strategy evaluation and selection

8/7/2019 strategy evaluation and selection

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BUSINESS STRATEGY

51110 / MKT3002

LECTURE Ten

Strategy Implementation

Organisational structure and

design


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Module 10

Organisational structure and design

Learning outcomes- at the conclusion of

this module, students should be able to:Describe the main types of organisational structures

Compare the various multi-national organisational

structures

Define devolution

Describe strategic planning, financial control &

strategic control

Define organisational configuration; building blocksand co-ordinating mechanisms

Undertake a stakeholder mapping exercise and

Describe Mintzbergs six organisational configurations


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Key words and concepts

Simple structure

Functional structure

Multi-national structure

Holding company

Matrix structure

Virtual organisation

Related diversification

Vertical integration

Transnational corporation

Devolution

Strategic planning style

Financial control

Strategic control


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Introduction

This module looks at basic organisationalstructural forms and how management

authority is exercised within theorganisation; it asks the following:Have major changes occurred in the firmsinternal strategic position?

Have major changes occurred in the firms

external strategic position?

Has the firm progressed satisfactorily towardachieving its stated objectives?


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Structural types

The simple structure; The functional structure;

The multi-divisional structure; The holding company structure; The matrix structure;

Intermediate structures & structural variations; Network & virtual organisations; and Structural types in multi-national companies.


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Thei l

etr t r

e

The simple structure: is one inwhich the organisation is run by thepersonal control of an individual.

(Johnson & Scholes 1999, p. 402)

Management problems arise when suchbusinesses grow.

Brothers Neilson, Uncle Tonys Kebabs etc could notkeep this structure in their quest for growth


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The functional structurebased on the primary activities that have to becarried out, such as production, finance andaccounting, marketing and personnel.


Organisations are organised around specific functions Departments and teams are designed each with its

own leadership structure

Results in specific task orientation rather than thegreater good of the whole organisation

Can result in many sub-cultures, goals, norms etc

Departmental feuds can result with horror storiesabout other departments. Blaming can often result.

Develops specialist skills and efficiencies but lacks

integration which may be needed for strategic growth


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The multi-divisional

structurethe subdivision of the firm into into (operating)units (divisions) on the basis of products,services, geographical areas or processes of the

enterprise.(Johnson & Scholes 1999, p. 404)

Used to manage diversified companies

Good ownership of strategic direction andoutcomes for SBU

Corporate control is loose and mainly revolvesaround corporate planning and budgeting

Can be fairly decentralised and autonomous

May result in competition between divisions and

some cannibalisation


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The holding company

structureis an investment company consisting of shareholdingsin a variety of separate business operations, over which

the corporate centre exercises simple control.(Johnson & Scholes 1999, p. 408)

Very diversified corporation

The SBU structural form groups similar divisions orstructures into strategic business units and delegatesauthority and responsibility for each unit to to a senior

exec. who reports the CEO.Very distinct SBU structure normally with individualbrands and names and allowed to run itself

Corporate parent has whole or part shareholdings in

many sperate firms


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The holding company

structure (Cont)

AdvantagesSuitable for complex

and growing businessenvironments

Reduces gap betweenupper & lowermanagement levels

Improves inter-firm

communicationStrategyimplementation can befacilitated moreeffectively

Disadvantages

Requires an additional

layer of management(high salary costs)

May reduce x-

fertilisation of ideas

within the corporation

Can dissipate corecompetencies thereby

reducing capacity to

develop new products

and technologies


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The matrix structure

combination of structures which often takes theform of product and geographical divisions orfunctional and divisional structures operating intandem. (Johnson & Scholes 1999, p. 409)

Complex dependent upon both vertical & horizontal

flows of authority & communication.Integrates activities, planning and allocation ofresources to overcome issues of functions and divisions

Used in small or large firms with multiple products,markets and functions

Dual (or more) management resulting in 2 bosssyndrome and conflicting orders.

Queensland Retail manager reports to Australia retail director,

Australia category manager and Australian MD


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The matrix structure

(Cont)

Advantages

Can integrate diverse

resources to addressan immediate problem

Project objectives can

be clearly defined

Often suitable for

defence, research &health industries

DisadvantagesVery complex

Lacks clearaccountability

More suited to adevelopmental role

Can result in highoverhead costs

Needs effectivecommunicationchannels to avoidmistrust betweenspecialist areas


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Other structuresIn reality very few firms follow the rigid models asdescribed but adapt & modify such models to meetspecific needs & contextual situations.

Firms need to develop structure based on;Degree of control sought over product management,strategic planning, organisational functions

Degree of diversity in geography (markets served)functions and product categories (SBUs)

Need for growth and response to environmental changeNeed for accountability and measurement of KPIs

Desire to motivate, train and develop employees along acareer path

In view of this there are 3 major elements to

consider when designing the structure


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The elements of

organisational design

Three elements:

Centralisation vs. devolution (structure on theresponsibility for operational and strategicdecision making)

Organisational configurations (matching thestructure with the context that the

organisation is operating)Resource allocation & control processes(influence on the behaviour of people andassist strategic development)


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Centralisation vs.

devolutionDevolution is: the extent to which the

centre of the organisation delegates

decision making to units & managerslower down the hierarchy.(Johnson & Scholes 1999, p. 423)

Issues that managers trying to avoid:

out of touch in the markets and operations

of the business.

Overcentralisation (too concerned with internal

matters).


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Centralisation vs.

devolution (Cont)

The role of the centreImprove efficiency.

Providing expertise andservices

Providing investment.

Fostering innovation.

Mitigating risk.

Providing strong externalimage.

Encouragingcollaboration and co-ordination.

Setting standard.

Dividing responsibilities Strategic planning.

Financial control. Strategic control.


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Organisational configurations

The configuration of an organisation is thedetailed design consisting of a number ofbuilding blocks and co-ordinating mechanisms.


Mintzberg (1979) six building blocks oforganisations:

The operating core

The strategic apex

The middle line

The techno-structure

Support staff

Ideology


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Lecture 10 review

Types of organisational structureThe elements of organisational design

Centralisation vs. devolution

Organisational configurations

Now go back and ask yourself the introductoryquestions

Now ask which organisational structure willMOST benefit the firm, in terms of being able to

achieve the strategic outcomes recommended inyour report?

Is a change required? If YES then is this changerealistic? If NO then are the recommendationsimplementable? If NO then.


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Next lecture

Module 11: Resource

allocation and control

(Study book: Module 11 - Text Chapter

10)


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Next tutorial

Assignment 1. (preparation)

Documents

strategy evaluation and selection