Description
An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims.
Organizational Structure and Controls
Ch11-1
Strategic Inputs
Chapter 2 External Environment Strategic Intent Chapter 3 Internal Environment Strategic Mission
The Strategic Management Process
Strategy Implementation
Chapter 10 Corporate Governance
Chapter 12 Strategic Leadership Chapter 11 Structure & Control Chapter 13
Entrepreneurship
Strategy Formulation
Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 8 International Strategy Chapter 6 Corporate-Level Strategy Chapter 9 Cooperative Strategies
Strategic Actions
Chapter 7 Acquisitions & Restructuring
& Innovation
Outcomes
Strategic
Feedback
Strategic Competitiveness Above Average Returns
Ch11-2
Structure Types
All 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 Multi-divisional Structure (M-form)
Ch11-3
Strategy & Structure Growth Patterns
Multidivisional Structure Sales Growth Coordination and Control Problems
Efficient implementation of formulated strategy Functional Structure Sales Growth Coordination and Control Problems Efficient implementation of formulated strategy Simple Structure
Ch11-4
Simple Structure
Owner / Manager
Owner/Manager makes all major decisions directly and monitors all activities Difficult to maintain this structure as the firm grows in size and complexity
Ch11-5
Functional Structure
First stage beyond a Simple Structure Appropriate for single or dominant-business firms Allows specialization of tasks
* Production * Finance * Engineering * Accounting * Sales & Marketing * Human Resources
Overcomes information processing limits of single owner/manager Functional department heads report to Chief Executive Officer who integrates decisions and actions from a company-wide point of view Risks conflicts between myopic function managers
Ch11-6
Functional Structure
Chief Executive Officer
Corporate Human Resources
Corporate R&D
Corporate Finance
Strategic Planning
Corporate Marketing
Finance
Production Engineering
Accounting
Sales & Marketing
Human Resources
Ch11-7
Functional Structure for Cost Leadership Strategy
Office of the President
• Operations is main function • Process engineering is
emphasized rather than new product R&D Relatively large centralized staff coordinates functions
• Formalized procedures allow
for low-cost culture
Centralized Staff
• Structure is mechanical; job
roles are highly structured
Engineering Marketing
Operations
Personnel
Accounting
Ch11-8
Functional Structure for Differentiation Strategy
President and Limited Staff
R&D
Marketing
New Product Marketing R&D
Operations
Human Resources
Finance
• Marketing is the main function for tracking new product ideas • New product R&D is emphasized • Most functions are decentralized • Formalization is limited to foster change and promote new ideas • Overall structure is organic; job roles are less structured
Ch11-9
Multi-Divisional Structure
Each division is operated as a separate business Appropriate for related-diversified businesses Key task of corporate managers is exploiting synergies among divisions Managers use a combination of strategic controls and financial controls Managers try to strike a balance between:
Competing among divisions for scarce capital resources Creating opportunities for cooperation to develop synergies
The goal is to maximize overall firm performance
Ch11-10
Multi-Divisional Structure
The decision-making of managers in a MultiDivisional structure may be:
Centralized or Decentralized Bureaucratic or Non-bureaucratic
Balance on these dimensions may change over time Structure will evolve over time with:
Changes in strategy Degree of diversification Geographic scope
Nature of competition
Ch11-11
Multi-Divisional Structure
Chief Executive Officer
Corporate R&D Corporate Finance Strategic Planning Corporate Marketing Corporate Human Resources
Division
Division
Division
Division
Finance
Production Engineering
Accounting
Sales & Marketing
Human Resources
Ch11-12
Variations of the Multi-Divisional Structure
Multi-Divisional Structure (M-form)
Cooperative Form
Related-Constrained Strategy
Strategic Business Unit (SBU) Structure
Related-Linked Strategy
Competitive Form
Unrelated /Holding Company Strategy
Ch11-13
Cooperative Form
Related-Constrained Strategy
President
Government Affairs Corporate Human Resources Product Division Legal Affairs
Corporate R&D Lab
Strategic Planning
Corporate Marketing
Corporate Finance
Product Division
Product Division
Product Division
Product Division
• Structural integration devices create tight links among all divisions • Large corporate office with R&D likely to be centralized • Culture emphasizes cooperative sharing Ch11-14
SBU Form
Related-Linked Strategy President
Corporate R&D Corporate Finance Strategic Planning Corporate Marketing
Corporate Human Resources
Strategic Business Unit A
Division
Strategic Business Unit B
Division Division
Strategic Business Unit C
Division
Strategic Business Unit D
Division Division
• Structural integration exists among divisions within SBUs, but not across SBUs • Each SBU may have its own budget for staff to foster integration • Corporate headquarters staff serve as consultants to SBUs and divisions
Ch11-15
Competitive Form
Unrelated /Holding Company Strategy President
Legal Affairs
Finance
Auditing
Division
Division
Division
Division
Division
• Corporate headquarters has a small staff • Finance and auditing are the most prominent functions in the headquarters • Divisions are independent and separate for financial evolution purposes • Divisions retain strategic control, but cash is managed by the corporate office • Divisions compete for corporate resources Ch11-16
Multi-Divisional Structure
The choice between centralization and decentralization is frequently based on the business-level strategy implemented in each division
Differentiation Cost Leadership Decentralization Centralization
Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized , depending upon the various business-level strategies employed throughout the firm’s individual businesses Multi-Divisional structure firms use a combination of:
Strategic Controls Financial Controls
Ch11-17
Attributes of Various Structural Forms
Structural Characteristics Cooperative M-Form SBU M-Form Competitive M-Form
Type of Strategy
RelatedConstrained
Related Linked
Unrelated
Decentralized to Division Nonexistent Synergies Financial Criteria
Degree of Centralized Centralized at Centralization Corporate Office in SBUs
Use of Integrating Mechanisms
Divisional Performance Appraisal Divisional Incentive Compensation
Extensive Synergies Subjective/ Strategic Criteria
Moderate Synergies
Strategic & Financial Criteria
Linked to Linked to Linked to Corporate Corporation, Divisional Performance Division & SBU Performance
Ch11-18
Evolution of Multi-Divisional Structure
Chief Executive Officer Corporate Office (Staff)
North America
Europe
Asia
Latin America
Africa
Australia
Product A
Product B
Product C
Product D Product A
Ch11-19
Evolution of Multi-Divisional Structure
Chief Executive Officer Corporate Office (Staff)
North America
Europe
Asia
Latin America
Africa
Australia
Product A
Product B
Product C
Product D
A Structural evolution based on Geographic lines usually implies a Multi-Domestic International Strategy
Ch11-20
Implementation of a Multidomestic Strategy
Worldwide Geographic Area Structure
Latin America Asia United States
Multinational Headquarters
Europe
Australia
Middle East/ Africa
• Green circles indicate decentralization of operations • Emphasis is on differentiation by local demand to fit a culture • Corporate headquarters coordinates financial resources among
independent subsidiaries • The organization is like a decentralized federation
Ch11-21
Evolution of Multi-Divisional Structure
Chief Executive Officer Corporate Office (Staff)
Product A
Product B
Product C
Product D
A Structural evolution based on Product lines usually implies a Global International Strategy
Ch11-22
Implementation of a Global Strategy
Worldwide Product Divisional Structure
Worldwide Products Division Worldwide Products Division
Worldwide Products Division
Multinational Headquarters
Worldwide Products Division
Worldwide Products Division
Worldwide Products Division
• Green circle indicates centralization to coordinate information
flow among worldwide products • Headquarters uses many intercoordination devices to facilitate global economies of scale and scope • Headquarters also allocates financial resources cooperatively • The organization is like a centralized federation
Ch11-23
Evolution of Multi-Divisional Structure
A Transnational International Strategy is likely to utilize a structure and that results in emphasis on both geographic and product structures
Ch11-24
Strategic Networks
A Strategic Network is a grouping of organizations that has been formed to create value through participation in an array of cooperative arrangements, such as a strategic alliance A Strategic Center Firm often manages the network
The Strategic Center Firm identifies actions that increase the opportunity for each firm to achieve success through its participation in the network The Strategic Center Firm creates incentives that reduce the probability of any single firm taking advantage of its network partners
Ch11-25
A Strategic Network
Network Firms
Strategic Center Firm
Ch11-26
Strategic Center Firm’s Critical Functions
Strategic Outsourcing
Capability Development Technology Sharing Building Linkages to Facilitate Learning
Ch11-27
Strategic Center Firm
Strategic Outsourcing
Strategic Center Firm
Center firm coordinates outsourcing among partners, initiates actions and coordinates problem solving
Ch11-28
Strategic Center Firm’s Critical Functions
Strategic Outsourcing
Capability Development Technology Sharing Building Linkages to Facilitate Learning
Ch11-29
Strategic Center Firm
Capability and Technology
Strategic Center Firm
Center firm attempts to develop each partner’s core competencies and provides incentives for network firms to share their capabilities and competencies with partners Strategic center firm manages the development and sharing technology-based ideas among network partners
Ch11-30
Strategic Center Firm’s Critical Functions
Strategic Outsourcing
Capability Development Technology Sharing Building Linkages to Facilitate Learning
Strategic Center Firm
Ch11-31
Building Linkages to Facilitate Learning
Strategic Center Firm
Strategic center firm emphasizes to partners the need to build linkages between value chains and networks of value chains. The strategic network seeks to develop a competitive advantage in primary or support activities
Ch11-32
A Distributed Strategic Network
Main Strategic Center Firm
Distributed Strategic Center Firms International Cooperative Strategies often require more complex networks Many large multinational firms form distributed strategic networks with multiple regional strategic centers to manage their array of cooperative arrangements with partner firms
Breaking large networks into multiple manageably-sized networks helps to manage the complexity of maintaining many relationships
Ch11-33
doc_781538561.ppt
An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims.
Organizational Structure and Controls
Ch11-1
Strategic Inputs
Chapter 2 External Environment Strategic Intent Chapter 3 Internal Environment Strategic Mission
The Strategic Management Process
Strategy Implementation
Chapter 10 Corporate Governance
Chapter 12 Strategic Leadership Chapter 11 Structure & Control Chapter 13
Entrepreneurship
Strategy Formulation
Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 8 International Strategy Chapter 6 Corporate-Level Strategy Chapter 9 Cooperative Strategies
Strategic Actions
Chapter 7 Acquisitions & Restructuring
& Innovation
Outcomes
Strategic
Feedback
Strategic Competitiveness Above Average Returns
Ch11-2
Structure Types
All 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 Multi-divisional Structure (M-form)
Ch11-3
Strategy & Structure Growth Patterns
Multidivisional Structure Sales Growth Coordination and Control Problems
Efficient implementation of formulated strategy Functional Structure Sales Growth Coordination and Control Problems Efficient implementation of formulated strategy Simple Structure
Ch11-4
Simple Structure
Owner / Manager
Owner/Manager makes all major decisions directly and monitors all activities Difficult to maintain this structure as the firm grows in size and complexity
Ch11-5
Functional Structure
First stage beyond a Simple Structure Appropriate for single or dominant-business firms Allows specialization of tasks
* Production * Finance * Engineering * Accounting * Sales & Marketing * Human Resources
Overcomes information processing limits of single owner/manager Functional department heads report to Chief Executive Officer who integrates decisions and actions from a company-wide point of view Risks conflicts between myopic function managers
Ch11-6
Functional Structure
Chief Executive Officer
Corporate Human Resources
Corporate R&D
Corporate Finance
Strategic Planning
Corporate Marketing
Finance
Production Engineering
Accounting
Sales & Marketing
Human Resources
Ch11-7
Functional Structure for Cost Leadership Strategy
Office of the President
• Operations is main function • Process engineering is
emphasized rather than new product R&D Relatively large centralized staff coordinates functions
• Formalized procedures allow
for low-cost culture
Centralized Staff
• Structure is mechanical; job
roles are highly structured
Engineering Marketing
Operations
Personnel
Accounting
Ch11-8
Functional Structure for Differentiation Strategy
President and Limited Staff
R&D
Marketing
New Product Marketing R&D
Operations
Human Resources
Finance
• Marketing is the main function for tracking new product ideas • New product R&D is emphasized • Most functions are decentralized • Formalization is limited to foster change and promote new ideas • Overall structure is organic; job roles are less structured
Ch11-9
Multi-Divisional Structure
Each division is operated as a separate business Appropriate for related-diversified businesses Key task of corporate managers is exploiting synergies among divisions Managers use a combination of strategic controls and financial controls Managers try to strike a balance between:
Competing among divisions for scarce capital resources Creating opportunities for cooperation to develop synergies
The goal is to maximize overall firm performance
Ch11-10
Multi-Divisional Structure
The decision-making of managers in a MultiDivisional structure may be:
Centralized or Decentralized Bureaucratic or Non-bureaucratic
Balance on these dimensions may change over time Structure will evolve over time with:
Changes in strategy Degree of diversification Geographic scope
Nature of competition
Ch11-11
Multi-Divisional Structure
Chief Executive Officer
Corporate R&D Corporate Finance Strategic Planning Corporate Marketing Corporate Human Resources
Division
Division
Division
Division
Finance
Production Engineering
Accounting
Sales & Marketing
Human Resources
Ch11-12
Variations of the Multi-Divisional Structure
Multi-Divisional Structure (M-form)
Cooperative Form
Related-Constrained Strategy
Strategic Business Unit (SBU) Structure
Related-Linked Strategy
Competitive Form
Unrelated /Holding Company Strategy
Ch11-13
Cooperative Form
Related-Constrained Strategy
President
Government Affairs Corporate Human Resources Product Division Legal Affairs
Corporate R&D Lab
Strategic Planning
Corporate Marketing
Corporate Finance
Product Division
Product Division
Product Division
Product Division
• Structural integration devices create tight links among all divisions • Large corporate office with R&D likely to be centralized • Culture emphasizes cooperative sharing Ch11-14
SBU Form
Related-Linked Strategy President
Corporate R&D Corporate Finance Strategic Planning Corporate Marketing
Corporate Human Resources
Strategic Business Unit A
Division
Strategic Business Unit B
Division Division
Strategic Business Unit C
Division
Strategic Business Unit D
Division Division
• Structural integration exists among divisions within SBUs, but not across SBUs • Each SBU may have its own budget for staff to foster integration • Corporate headquarters staff serve as consultants to SBUs and divisions
Ch11-15
Competitive Form
Unrelated /Holding Company Strategy President
Legal Affairs
Finance
Auditing
Division
Division
Division
Division
Division
• Corporate headquarters has a small staff • Finance and auditing are the most prominent functions in the headquarters • Divisions are independent and separate for financial evolution purposes • Divisions retain strategic control, but cash is managed by the corporate office • Divisions compete for corporate resources Ch11-16
Multi-Divisional Structure
The choice between centralization and decentralization is frequently based on the business-level strategy implemented in each division
Differentiation Cost Leadership Decentralization Centralization
Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized , depending upon the various business-level strategies employed throughout the firm’s individual businesses Multi-Divisional structure firms use a combination of:
Strategic Controls Financial Controls
Ch11-17
Attributes of Various Structural Forms
Structural Characteristics Cooperative M-Form SBU M-Form Competitive M-Form
Type of Strategy
RelatedConstrained
Related Linked
Unrelated
Decentralized to Division Nonexistent Synergies Financial Criteria
Degree of Centralized Centralized at Centralization Corporate Office in SBUs
Use of Integrating Mechanisms
Divisional Performance Appraisal Divisional Incentive Compensation
Extensive Synergies Subjective/ Strategic Criteria
Moderate Synergies
Strategic & Financial Criteria
Linked to Linked to Linked to Corporate Corporation, Divisional Performance Division & SBU Performance
Ch11-18
Evolution of Multi-Divisional Structure
Chief Executive Officer Corporate Office (Staff)
North America
Europe
Asia
Latin America
Africa
Australia
Product A
Product B
Product C
Product D Product A
Ch11-19
Evolution of Multi-Divisional Structure
Chief Executive Officer Corporate Office (Staff)
North America
Europe
Asia
Latin America
Africa
Australia
Product A
Product B
Product C
Product D
A Structural evolution based on Geographic lines usually implies a Multi-Domestic International Strategy
Ch11-20
Implementation of a Multidomestic Strategy
Worldwide Geographic Area Structure
Latin America Asia United States
Multinational Headquarters
Europe
Australia
Middle East/ Africa
• Green circles indicate decentralization of operations • Emphasis is on differentiation by local demand to fit a culture • Corporate headquarters coordinates financial resources among
independent subsidiaries • The organization is like a decentralized federation
Ch11-21
Evolution of Multi-Divisional Structure
Chief Executive Officer Corporate Office (Staff)
Product A
Product B
Product C
Product D
A Structural evolution based on Product lines usually implies a Global International Strategy
Ch11-22
Implementation of a Global Strategy
Worldwide Product Divisional Structure
Worldwide Products Division Worldwide Products Division
Worldwide Products Division
Multinational Headquarters
Worldwide Products Division
Worldwide Products Division
Worldwide Products Division
• Green circle indicates centralization to coordinate information
flow among worldwide products • Headquarters uses many intercoordination devices to facilitate global economies of scale and scope • Headquarters also allocates financial resources cooperatively • The organization is like a centralized federation
Ch11-23
Evolution of Multi-Divisional Structure
A Transnational International Strategy is likely to utilize a structure and that results in emphasis on both geographic and product structures
Ch11-24
Strategic Networks
A Strategic Network is a grouping of organizations that has been formed to create value through participation in an array of cooperative arrangements, such as a strategic alliance A Strategic Center Firm often manages the network
The Strategic Center Firm identifies actions that increase the opportunity for each firm to achieve success through its participation in the network The Strategic Center Firm creates incentives that reduce the probability of any single firm taking advantage of its network partners
Ch11-25
A Strategic Network
Network Firms
Strategic Center Firm
Ch11-26
Strategic Center Firm’s Critical Functions
Strategic Outsourcing
Capability Development Technology Sharing Building Linkages to Facilitate Learning
Ch11-27
Strategic Center Firm
Strategic Outsourcing
Strategic Center Firm
Center firm coordinates outsourcing among partners, initiates actions and coordinates problem solving
Ch11-28
Strategic Center Firm’s Critical Functions
Strategic Outsourcing
Capability Development Technology Sharing Building Linkages to Facilitate Learning
Ch11-29
Strategic Center Firm
Capability and Technology
Strategic Center Firm
Center firm attempts to develop each partner’s core competencies and provides incentives for network firms to share their capabilities and competencies with partners Strategic center firm manages the development and sharing technology-based ideas among network partners
Ch11-30
Strategic Center Firm’s Critical Functions
Strategic Outsourcing
Capability Development Technology Sharing Building Linkages to Facilitate Learning
Strategic Center Firm
Ch11-31
Building Linkages to Facilitate Learning
Strategic Center Firm
Strategic center firm emphasizes to partners the need to build linkages between value chains and networks of value chains. The strategic network seeks to develop a competitive advantage in primary or support activities
Ch11-32
A Distributed Strategic Network
Main Strategic Center Firm
Distributed Strategic Center Firms International Cooperative Strategies often require more complex networks Many large multinational firms form distributed strategic networks with multiple regional strategic centers to manage their array of cooperative arrangements with partner firms
Breaking large networks into multiple manageably-sized networks helps to manage the complexity of maintaining many relationships
Ch11-33
doc_781538561.ppt