bilingual series-strategic management chapter 11

Bilingual Series-Strategic Management

Chapter 11

Organizational Structure

and Controls

Organizational Structure

and Controls

CompetitivenessCompetitiveness

Chapter 3Chapter 3InternalInternal

EnvironmentEnvironment

Chapter 2Chapter 2ExternalExternal

EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement

ProcessProcess

The StrategicThe StrategicManagementManagement

ProcessProcess

Strategic IntentStrategic Intent

Strategic MissionStrategic Mission

StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average

ReturnsReturnsFeedback

Strategy FormulationStrategy Formulation

Chapter 4Chapter 4Business-LevelBusiness-Level

StrategyStrategy

Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics

Chapter 6Chapter 6Corporate-LevelCorporate-Level

StrategyStrategy

Chapter 8Chapter 8InternationalInternational

StrategyStrategy

Chapter 9Chapter 9CooperativeCooperativeStrategiesStrategies

Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring

Strategy ImplementationStrategy Implementation

Chapter 10Chapter 10CorporateCorporate

GovernanceGovernance

Chapter 11Chapter 11StructureStructure& Control& Control

Chapter 12Chapter 12StrategicStrategic

LeadershipLeadership

Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation

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Structure TypesStructure Types

All organizations require some form of All organizations require some form of organizational structure to implement and organizational structure to implement and manage their strategiesmanage their strategiesFirms frequently alter their structure as they Firms frequently alter their structure as they grow in size and complexitygrow in size and complexity

Three basic structure types:Three basic structure types:

Functional StructureFunctional Structure

Multi-divisional Structure (M-form)Multi-divisional Structure (M-form)

Simple StructureSimple Structure

Strategy & Strategy & StructureStructureGrowth PatternsGrowth Patterns Sales Growth CoordinationSales Growth Coordination

and Control Problemsand Control ProblemsSales Growth CoordinationSales Growth Coordination

and Control Problemsand Control Problems

Efficient implementationEfficient implementationof formulated strategyof formulated strategy


MultidivisionalMultidivisionalStructureStructure

MultidivisionalMultidivisionalStructureStructure



Sales Growth CoordinationSales Growth Coordinationand Control Problemsand Control Problems

Sales Growth CoordinationSales Growth Coordinationand Control Problemsand Control Problems

Functional Functional StructureStructure

Functional Functional StructureStructure

Simple Simple StructureStructureSimple Simple

StructureStructure

Simple StructureSimple Structure

Owner / ManagerOwner / Manager

Owner/Manager makes all major decisions Owner/Manager makes all major decisions directly and monitors all activitiesdirectly and monitors all activities

Difficult to maintain this structure as the Difficult to maintain this structure as the firm grows in size and complexityfirm grows in size and complexity

* Production* Production

* Finance* Finance

* Engineering* Engineering

* Accounting* Accounting

* Sales & Marketing* Sales & Marketing

* Human Resources* Human Resources


First stage beyond a Simple StructureFirst stage beyond a Simple StructureAppropriate for single or dominant-business firmsAppropriate for single or dominant-business firmsAllows specialization of tasksAllows specialization of tasks

Overcomes information processing limits of Overcomes information processing limits of single owner/managersingle owner/managerFunctional department heads report to Chief Functional department heads report to Chief Executive Officer who integrates decisions and Executive Officer who integrates decisions and actions from a company-wide point of viewactions from a company-wide point of view

Risks conflicts between myopic function Risks conflicts between myopic function managersmanagers

ProductionProductionFinanceFinance EngineeringEngineering AccountingAccounting Sales & Sales & MarketingMarketing

Human Human ResourcesResources


Chief Executive OfficerChief Executive Officer

Corporate Corporate FinanceFinance

CorporatCorporate R&De R&D

Corporate Corporate MarketingMarketing

Corporate Corporate Human Human

ResourcesResources

Strategic Strategic PlanningPlanning

MarketingMarketingEngineeringEngineering OperationOperationss

PersonnelPersonnel AccountingAccounting

Functional Structure forFunctional Structure forCost LeadershipCost Leadership Strategy StrategyFunctional Structure forFunctional Structure for

Cost LeadershipCost Leadership Strategy Strategy

Office of the Office of the PresidentPresident

CentralizedCentralizedStaffStaff

• Operations is main functionOperations is main function

• Process engineering is Process engineering is emphasized rather than new emphasized rather than new product R&Dproduct R&D

• Formalized procedures Formalized procedures allow for low-cost cultureallow for low-cost culture

• Structure is mechanical; job Structure is mechanical; job roles are highly structuredroles are highly structured

Relatively large Relatively large centralized staff centralized staff coordinates coordinates functionsfunctions

MarketingMarketingNew Product New Product R&DR&D

OperationOperationss

HumanHumanResourcesResources

FinanceFinance

R&DR&D MarketingMarketing

Functional Structure forFunctional Structure forDifferentiationDifferentiation Strategy StrategyFunctional Structure forFunctional Structure forDifferentiationDifferentiation Strategy Strategy

President andPresident andLimited StaffLimited Staff

•Marketing is the main function for tracking new product ideasMarketing is the main function for tracking new product ideas•New product R&D is emphasizedNew product R&D is emphasized•Most functions are decentralizedMost functions are decentralized•Formalization is limited to foster change and promote new ideasFormalization is limited to foster change and promote new ideas•Overall structure is organic; job roles are less structuredOverall structure is organic; job roles are less structured

Multi-Divisional StructureMulti-Divisional Structure

Each division is operated as a separate businessEach division is operated as a separate businessAppropriate for related-diversified businessesAppropriate for related-diversified businessesKey task of corporate managers is exploiting Key task of corporate managers is exploiting synergies among divisionssynergies among divisionsManagers use a combination of strategic controls Managers use a combination of strategic controls and financial controlsand financial controlsManagers try to strike a balance between:Managers try to strike a balance between:

Competing among divisions for scarce capital resourcesCompeting among divisions for scarce capital resources

Creating opportunities for cooperation to develop synergiesCreating opportunities for cooperation to develop synergies

The goal is to maximize overall firm performanceThe goal is to maximize overall firm performance


Balance on these dimensions may change over Balance on these dimensions may change over timetime

The decision-making of managers in a Multi-The decision-making of managers in a Multi-Divisional structure may be:Divisional structure may be:

Centralized or DecentralizedCentralized or Decentralized

Bureaucratic or Non-bureaucraticBureaucratic or Non-bureaucratic

Changes in strategyChanges in strategy

Degree of diversificationDegree of diversification

Geographic scopeGeographic scope

Nature of competitionNature of competition

Structure will evolve over time with:Structure will evolve over time with:

DivisionDivision DivisionDivision DivisionDivision DivisionDivision

ProductionProductionFinanceFinance EngineeringEngineering AccountingAccounting Sales & Sales & MarketingMarketing

Human Human ResourcesResources


Chief Executive Chief Executive OfficerOfficer






ResourcesResources

CooperativeCooperativeFormForm

CooperativeCooperativeFormForm

Strategic Business UnitStrategic Business Unit(SBU) Structure(SBU) Structure

Strategic Business UnitStrategic Business Unit(SBU) Structure(SBU) Structure

CompetitiveCompetitiveFormForm

CompetitiveCompetitiveFormForm

Variations of theVariations of theMulti-Divisional StructureMulti-Divisional Structure

Multi-DivisionalMulti-DivisionalStructureStructure(M-form)(M-form)

Multi-DivisionalMulti-DivisionalStructureStructure(M-form)(M-form)

Related-ConstrainedRelated-ConstrainedStrategyStrategy

Related-LinkedRelated-LinkedStrategyStrategy

Unrelated /HoldingUnrelated /HoldingCompany StrategyCompany Strategy

Product Product DivisionDivision





StrategiStrategicc

PlanninPlanningg

Corporate Corporate R&D LabR&D Lab

CorporatCorporateHumaneHumanResourcResourc

eses

LegalLegalAffairsAffairsLegalLegal

AffairsAffairs

CorporatCorporateMarketineMarketin

gg

CorporateCorporateFinanceFinance

Cooperative FormCooperative Form

PresidentPresident

Related-Constrained StrategyRelated-Constrained Strategy

GovernmentGovernmentAffairsAffairs

GovernmentGovernmentAffairsAffairs

• Structural integration devices create tight links among all divisionsStructural integration devices create tight links among all divisions• Large corporate office with R&D likely to be centralizedLarge corporate office with R&D likely to be centralized• Culture emphasizes cooperative sharingCulture emphasizes cooperative sharing

PresidentPresidentPresidentPresident

Strategic Strategic Business Business

Unit AUnit A

SBU FormSBU FormRelated-Linked StrategyRelated-Linked Strategy






ResourcesResources

DivisionDivisionDivisionDivisionDivisionDivision


Unit CUnit C

DivisionDivisionDivisionDivisionDivisionDivision


Unit BUnit B


Unit DUnit D

• Structural integration exists among divisions within SBUs, but not across Structural integration exists among divisions within SBUs, but not across SBUsSBUs

• Each SBU may have its own budget for staff to foster integrationEach SBU may have its own budget for staff to foster integration• Corporate headquarters staff serve as consultants to SBUs and divisionsCorporate headquarters staff serve as consultants to SBUs and divisions

Competitive FormCompetitive FormUnrelated /Holding Company StrategyUnrelated /Holding Company Strategy

PresidentPresidentPresidentPresident

LegalLegalAffairsAffairs

FinanceFinance

• Corporate headquarters has a small staffCorporate headquarters has a small staff• Finance and auditing are the most prominent functions in the headquartersFinance and auditing are the most prominent functions in the headquarters• Divisions are independent and separate for financial evolution purposesDivisions are independent and separate for financial evolution purposes• Divisions retain strategic control, but cash is managed by the corporate officeDivisions retain strategic control, but cash is managed by the corporate office• Divisions compete for corporate resourcesDivisions compete for corporate resources

AuditingAuditing

DivisionDivisionDivisionDivisionDivisionDivisionDivisionDivision DivisionDivision

Cost LeadershipCost Leadership

DecentralizationDecentralizationDifferentiationDifferentiation

CentralizationCentralization


The choice between centralization and The choice between centralization and decentralization is frequently based on the business-decentralization is frequently based on the business-level strategy implemented in each divisionlevel strategy implemented in each division

Complex Multi-Divisional structure firms may be Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized , simultaneously centralized and decentralized , depending upon the various business-level depending upon the various business-level strategies employed throughout the firm’s individual strategies employed throughout the firm’s individual businessesbusinessesMulti-Divisional structure firms use a combination of:Multi-Divisional structure firms use a combination of:

Financial ControlsFinancial Controls

Strategic Controls Strategic Controls

Attributes of Various Structural FormsAttributes of Various Structural FormsStructural Structural

CharacteristicsCharacteristics

Degree ofDegree ofCentralizationCentralization

Use ofUse ofIntegratingIntegrating

MechanismsMechanisms

DivisionalDivisionalPerformancePerformance

AppraisalAppraisal

DivisionalDivisionalIncentive Incentive

CompensationCompensation

Type of Type of StrategyStrategy

Cooperative M-Cooperative M-FormForm

SBUSBU M-FormM-Form

Competitive M-Competitive M-FormForm

Centralized atCentralized atCorporateCorporate OfficeOffice

CentralizedCentralizedinin SBUsSBUs

DecentralizedDecentralizedtoto DivisionDivision

Linked to Linked to CorporateCorporate

PerformancePerformance

Linked toLinked toCorporation,Corporation,

Division & SBUDivision & SBU

Linked toLinked toDivisionalDivisional

PerformancePerformance

ExtensiveExtensiveSynergiesSynergies

ModerateModerateSynergiesSynergies

NonexistentNonexistentSynergiesSynergies

FinancialFinancialCriteriaCriteria

Strategic &Strategic &FinancialFinancialCriteriaCriteria

Subjective/Subjective/StrategicStrategicCriteriaCriteria

Related-Related-ConstrainedConstrained

RelatedRelatedLinkedLinked

UnrelatedUnrelated

North North AmericaAmerica AustraliAustrali

aaEuropeEurope AsiaAsia Latin Latin

AmericaAmerica AfricaAfrica

Product AProduct A Product BProduct B Product CProduct C Product DProduct D

Product AProduct A

Evolution of Multi-Divisional StructureEvolution of Multi-Divisional Structure

Chief Executive OfficerChief Executive OfficerChief Executive OfficerChief Executive Officer

Corporate Office (Staff)Corporate Office (Staff)Corporate Office (Staff)Corporate Office (Staff)

A Structural evolution based on A Structural evolution based on GeographicGeographic lines lines usually implies a usually implies a Multi-DomesticMulti-Domestic International International StrategyStrategy


North North AmericaAmerica AustraliAustrali

aaEuropeEurope AsiaAsia Latin Latin

AmericaAmerica AfricaAfrica

Product AProduct A Product Product BB

Product CProduct C Product Product DD



Implementation of a Implementation of a MultidomesticMultidomestic StrategyStrategyWorldwideWorldwide

GeographicGeographicAreaArea

StructureStructure

MultinationalMultinationalHeadquartersHeadquartersMultinationalMultinationalHeadquartersHeadquarters

AsiaAsiaAsiaAsia UnitedUnitedStatesStatesUnitedUnitedStatesStates

LatinLatinAmericaAmerica

LatinLatinAmericaAmerica EuropeEuropeEuropeEurope

AustraliaAustraliaAustraliaAustraliaMiddleMiddleEast/East/AfricaAfrica

MiddleMiddleEast/East/AfricaAfrica

• Green circles indicate decentralization of operationsGreen circles indicate decentralization of operations

• Emphasis is on differentiation by local demand to fit a cultureEmphasis is on differentiation by local demand to fit a culture

• Corporate headquarters coordinates financial resources among Corporate headquarters coordinates financial resources among independent subsidiariesindependent subsidiaries

• The organization is like a decentralized federationThe organization is like a decentralized federation

Product AProduct A Product BProduct B Product CProduct C Product DProduct D

A Structural evolution based on A Structural evolution based on ProductProduct lines lines usually implies a usually implies a GlobalGlobal International Strategy International Strategy




Implementation of a Implementation of a GlobalGlobal Strategy StrategyWorldwideWorldwide

ProductProductDivisionalDivisionalStructureStructure

• Green circle indicates centralization to coordinate information flow among Green circle indicates centralization to coordinate information flow among worldwide productsworldwide products

• Headquarters uses many intercoordination devices to facilitate global Headquarters uses many intercoordination devices to facilitate global economies of scale and scopeeconomies of scale and scope

• Headquarters also allocates financial resources cooperativelyHeadquarters also allocates financial resources cooperatively

• The organization is like a centralized federationThe organization is like a centralized federation

MultinationalMultinationalHeadquartersHeadquartersMultinationalMultinationalHeadquartersHeadquarters

WorldwideWorldwideProductsProductsDivisionDivision












A Transnational International Strategy is A Transnational International Strategy is likely to utilize a structure and that results in likely to utilize a structure and that results in emphasis on both geographic and product emphasis on both geographic and product structuresstructures


Strategic NetworksStrategic Networks

A Strategic Network is a grouping of organizations that A Strategic Network is a grouping of organizations that has been formed to create value through participation in has been formed to create value through participation in an array of cooperative arrangements, such as a strategic an array of cooperative arrangements, such as a strategic alliancealliance

A Strategic Center Firm often manages the networkA Strategic Center Firm often manages the network

The Strategic Center Firm identifies actions that increase The Strategic Center Firm identifies actions that increase the opportunity for each firm to achieve success through the opportunity for each firm to achieve success through its participation in the networkits participation in the network

The Strategic Center Firm creates incentives that reduce The Strategic Center Firm creates incentives that reduce the probability of any single firm taking advantage of its the probability of any single firm taking advantage of its network partnersnetwork partners

A Strategic NetworkA Strategic Network

StrategicStrategicCenterCenterFirmFirm


Network FirmsNetwork Firms



Strategic Center Firm’s Critical Strategic Center Firm’s Critical FunctionsFunctions

Strategic Strategic OutsourcingOutsourcing

Capability DevelopmentCapability Development

Technology SharingTechnology Sharing

Building Linkages to Facilitate LearningBuilding Linkages to Facilitate Learning



Strategic OutsourcingStrategic Outsourcing

Center firm coordinates outsourcing among partners, initiates Center firm coordinates outsourcing among partners, initiates actions and coordinates problem solvingactions and coordinates problem solving

Strategic center firm manages the development and sharing technology-Strategic center firm manages the development and sharing technology-based ideas among network partnersbased ideas among network partners

Capability and TechnologyCapability and Technology



Center firm attempts to develop each partner’s core competencies and Center firm attempts to develop each partner’s core competencies and provides incentives for network firms to share their capabilities and provides incentives for network firms to share their capabilities and competencies with partnerscompetencies with partners







Building Linkages to Building Linkages to Facilitate LearningFacilitate Learning




Strategic center firm emphasizes to partners the need to build linkages Strategic center firm emphasizes to partners the need to build linkages between value chains and networks of value chains.between value chains and networks of value chains.

The strategic network seeks to develop a competitive advantage in The strategic network seeks to develop a competitive advantage in primary or support activitiesprimary or support activities

A Distributed Strategic NetworkA Distributed Strategic Network

MainMainStrategicStrategic

CenterCenterFirmFirm

MainMainStrategicStrategic

CenterCenterFirmFirm

Distributed Strategic Center FirmsDistributed Strategic Center FirmsInternational Cooperative Strategies often require more complex networksInternational Cooperative Strategies often require more complex networksMany large multinational firms form distributed strategic networks with Many large multinational firms form distributed strategic networks with multiple regional strategic centers to manage their array of cooperative multiple regional strategic centers to manage their array of cooperative arrangements with partner firmsarrangements with partner firmsBreaking large networks into multiple manageably-sized networks helps to Breaking large networks into multiple manageably-sized networks helps to manage the complexity of maintaining many relationshipsmanage the complexity of maintaining many relationships

bilingual series-strategic management chapter 11

Documents

structure controlchapter

organizational structure

new ideasoverall structure

strategic control

corporate officedivisions

rd likely

mechanical job roles

organic job roles