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Strategy Implementation
What must we do to put the strategy in place, execute it proficiently, and produce good results?
Creating FITS between strategy and external environment and creating FITS inside the organization
Control, coordination, and motivation issues
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Figure 10.1: The Eight Componentsof the Strategy Execution Process
The Action Agenda for Executing
Strategy
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Figure 10.2: The Three Components of Building a Capable Organization
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Matching Organization Structure to Strategy
Few hard and fast rules for organizing The One Big Rule: The role and purpose of the
organization structure is to support and facilitate good strategy execution!
Each firm’s structure is idiosyncratic, reflecting Prior arrangements and internal politics Executive judgments and preferences about how to
arrange reporting relationships How best to integrate and coordinate work effort of
different work groups and departments
Vice President Vice President Vice President
CEO
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What is Structure?
How the firm is organized? Includes
Reporting relationshipsHow coordination is achievedAuthorityDegree of centralizationDegree of integrationFormalization
Used to control, coordinate, and motivate employees and the activities they perform
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Figure 10.3: Structuring the Work Effort to Promote Successful Strategy Execution
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Important Implications of Structure
Appropriate structure depends on the firm’s strategy
Changes in strategy typically require a new structure New strategy often involves different skills,
different key activities, different staffing and organizational requirements
Hence, a new strategy signals a need to reassess the organization structure
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Perspectives on Organizing
All basic organization designs have strategy-related strengths and weaknesses
No ideal organization design exists To do a good job of matching structure to
strategy Pick a basic design Modify as needed Supplement with appropriate coordinating,
networking, and communication mechanisms to support effective execution of the strategy
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Structural Arrangements: The Basics
Simple
Functional and process specialization
Geographic organization
Multidivisional
Strategic business units
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A Traditional FunctionalOrganizational Structure
General Manager
Research &Development
ManufacturingHuman
Resources
Engineering MarketingFinance &
Accounting
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A Process-Oriented Functional Structure
General Manager
Foundry &Castings
ScrewMachining
InspectionCustomer
Service
Milling &Grinding
Finishing &Heat Treating
Loading &Shipping
Billing &Accounting
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Functional Structure for Cost Leadership Strategy
General ManagerGeneral Manager
Centralized StaffCentralized Staff
MarketingMarketing PersonnelPersonnel
EngineeringEngineering OperationsOperations AccountingAccounting
• Operations is main functionOperations is main function
• Process engineering is Process engineering is emphasized over R&Demphasized over R&D
• Large centralized staffLarge centralized staff
• Formalized proceduresFormalized procedures
• Structure is mechanical, job Structure is mechanical, job roles highly structuredroles highly structured
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OperationsOperations HumanHumanResourcesResources
Functional Structure for Differentiation Strategy
General Manager andGeneral Manager andLimited StaffLimited Staff
MarketingMarketing
New ProductNew ProductR&DR&D
• 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
R&DR&D
FinanceFinanceMarketingMarketing
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A GeographicOrganizational Structure
CEO
CorporateStaff
GMEurope
GMLatin America
GMNorth America
GMAsia Pacific
GMCentral Asia &
Africa
Marketing &Distribution
ProductionEngineering &Prod. Design
DistrictStaff
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A Multidivisional Organizational Structure
CEO
CorporateServices
GMBusiness B
Functional/ProcessDepartments
GMBusiness A
Functional/ProcessDepartments
GMBusiness C
Functional/ProcessDepartments
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An SBU Organization Structure
CEO
CorporateServices
Group VPSBU II
Strategically RelatedBusiness Units
Group VPSBU I
Strategically RelatedBusiness Units
Group VPSBU III
Strategically RelatedBusiness Units
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Options to Supplement theBasic Organization Structure
Coordinating mechanisms
Cross-functional task forces, special project teams, self-contained work teams, etc…
Instituting networking and communications arrangements that support implementation