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Chapter 12
 

Chapter 12

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Chapter 12 Chapter 12 Presentation Transcript

  • Organizational Structure & Controls Chapter 12© 2006 by Nelson, a division of Thomson Canada Limited. 12-1
  • Chapter 3 External The Strategic . Strategic Management Inputs Environment The Strategic Management Process Strat. Intent . Chapter 4 Internal Strat. Mission Process Environment Strategy Formulation Strategy ImplementationStrategic Actions Chapter 5 Chapter 6 Chapter 7 Chapter 11 Chapter 12 Bus. - Level Competitive Corp. - Level Corporate Structure Structure Strategy Dynamics Strategy Governance & Control & Control Chapter 8 Chapter 9 Chapter 10 Chapter 13 Chapter 14 Acquisitions & International Cooperative Strategic Entrepreneurship Restructuring Strategy Strategies Leadership & Innovation Outcomes Strategic Chapter 2 Chapter 1 Feedback Above Average Strategic Returns Competitiveness © 2006 by Nelson, a division of Thomson Canada Limited. 12-2
  • Organizational Structure & ControlsKnowledge Objectives:• Define organizational structure & controls & discuss the difference between strategic & financial controls.• Describe the relationship between strategy & structure.• Discuss the functional structures used to implement business-level strategies.• Explain the use of three versions of the multidivisional (M-Form) structure to implement different diversification strategies. © 2006 by Nelson, a division of Thomson Canada Limited. 12-3
  • Organizational Structure & ControlsKnowledge Objectives cont’d…2. Discuss the organizational structures used to implement three international strategies.3. Define strategic networks & strategic centre firms. © 2006 by Nelson, a division of Thomson Canada Limited. 12-4
  • Organizational Structure• Organizational structure & the controls that are a part of it affect firm’s performance.• When the firm’s strategy isn’t matched with the most appropriate structure & controls, performance declines. © 2006 by Nelson, a division of Thomson Canada Limited. 12-5
  • Organizational Structure• Specifies the firm’s formal reporting relationships, procedures, controls & authority, and decision making process.• Influences how managers work & the decisions resulting from that work.• Specifies the work to be done & how to do it given the firm’s strategy or strategies.• Provides the stability a firm needs to successfully implement it’s strategies & maintain it’s competitive advantages. © 2006 by Nelson, a division of Thomson Canada Limited. 12-6
  • Organizational Structure•Structural Stability: Provides the capacity the firm requires to consistently & predictably manage it’s daily work routines.• Structural Flexibility: Provides the opportunity to explore competitive possibilities & allocate resources to activities that will shape the competitive advantages of the firm that it will need to be successful in the future. © 2006 by Nelson, a division of Thomson Canada Limited. 12-7
  • Organizational Controls• Guide the use of strategy.• Indicate how to compare actual results with expected results.• Suggest corrective action when the differences between actual & expected results are unacceptable. © 2006 by Nelson, a division of Thomson Canada Limited. 12-8
  • Strategic Controls •Concerned with examining the fit between what the firm might do and what it can do. •Evaluate the degree to which the firmfocuses on the requirements to implement it’s strategies. © 2006 by Nelson, a division of Thomson Canada Limited. 12-9
  • Financial Controls• Largely financial objective criteria used to measure the firm’s performance against previously established quantitative standards. © 2006 by Nelson, a division of Thomson Canada Limited. 12-10
  • Structure TypesAll 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: Simple Structure Functional Structure Multi-divisional Structure (M-form) © 2006 by Nelson, a division of Thomson Canada Limited. 12-11
  • Strategy & Structure Multidivisional StructureGrowth Patterns Sales Growth Coordination & Control Problems Efficient implementation of formulated strategy Functional Structure Sales Growth Coordination & Control Problems Efficient implementation of formulated strategy Simple Structure © 2006 by Nelson, a division of Thomson Canada Limited. 12-12
  • Simple Structure Owner / ManagerOwner/Manager makes all major decisionsdirectly and monitors all activities.Difficult to maintain this structure asthe firm grows in size and complexity. © 2006 by Nelson, a division of Thomson Canada Limited. 12-13
  • Functional StructureFirst stage beyond a Simple StructureFine for single or dominant-business firmsAllows specialization of tasks * Production * Engineering * Sales & Marketing * Finance * Accounting * Human ResourcesOvercomes information processing limits ofsingle owner/managerFunctional department heads report to ChiefExecutive Officer who integrates decisions & actionsfrom a company-wide point of view.Risks conflicts between myopic functionalmanagers © 2006 by Nelson, a division of Thomson Canada Limited. 12-14
  • Functional Structure Chief Executive Officer Corporate Corporate Corporate Strategic Corporate Human R&D Finance Planning Marketing Resources Sales & HumanFinance Production Engineering Accounting Marketing Resources © 2006 by Nelson, a division of Thomson Canada Limited. 12-15
  • Functional Structure for Cost Leadership Strategy Office of the President• Operations are the main function• Formalized procedures allow for Relatively low-cost culture Centralized large• Structure is mechanical; job roles Staff centralized are highly structured staff• Process engineering is emphasized coordinates rather than new product R&D functions Engineering Marketing Operation Personnel Accounting s © 2006 by Nelson, a division of Thomson Canada Limited. 12-16
  • Functional Structure for Differentiation Strategy President and Limited Staff R&D Marketing New Product Human Finance Marketing Operations R&D Resources• 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. © 2006 by Nelson, a division of Thomson Canada Limited. 12-17
  • 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. Managers try to strike a balance between: Competing among divisions for scarce capital resources andCreating opportunities for cooperation to develop synergies The goal is to maximize overall firm performance. © 2006 by Nelson, a division of Thomson Canada Limited. 12-18
  • Multi-Divisional StructureThe decision-making of managers in a Multi-Divisional structure may be: Centralized or Decentralized Bureaucratic or Non-bureaucraticBalance on these dimensions may change overtime.Structure will evolve over time with: Changes in strategy Geographic scope Degree of diversification Nature of competition © 2006 by Nelson, a division of Thomson Canada Limited. 12-19
  • Multi-Divisional Structure Corp. Head Chief Executive Officer quarters Corporate Corporate Corporate Strategic Corporate Human R&D Finance Planning Marketing ResourcesDivision Division Division Division Sales & HumanFinance Production Engineering Accounting Marketing Resources © 2006 by Nelson, a division of Thomson Canada Limited. 12-20
  • Three Variations of the Multi-Divisional Structure Multi-Divisional Structure (M-form)Cooperative Strategic Business Unit Competitive Form (SBU) Structure Form Related- Related- UnrelatedConstrained Linked /Holding Strategy Strategy Company Strategy © 2006 by Nelson, a division of Thomson Canada Limited. 12-21
  • Cooperative Form Related-Constrained Strategy Corp. Headquarters President Government Legal Affairs Affairs Corporate Strategic Corporate Corporate Corporate Planning Human Marketing Finance R&D Lab Resources Product Product Product Product Product Division Division Division Division Division• Structural integration devices create tight links among divisions• Large corporate office with R&D likely to be emphasized• Culture emphasizes cooperative sharing © 2006 by Nelson, a division of Thomson Canada Limited. 12-22
  • Product & Functional MatrixEach Unit reports to Senior Dimensions Each Project has 2ManagementFunctional AND Project Functional UnitsManagers Operations Marketing Finance People Manager Operations Marketing Finance People Product A Unit Unit Unit Unit Manager Operations Marketing Finance People Product B Unit Unit Unit Unit Manager Operations Marketing Finance People Product C Unit Unit Unit Unit Manager Operations Marketing Finance People Product D Unit Unit Unit Unit © 2006 by Nelson, a division of Thomson Canada Limited. 12-23
  • SBU Form Related-Linked Strategy Corp. President Headquarters Corporate Corporate Corporate Strategic Corporate Human R&D Finance Planning Marketing Resources Strategic Strategic Strategic Strategic Business Business Business Business Unit A Unit B Unit C Unit D Division Division Division Division Division Division• 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. © 2006 by Nelson, a division of Thomson Canada Limited. 12-24
  • Competitive Form Unrelated /Holding Company Strategy Corp. Headquarters President Legal Finance Auditing Affairs Division Division Division Division Division• 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 the corporate office.• Divisions compete for corporate resources. © 2006 by Nelson, a division of Thomson Canada Limited. 12-25
  • Characteristics of Diversification Strategies © 2006 by Nelson, a division of Thomson Canada Limited. 12-26
  • Worldwide Geographic Area Structure: Multidomestic Strategy • Product characteristics United Canada tailored to local States preferences • Isolation from global competition Latin Multinational – establish protected EuropeAmerica Headquarters market positions, compete in industry – segments most Middle affected by Asia East/ differences among Africa local countries © 2006 by Nelson, a division of Thomson Canada Limited. 12-27
  • Worldwide Product Divisional Structure: Global Strategy Worldwide Worldwide • Standardized products Products Products across countries Division Division • Economies of scope and scale • Outsource someWorldwide Global Worldwide primary or supportProducts Corporate Products Division Division activities to the world’s Headquarters best providers • Decision-making Worldwide Worldwide authority centralized in Products Products worldwide division Division Division headquarters © 2006 by Nelson, a division of Thomson Canada Limited. 12-28
  • Strategic NetworksA Strategic Network is a grouping of organizationsthat has been formed to create value viaparticipation in a set of cooperative arrangements(such as a strategic alliance).A Strategic Centre Firm often manages thenetwork.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. © 2006 by Nelson, a division of Thomson Canada Limited. 12-29
  • A Strategic Network Strategic Centre FirmCentre firm is engaged in four primary tasks –Strategic Outsourcing, Competencies, Technology &A Race to Learn. © 2006 by Nelson, a division of Thomson Canada Limited. 12-30
  • The Primary tasks of the Strategic Centre FirmStrategic Outsourcing: Outsourcing and partneringwith more firms than the other network firms.Competencies: Seeks ways to support eachmember’s efforts to develop core competencies thatcan benefit the network.Technology: Responsible for managing thedevelopment & sharing of technology based ideasamong network members.Race to Learn: Guides participants in efforts toform network-specific competitive advantages. © 2006 by Nelson, a division of Thomson Canada Limited. 12-31
  • A Distributed Strategic Main Strategic Network Centre Firm Distributed Strategic Centre FirmsInternational 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 helps tomanage the complexity of maintaining many relationships. © 2006 by Nelson, a division of Thomson Canada Limited. 12-32