Organizational Structure• Organizational Structure: the formalized patterns ofinteractions that link a firm’s tasks, technologies, andpeople• 4 types of organizational structure1. Simple2. Functional3. Divisional4. Matrix
Simple Structure• Simple Structure: the oldest, and most commonstructure which the owner makes most of the decisions• Advantage: highly informal and the coordination oftasks is accomplished by direct supervision• Disadvantage: “informality” may lead to problems,unclear of responsibilities
Functional Structure• Functional Structure: major functions of the firm aregrouped internally• Advantage: able to enhance its coordination andcontrol within each of the functional areas• Disadvantage: differences in values and orientationsamong functional areas may impede communication andcoordination
Divisional Structure• Divisional Structure: a form in which products,projects, or product markets are grouped internally• Advantage: by having separate divisions to manageindividual product markets, there is a separation ofstrategic and operating control• Disadvantage: expensive, due to operations, andinvestment since each division must staff multiplefunctional departments
Matrix Structure• Matrix Structure: combination of functional anddivisional structures• Advantage: facilitates the use of specialized personnel,equipment, and facilities• Disadvantage: dual-reporting structures can result inuncertainty and lead to intense power struggles andconflict
International Operations:Implications for OrganizationalStructure• Three major contingencies that influence the chosenstructure:− Type of strategy that is driving a firm’s foreignoperations− Product Diversity− Extent to which a firm is dependent on foreign sales
Primary Structures• Used to manage a firm’s international operation:– International division– Geographic-area division– Worldwide functional– Worldwide product division– Worldwide matrix
Multi-domestic Strategies• Driven by political and cultural imperatives requiringmanagers within each country to respond to localconditions.• International division structure• Geographic-area division structure
Global Strategies• Driven by economic pressures that require managers toview operations in different geographic areas to bemanaged for overall efficiency.• Worldwide Functional Structure• Worldwide Product Division Structure
How an Organization’sStructure Can InfluenceStrategy Formulation• Strategy follows structure.• The strategy that a firm chooses dictates such structuralelements as the division of tasks, the need forintegration of activities, and authority relationshipswithin the organization. However, an existing structurecan influence strategy formulation.• Once a firms structure is in place it is very difficult andexpensive to change.
Global Start Ups: A NewPhenomenon• Global Start-Up Defined: a business organization that,from inception, seeks to derive significant advantagefrom the use of resources and the sale of outputs inmultiple countries.– Geographical Boundaries of nation-states areirrelevant for a global start up.– Being Global necessarily involves highercommunication, coordination, and transportationcosts.
Linking Strategic Reward andEvaluation Systems• Rewards and evaluation system– Key role in motivating management to conform with:• Organization strategies.• Achieve performance targets.• Close the gap between organizational andindividual goals.– Improper design• Detrimental to organizational performance.• Lower employee morale.• Employee dissatisfaction.
Business-Level Strategy• Overall Cost Leadership Strategy– Product Lines remain stable.– Innovation deals mostly with product process.– Firms competing on cost.• Incentives are based on meeting financial targets.• Differentiation Strategy– Development of innovative products or services.– Requires to the use of experts to ID crucial elements.– Difficult to evaluate using quantitative data• Based on collaboration and info. sharing.
Corporate-Level Strategy• Related Diversification Strategy– Use core competencies and sharing across differentbusinesses.• Ex. Sporting Goods Store that buys retail store tocarry other product lines.– Use of promotion based on seniority and skills.• Helps to ensure long-term > short-term.• Unrelated Diversification Strategy– Keeping acquired business as additions to the family.• Rewards based on individual accountability.
Boundaryless OrganizationalDesign• Organizations in which the boundaries, includingvertical, horizontal, external, and geographic arepermeable.• These include:− Barrier-Free Organization− Modular Organization− Virtual Organization
Barrier-Free Organization• An organization design in which firms bridge realdifferences in culture, function, and goals.• Find common ground that facilitates information sharingand other forms of cooperative behavior.• Pros– Leverages talent of employees, enhancescooperation, enables quicker response to marketschanges.
Barrier-Free Organization Cont.• Cons– Can be difficult to overcome political and authorityboundaries.– Lacks strong leadership and common vision.– Time-consuming and difficult to manage democraticprocesses.
Modular Organization• An organization in which non-vital functions areoutsourced, uses the knowledge and expertiseof outside suppliers while retaining strategiccontrol.– Ex. Nike and Reebok.• Pros– Able to direct firms managerial and technical talentto most critical activates.– Maintains full strategic control over corecompetencies.– Achieves “best in class” performance for each link inthe value chain.
Modular Organization Cont.• Cons– Inhibits common vision through reliance onoutsiders.– Diminishes future competitive advantages if criticaltechnologies are outsourced.– Increases the difficulty of bringing back into firmactivities that now add value due to market shifts.
Virtual Organization• A continually evolving network of independentcompanies that are linked together to shareskills, costs, and access to one anothersmarket.• Pros– Enables the sharing of costs and skills.– Enhances access to global markets.– Increases market responsiveness.
Virtual Organization Cont.• Cons– Harder to determine where one company ends andanother begins, due to close interdependenciesamong players.– Leads to potential loss of operational control amongplayers.– Results in loss of strategic control.
Making BoundarylessOrganizations Work• Achieving the coordination and integrationnecessary to maximize the potential of anorganization’s human capital involves muchmore than creating a new structure.• Some Factors to consider:– Common culture and shared values.– Horizontal organizational structures.– Horizontal systems and Processes.– Communications and information technologies (IT).– Human resource Practices.
Ambidextrous OrganizationalDesign• Manager must be able to maintain:– Adaptability• When changes are rapid and unpredictable– Alignment• Ability to exploit assets and competencies.– Very difficult to accomplish• Study of different organizational studies found:– Were effective• Launched breakthrough products and services.• Improved existing business performance.