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Strategic Implementation. Strategic Management (BA 491). Creating Effective Organizational Designs. Three Aspects of Implementation. Functional policies/processes Culture Structure. Functional Policies & Processes. - PowerPoint PPT Presentation
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McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT
Creating Effective Organizational
Designs
Strategic Management (BA 491)
Strategic ImplementationStrategic Implementation
2Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Three Aspects of Implementation
• Functional policies/processes
• Culture
• Structure
3Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Functional Policies & Processes
• What does each functional area need to do to support company-wide strategies?• Production/Operations
• Marketing
• Accounting and Finance
• Research and Development
• Human Resource Management
4Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Organizational Culture
• Culture is the pattern of values and beliefs shared by the organization’s members.
• Exists at two levels:• Surface level of symbols, stories, heroes,
slogans, and ceremonies• Deeper level of values and norms
• Culture needs to be aligned with, or at least not antagonistic with, strategy.
5Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Traditional Forms of Organizational Structure
• Organizational structure refers to formalized patterns of interactions that link a firm’s• Tasks• Technologies• People
• Structure provides a means of balancing two conflicting forces• Need for the division of tasks into meaningful
groupings• Need to integrate the groupings for efficiency and
effectiveness
6Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Dominant Growth Patterns of Large Corporations
International Expansion
Related diversification
Vertical integration
Growth in revenues and employees
International expansion
Related diversification
Increase relatedness of products and markets
Increase relatedness of products and markets
International expansion
Diversification in unrelated areas
Strategies leading to new structure
Dominant growth path for U.S. firms
Diversification into related products and markets
Source: Adapted from J. R. Galbraith and R. K. Kazanjian, Strategy Implementation: The Role of Structure and Process, 2nd ed. (St. Paul, MN: West Publishing Company, 1986), p. 139.
7Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Patterns of Growth of Large Corporations:
• Simple structure is the oldest and most common organizational form• Staff serve as an extension of the top executive’s
personality
• Highly informal
• Coordination of tasks by direct supervision
• Decision making is highly centralized
• Little specialization of tasks, few rules and regulations, informal evaluation and reward system
Simple Structure
8Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Patterns of Growth of Large Corporations: Functional Structure
Lower-level managers, specialists, and operating personnel
9Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Patterns of Growth of Large Corporations:
• Found where there is a single or closely related product or service, high production volume, and some vertical integration
Functional Structure
Advantages• Enhanced coordination and
control• Centralized decision making• Enhanced organizational-
level perspective• More efficient use of
managerial and technical talent
• Facilitated career paths and development in specialized areas
Disadvantages• Impeded communication and
coordination due to differences in values and orientations
• May lead to short-term thinking (functions vs. organization as a whole
• Difficult to establish uniform performance standards
10Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Divisional Structure
Lower-level managers, specialists, and operating personnel
11Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Divisional Structure
• Organized around products, projects, or markets
• Each division includes its own functional specialists typically organized into departments
• Divisions are relative autonomous and consist of products and services that are different from those of other divisions
• Division executives help determine product-market and financial objectives
12Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Divisional Structure
Advantages• Separation of strategic and
operating control
• Quick response to important changes in external environment
• Minimal problems of sharing resources across functional departments
• Development of general management talent is enhanced
Disadvantages• Can be very expensive
• Can be dysfunctional competition among divisions
• Can be a sense of a “zero-sum” game that discourages sharing ideas and resources among divisions
• Differences in image and quality may occur across divisions
• Can focus on short-term performance
13Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Divisional Structure
• Strategic business unit (SBU) structure• Divisions with similar products, markets, and/or
technologies are grouped into homogenous SBUs Task of planning and control at corporate office is more
manageable May become difficult to achieve synergies across SBUs
• Holding company structure (conglomerate)• Appropriate when the businesses in a corporation’s
portfolio do not have much in common Lower expenses and overhead, fewer levels in the hierarchy Inherent lack of control and dependence of CEO-level
executives on divisional executives
14Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Matrix Structure
15Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Matrix Structure• A combination of the functional and divisional
structures• Individuals who work in a matrix organization
become responsible to two managers• The project manager• The functional area manager
Advantages• Facilitates the use of
specialized personnel, equipment and facilities
• Provides professionals with a broader range of responsibility and experience
Disadvantages• Can cause uncertainty and
lead to intense power struggles
• Working relationships become more complicated
• Decisions may take longer
16Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
International Operations: Implications for Organizational Structure
• Three major contingencies influence structure adopted by firms with international operations• Type of strategy driving the firm’s foreign
operations
• Product diversity
• Extent to which the firm is dependent on foreign sales
17Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
International Operations: Implications for Organizational Structure
• Structures used to manage international operations• International division
• Geographic-area division
• Worldwide functional
• Worldwide product division
• Worldwide matrix