SM Sec.1 Dated 13/11/10

STRATEGY & STRUCTUREGroup 3

Strategy and StructureStrategy & Structure – 13 Nov 10 – Group 3

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• Organization Structure

• Firm’s Structure

Concerns arrangements, both formal & informal, by which a firm divides up its critical tasks, specifies how its managers and

employees make decisions, establishes routines and information flows to support operations so as to link opportunities in the

environment wit its resources and capabilities.

Reflects the ways in which the firms solve problems of information and coordination implied by its strategic decisions.

Strategy & Structure – 13 Nov 10 – Group 3

Strategy and Coordination

If a firm’s strategy is to be carried out, or implemented, individuals working within the

firm must know about the strategy and its operational requirements of tasks and their

coordination.

Coordinating people and tasks is difficult even when everyone cooperates. Problems of incentives and controls further complicate the problem of coordinating cooperative agents to carry out the firm’s strategy.

Firm’s Strategy

Coordination

Organization DesignStrategy & Structure – 13 Nov 10 – Group 3

Organization Design typically involves 2 steps1. Organize simple tasks for simple work group2. Link work groups and their activities together into

complex hierarchies.

How to structure simple tasks? 1. Individually2. Self-managed Team3. Hierarchy of Authority

How to structure simple task?Strategy & Structure – 13 Nov 10 – Group 3

Individually- Members of the work group are treated as if they were

independent and receive incentives based on individual actions and outcomes.

Self-managed Team- A collection of individuals, each member works with

others to set and pursue common objectives, with individual rewarded, in part, on the basis of group

performance.

Hierarchy of Authority- One member of the group monitors and coordinates the

work of the other members.

Complex HierarchyStrategy & Structure – 13 Nov 10 – Group 3

Large firms require complex hierarchy which is a structure involving multiple groups & multiple levels of groupings.

Complex Hierarchy involves 2 problems: Departmentalization:

-Identify formal groupings in the organization, may be organized by varied dimensions e.g. common tasks or functions, inputs,

outputs, geographic location, time of work, etc. Coordination & control of activities:

-Coordination involves the flow of information to facilitate subunit decisions that are consistent with each other and with

organization objectives.-Control involves the location of decision-making rights an d

rule-making authority within the hierarchy.

How to develop coordination within firm?Strategy & Structure – 13 Nov 10 – Group 3

There are 2 approaches to develop coordination within firms:

Autonomy (Self-containment):-Emphasize autonomy or self-containment of work units to

reduce the needs of coordination across units

Lateral Relations:-Emphasize the importance of strong lateral relations

across work groups.

Centralization vs Decentralization?Strategy & Structure – 13 Nov 10 – Group 3

The allocation of authority within a firm is typically considered in terms of;

Centralization:-As decisions are made at higher levels within a firm’s

hierarchy, the firm is said to be more centralized regarding those decision.

Decentralizations:-As certain decisions are made at lower levels, the firm is

more decentralized regarding those decisions.

4 Basic Types of Large OrganizationsStrategy & Structure – 13 Nov 10 – Group 3

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U-FORM

M-FORM

MATRIX

NETWORK

The Unitary Functional Structure

The Multi-Divisional Structure

The Matrix Structure

The Network Structure

The U-Form StructureStrategy & Structure – 13 Nov 10 – Group 3

The U-Form allows a specialization of labor to gain economies of scale in manufacturing, marketing and distribution.

The M-Form StructureStrategy & Structure – 13 Nov 10 – Group 3

The M-Form -Remove top management from involvement in operational details-Allow top management to concentrate on strategic decisions & long range planning-Division managers monitor operations & are rewarded in basis of overall divisional performance

The Matrix StructureStrategy & Structure – 13 Nov 10 – Group 3

The Matrix Structure involves overlapping hierarchies and are

necessary in situations where there are

conflicting decision demands and severe

constraints on managerial resource.

The Network StructureStrategy & Structure – 13 Nov 10 – Group 3

The Network Structure focuses on individuals

rather than positions and is the most flexible type. Recent developments in networking technologies

and modular product designs have greatly

expanded the potential applications of network

organizations.

NotesStrategy & Structure – 13 Nov 10 – Group 3

Only a limited number of structural forms are efficient because the characteristics of structures share

complementarities. Thus, it is difficult to mix and match structural types, and performance may decline

if mixing is attempted.

The best organization structure for a particular firm depends on the specific circumstances it faces,

although managers may differ on the environmental situation facing the firm or hot the firm should address

to it.

NotesStrategy & Structure – 13 Nov 10 – Group 3

The approach that structure follows strategy has been applied to firms that compete internationally.

Multinationals have discovered the need to balance responsiveness to local conditions which centralization to achieve global economics. This is the transnational strategy and it is becoming associated with flexible

organizations that combine matrix and network structures.

SM Sec.1 Dated 13/11/10

THANK YOUGroup 3