2ch12- very good

8/3/2019 2Ch12- Very Good

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12-1 2006 by Nelson, a division of Thomson Canada Limited.

Organizational

Structure & Controls

Chapter Twelve

2006 by Nelson, a division of Thomson Canada Limited.


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The StrategicManagement

Process

Chapter 8:

Acquisition &

Restructuring

Chapter 9:

International

Strategy

Chapter 10:

Cooperative

Strategy

Strategy Formulation

Chapter 11:

CorporateGovernance

Ch. 12: Org.

Structure &

Controls

Chapter 13:

StrategicLeadership

Chapter 14:

Org. Renewal& Innovation

Strategy

Implementation

Strategic

Actions

Chapter 3:

The External

EnvironmentStrategic

CompetitivenessStrategic Mission

& Strategic Intent

Strategic

Objectives & Inputs

Chapter 1:

Strategic

Management

Strategic

Competitiveness Ch. 2: Strat.

Mgmt . &

Performance

Chapter 3:

The External

Environment

Chapter 3:

The External

Environment

Chapter 4:

The Internal

Environment

Chapter 5:

Bus.-Level

Strategy

Chapter 6:

Competitive

Dynamics

Chapter 7:

Corp.-Level

Strategy

Ch. 12: Org.

Structure &

Controls


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Organizational Structure & Controls

Knowledge Objectives:

Discuss organizational structure & controls & discuss thedifference between strategic & financial controls

Describe the relationship between strategy & structure

Discuss the functional structures used to implementbusiness-level strategies

Explain the use of 3 versions of multidivisional (M-Form)structure to implement different diversification strategies

Discuss the organizational structures used to implementthree international strategies

Define strategic networks & strategic centre firms


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Organizational Structure

Organizational structure & the controls that are apart of it affect firms performance.

When the firms strategy is not matched with the

most appropriate structure & controls,performance declines.

Specifies the firms formal reporting

relationships, procedures, controls & authority,and decision making process.


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Influences how managers work & the decisionsresulting from that work.

Specifies the work to be done & how to do itgiven the firms strategy or strategies.

Provides the stability a firm needs to successfullyimplement its strategies & maintain its

competitive advantages.


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Structural Flexibility: Provides the opportunity

to explore competitive possibilities & allocate

resources to activities that will shape thecompetitive advantages of the firm that it will

need to be successful in the future.

Structural Stability: Provides the capacity the

firm requires to consistently & predictably

manage its daily work routines.


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Organizational Controls

Guide the use of strategy. Indicate how to compare actual with expected results.

Suggest corrective action when differences betweenactual & expected results are unacceptable.

Evaluate the degree to which the firm focuses on the

the requirements to implement its strategies.

Concerned with examining the fit between what the

firm might do and what it can do


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Financial Controls

Largely financial objective criteria used tomeasure the firms performance against

previously established quantitative standards.


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All organizations require some form oforganizational structure to implement andmanage their strategies.

Firms frequently alter their structure as theygrow in size and complexity.

Three basic structure types:

Functional Structure

Multi-divisional Structure (M-form)

Simple Structure

Structure Types


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Efficient implementationof formulated strategy

Multidivisional Structure

Efficient implementationof formulated strategy

Simple Structure

Strategy & Structure

Growth Patterns

Sales GrowthCoordination&Control Problems

Sales GrowthCoordination&Control Problems


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Owner / Manager

Owner/Manager makes all major decisionsdirectly and monitors all activities.

Difficult to maintain this structure as

the firm grows in size and complexity.

Simple Structure


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*Production

*Finance

*Engineering

*Accounting

*Sales & Marketing

*Human Resources

First stage beyond a Simple Structure

Fine for single or dominant-business firms

Allows specialization of tasks

Overcomes information processing limits ofsingle owner/manager

Functional department heads report to ChiefExecutive Officer who integrates decisions &actions from a company-wide point of view.

Risks conflict between myopic functional managers



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ProductionFinance Engineering AccountingSales &

MarketingHuman

Resources

Chief Executive Officer

CorporateFinance

CorporateR&D

CorporateMarketing

CorporateHuman

Resources

StrategicPlanning



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Office of the President

CentralizedStaff

Operations are the main functionFormalized procedures allow for

low-cost culture

Structure is mechanical; job rolesare highly structuredProcess engineering is

emphasized rather thannew product R&D

Relativelylarge

centralizedstaff

coordinatesfunctions

MarketingEngineering Operations Personnel Accounting

Functional Structure for

Cost LeadershipStrategy


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MarketingNew Product

R&DOperations

HumanResources

Finance

R&D Marketing

President andLimited Staff

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 & promote new ideas.Overall structure is organic; job roles are less structured.

Functional Structure forDifferentiationStrategy


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Each division is operated as a separate business.

Appropriate for related-diversified businesses.

Key task of corporate managers is exploitingsynergies among divisions.

Managers use a combination of strategic controlsand financial controls.

The goal is to maximize overall firm performance.

Multi-Divisional Structure

Competing among divisions for scarce capital resources

Creating opportunities for cooperation to develop synergies

Managers try to strike a balance between:

and


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Balance of these dimensions may change over time

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

Structure will evolve over time with:

Changes in strategy

Degree of diversification

Geographic scope

Nature of competition


Centralized or Decentralized

Bureaucratic or Non-bureaucratic


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Division Division Division Division

Chief Executive Officer

CorporateFinance

CorporateR&D

CorporateMarketing

StrategicPlanning

CorporateHuman

Resources


ProductionFinance Engineering AccountingSales &

MarketingHuman

Resources

Corp.

Headquarters


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CooperativeForm

Strategic Business Unit(SBU) Structure

CompetitiveForm

Multi-DivisionalStructure(M-form)

Related-Constrained

Strategy

Related-Linked

Strategy

Unrelated/HoldingCompanyStrategy

Three Variations of theMulti-Divisional Structure

C ti F


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Product

Division

Product

Division

Product

Division

Product

Division

Product

Division

President

Related-Constrained Strategy

StrategicPlanning

CorporateR&D Lab

CorporateHumanResources

CorporateMarketing

CorporateFinance

LegalAffairs

GovernmentAffairs

Structural integration devices create tight links among divisions Large corporate office with R&D likely to be emphasized Culture emphasizes cooperative sharing

Cooperative Form

Corp. Headquarters

P d t & F ti l M t i

P d t F ti l


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2 Dimensions

Operations

Unit

Marketing

Unit

Finance

Unit

People

Unit

Product & Functional Matrix

Operations

Unit

Marketing

Unit

Finance

Unit

People

Unit

Operations Marketing Finance People

Operations

Unit

Marketing

Unit

Finance

Unit

People

Unit

Operations

Unit

Marketing

Unit

Finance

Unit

People

Unit

Manager

Product A

Manager

Product B

Manager

Product C

Manager

Product D

Each Unit reports toFunctional AND Project

Managers

SeniorManagement

Each Project hasFunctional Units

Product Functional


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DivisionDivisionDivisionDivisionDivisionDivision

StrategicBusinessUnit A

StrategicBusiness

Unit C

StrategicBusiness

Unit B

StrategicBusiness

Unit D

Related-Linked Strategy

President

CorporateFinance

CorporateR&D

CorporateMarketing

StrategicPlanning

CorporateHuman

Resources

Structural integration exists among divisions within but not across SBUsEach SBU may have its own budget for staff to foster integrationCorp. headquarters staff serve as consultants to SBUs & divisions

SBU Form

Corp.Headquarters

C i i F


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Unrelated /Holding Company Strategy

Corporate headquarters (HQ) has a small staff

Finance and auditing are the most prominent functions in the HQDivisions are independent & separate for financial evaluationDivisions retain strategic control, but cash is managed by corp. officeDivisions compete for corporate resources

Competitive Form

President

LegalAffairs

Finance Auditing

DivisionDivisionDivisionDivision Division

Corp.Headquarters


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StructuralCharacteristics

CentralizationOf Operations

Use ofIntegrating

Mechanisms

Divisional

PerformanceAppraisal

DivisionalIncentive

Compensation

Type ofStrategy

CooperativeM-Form

SBUM-Form

CompetitiveM-Form

Centralized atCorporate Office

Centralizedin SBUs

Decentralizedto Division

Linked toCorporate

Performance

Linked toCorporation,

Division & SBU

Linked toDivisional

Performance

ExtensiveSynergies

ModerateSynergies

NonexistentSynergies

Financial

Criteria

Strategic &

FinancialCriteria

Subjective/

StrategicCriteria

Related-Constrained

RelatedLinked

Unrelated

Characteristics of Diversification Strategies


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Product characteristicstailored to localpreferences

Worldwide Geographic Area Structure

MultinationalHeadquarters

Europe

UnitedStates

MiddleEast/Africa

Canada

Asia

LatinAmerica

Multidomestic Strategy

Isolation from globalcompetition establish protected

market positions,compete in industry

segments mostaffected bydifferences amonglocal countries


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Standardized productsacross countries

Economies of scope

and scale

Worldwide Product Divisional Structure

GlobalCorporate

Headquarters

WorldwideProductsDivision






Global Strategy

Outsource someprimary or supportactivities to the worldsbest providers

Decision-makingauthority centralized inworldwide divisionheadquarters


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Strategic Networks

A Strategic Network is a grouping of organizations

that has been formed to create value viaparticipation in a set of cooperative arrangements(such as a strategic alliance).

A StrategicCentre firm often manages the network

The Strategic Centre firm identifies actions thatincrease the opportunity for each firm to achievesuccess through its participation in the network.

The Strategic Centre firm creates incentives thatreduce the probability of any single firm takingadvantage of its network partners.


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StrategicCentre

Firm

Centre firm is engaged in four primary tasks Strategic Outsourcing, Competencies, Technology &A Race to Learn.

A Strategic Network


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Main

StrategicCentreFirm

Distributed Strategic Centre Firms

A Distributed

StrategicNetwork

International Cooperative Strategies often require more complexnetworks.

Many large multinational firms form distributed strategic networkswith multiple regional strategic centres to manage their array ofcooperative arrangements with partner firms.

Breaking big networks into multiple manageably-sized ones helpsto manage the complexity of maintaining many relationships.

Strategic


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12-31 2006 by Nelson a division of Thomson Canada Limited

The StrategicManagement

Process

Chapter 8:

Acquisition &

Restructuring

Chapter 9:

International

Strategy

Chapter 10:

Cooperative

Strategy

Strategy Formulation

Chapter 11:

CorporateGovernance

Ch. 12: Org.

Structure &

Controls

Chapter 13:

StrategicLeadership

Chapter 14:

Org. Renewal& Innovation

Strategy

Implementation

Strategic

Actions

Chapter 3:

The External

EnvironmentStrategic

Competitiveness

Strategic Mission

& Strategic Intent

Strategic

Objectives & Inputs

Chapter 1:

Strategic

ManagementStrategic

Competitiveness Ch. 2: Strat.Mgmt . &

Performance

Chapter 3:

The External

Environment

Chapter 3:

The External

Environment

Chapter 4:The Internal

Environment

Chapter 5:

Bus.-Level

Strategy

Chapter 6:

Competitive

Dynamics

Chapter 7:

Corp.-Level

Strategy

Ch. 12: Org.

Structure &

Controls

2ch12- very good

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