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Largely financial objective criteria used to measure the firm’s performance against previously established quantitative standards.
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: Functional Structure Multi-divisional Structure (M-form) Simple Structure
Strategy & Structure Growth Patterns Simple Structure Functional Structure Efficient implementation of formulated strategy Multidivisional Structure Efficient implementation of formulated strategy Sales Growth Coordination & Control Problems Sales Growth Coordination & Control Problems
Simple Structure Owner/Manager makes all major decisions directly and monitors all activities. Difficult to maintain this structure as the firm grows in size and complexity. Owner / Manager
Functional Structure * 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 of single owner/manager Functional department heads report to Chief Executive Officer who integrates decisions & actions from a company-wide point of view. Risks conflict between myopic functional managers
Functional Structure Production Finance Engineering Accounting Sales & Marketing Human Resources Chief Executive Officer Corporate Finance Corporate R&D Corporate Marketing Corporate Human Resources Strategic Planning
Functional Structure for Cost Leadership Strategy
Operations are the main function
Formalized procedures allow for low-cost culture
Structure is mechanical; job roles are highly structured
Process engineering is emphasized rather than new product R&D
Relatively large centralized staff coordinates functions Office of the President Centralized Staff Marketing Engineering Operations Personnel Accounting
Functional Structure for Differentiation Strategy
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.
Marketing New Product R&D Operations Human Resources Finance R&D Marketing President and Limited Staff
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. The goal is to maximize overall firm performance. Competing among divisions for scarce capital resources Creating opportunities for cooperation to develop synergies Managers try to strike a balance between: and
Multi-Divisional Structure 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
Multi-Divisional Structure Corp. Head quarters Division Division Division Division Chief Executive Officer Corporate Finance Corporate R&D Corporate Marketing Strategic Planning Corporate Human Resources Production Finance Engineering Accounting Sales & Marketing Human Resources
Three Variations of the Multi-Divisional Structure Multi-Divisional Structure (M-form) Related-Constrained Strategy Related-Linked Strategy Unrelated /Holding Company Strategy Cooperative Form Strategic Business Unit (SBU) Structure Competitive Form
Structural integration devices create tight links among divisions
Large corporate office with R&D likely to be emphasized
Culture emphasizes cooperative sharing
Corp. Headquarters Product Division Product Division Product Division Product Division Product Division President Strategic Planning Corporate R&D Lab Corporate Human Resources Corporate Marketing Corporate Finance Legal Affairs Government Affairs
Product & Functional Matrix 2 Dimensions Each Unit reports to Functional AND Project Managers Each Project has Functional Units Product Functional Operations Unit Marketing Unit Finance Unit People Unit 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 Senior Management
Structural integration exists among divisions within but not across SBUs
Each SBU may have its own budget for staff to foster integration
Corp. headquarter’s staff serve as consultants to SBUs & divisions
Corp. Headquarters Division Division Division Division Division Division Strategic Business Unit A Strategic Business Unit C Strategic Business Unit B Strategic Business Unit D Corporate Finance Corporate R&D Corporate Marketing Strategic Planning Corporate Human Resources
Competitive Form Unrelated /Holding Company Strategy
Corporate headquarters (HQ) has a small staff
Finance and auditing are the most prominent functions in the HQ
Divisions are independent & separate for financial evaluation
Divisions retain strategic control, but cash is managed by corp. office
Strategic Networks A Strategic Network is a grouping of organizations that has been formed to create value via participation in a set of cooperative arrangements (such as a strategic alliance). A Strategic Centre firm often manages the network The Strategic Centre firm identifies actions that increase the opportunity for each firm to achieve success through its participation in the network. The Strategic Centre firm creates incentives that reduce the probability of any single firm taking advantage of its network partners.
A Strategic Network Strategic Centre Firm Centre firm is engaged in four primary tasks – Strategic Outsourcing, Competencies, Technology & A Race to Learn.
Strategic Outsourcing: Outsourcing and partnering with more firms than the other network firms.
Competencies: Seeks ways to support each member’s efforts to develop core competencies that can benefit the network.
Technology: Responsible for managing the development & sharing of technology based ideas among network members. Race to Learn: Guides participants in efforts to form network-specific competitive advantages.
A Distributed Strategic Network Main Strategic Centre Firm Distributed Strategic Centre Firms International Cooperative Strategies often require more complex networks. Many large multinational firms form distributed strategic networks with multiple regional strategic centres to manage their array of cooperative arrangements with partner firms. Breaking big networks into multiple manageably-sized ones helps to manage the complexity of maintaining many relationships.