how to do it, given the firm’s strategy.
Organizational controls Guides the use of strategy,
indicates how to compare actual and expected results, suggests actions to take to improve performance when it falls below expectations.
It influences how managers work and the decisions resulting from that work.
A proper match between strategy and structurecan lead to a competitive advantage.
Copyright © 2008 Cengage
Organizational controls
Organizational controls Strategic controls (largely subjective criteria) financial controls (largely objective criteria)
Both controls are critical, although their degree of emphasis varies based on individual matches between strategy and structure.
Copyright © 2008 Cengage
Strategy and structure
Strategy and structure - a reciprocal relationship Although strategy has a stronger influence on
structure. Firms tend to change structure when declining
performance forces them to do so. Effective managers anticipate the need for
structural change and quickly modify structure to better accommodate the firm’s strategy when evidence calls for that action.
Copyright © 2008 Cengage
Simple structure
Simple structure A structure in which the owner-manager makes all major
decisions and monitors all activities while the staff serves as an extension of the manager’s supervisory authority.
Associated strategy Focus strategies, often used in small firms, require a simple
structure until such time that the firm diversifies in terms of products and/or markets.
Copyright © 2008 Cengage
Functional structure
The functional structure Used to implement business-level strategies. Structure includes a chief executive officer and a limited
corporate staff, with functional line managers in dominant organizational areas such as production, accounting, marketing, R&D, engineering, and human resources.
Associated strategy Cost leadership strategy requires a centralized functional
structure—one in which manufacturing efficiency and process engineering are emphasized.
Differentiation strategy uses a functional structure that decentralizes implementation-related decisions.
Copyright © 2008 Cengage
Multidivisional structures
The multidivisional (M-form) structure Consists of operating divisions, each representing
a separate business or profit center in which the top corporate officer delegates responsibilities for day-to-day operations and business-unit strategy to division managers. Cooperative M-form SBU M-form structure Competitive M-form structure
Copyright © 2008 Cengage
Characteristics of the Structures Necessary to Implement the Related Constrained, Related Linked, and Unrelated Diversification Strategies
Overall Structural Form
Cooperative M-Form SBU M-Form Competitive M-Form
Structural (Related Constrained (Related Linked (Unrelated DiversificationCharacteristics Strategy)a Strategy)a Strategy)a
Centralization of Centralized at Partially centralized Decentralized tooperations corporate office (in SBUs) divisions
Use of integration Extensive Moderate Nonexistentmechanisms
Divisional Emphasize subjective Use a mixture of Emphasize objectiveperformance (strategic) criteria subjective (strategic) (financial) criteriaappraisals and objective
(financial) criteria
Divisional incentive Linked to overall Mixed linkage to Linked to divisionalcompensation corporate corporate, SBU, and performanceperformance divisional performance
Copyright © 2008 Cengage
Multi-domestic strategy
The multi-domestic strategy Implemented through the worldwide geographic
area structure emphasizes decentralization locates all functional activities in the host country
or geographic area.
Copyright © 2008 Cengage
Transnational strategy
Transnational strategy Combines local responsiveness of multi-domestic
strategy and global efficiency of global strategy, implemented through the combination structure Combination structure - difficult to organize and manage
because it must be simultaneously centralized and decentralized, integrated and nonintegrated, and formalized and non-formalized
Copyright © 2008 Cengage
Implementing transnational strategy 2 structural designs suggested
Both have geographic and product-oriented divisions Matrix structure
Unites local market and product expertise into teams Problem: employees may be accountable to multiple
managers Reporting relationships may be complex and vague
Hybrid structure Some oriented toward products, others toward market
areas
Copyright © 2008 Cengage
Cooperative strategies and network structures
Cooperative strategies Are increasingly important to competitive success Are implemented through organizational
structures framed around strategic networks. Strategic center firms play a critical role in
managing strategic networks.
Copyright © 2008 Cengage
Network strategies
Strategic network Group of firms formed to create value by
participating in multiple cooperative arrangements Strategic center firm
Foundation for the strategic network’s structure. Strategic center firm has 4 primary tasks
Strategic outsourcing Competencies Technology Race to learn