Chapter

Chapter 11
11

Organizational
Organizational Structure
Structure
and
and Controls
Controls
 Chapter 2
Strategic External
Environment
The Strategic
Management
Inputs
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Process

Strategy Formulation Strategy Implementation

Chapter 4 Chapter 5 Chapter 6 Chapter 10 Chapter 11

Business-Level Competitive Corporate-Level Corporate Structure
Strategic
Actions

Strategy Dynamics Strategy Governance & Control

Chapter 7 Chapter 8 Chapter 9 Chapter 12 Chapter 13

Acquisitions & International Cooperative Strategic Entrepreneurship
Restructuring Strategy Strategies Leadership & Innovation
Outcomes
Strategic

Strategic
Competitiveness
Above Average
Feedback
Returns
Organization
Organization Structure
Structure (OS):
(OS): Overview
Overview

•Effective OS’s
•Evolution of OS’s (Chandler’s Thesis)
•OS’s for Single/Dominant Businesses
•OS’s for Related-Constrained Diversifiers
•OS’s for Related-Linked Diversifiers
•OS’s for Unrelated Diversifiers
•OS’s for Global Strategies
•OS’s for Multidivisional Strategies
•OS’s for Cooperative Strategies
 Organization
Organization Structures
Structures (OS)
(OS)

Used
Used to
to Implement
Implement strategies
strategies
••Allocate/Leverage
Allocate/Leverage R&C’s
R&C’s
••Define
Define Reporting
Reporting Relationships
Relationships
••Create
Create Accountability
Accountability

Effective
Effective OS’s:
OS’s:
••Organizing
Organizing Divisions:
Divisions:
••Discrete
Discrete Units
Units
••Interdependent
Interdependent Activities
Activities
••Unit
Unit Managers
Managers
••Authority
Authority
••Rewards
Rewards
 Chandler’s
Chandler’s Thesis:
Thesis: OS
OS Evolution
Evolution

Stage
Stage II Simple
Simple Structure
Structure

Stage
Stage II
II Functional
Functional Structure
Structure

Stage
Stage III
III Multidivisional
Multidivisional Structure
Structure
 Simple
Simple Structure
Structure

Owner / Manager (OM)

•OM makes all major decisions

•Little Specialization
•Little Formalization
•Single products/single markets
•Focus Strategies
 Simple
Simple Structure
Structure

Owner/Manager

Employee Employee Employee Employee Employee Employee

 Functional
Functional Structure
Structure
•First stage after Simple Structure

•Single or dominant-business firms

•Specialization / Learning Curve

•Overcomes limits of owner/manager

•Functional mgrs report to CEO who makes

company-wide decisions.

•Risk: Myopic function managers

 Functional
Functional Structure
Structure

Chief Executive Officer

Sales & Human

Finance Production R&D Accounting
Marketing Resources
 Functional
Functional Structure
Structure

Chief Executive Officer

Low Cost Business-level Differentiation Business-

strategy usually employs
a centralized structure
and emphasizes Process
R&D and Operations
level strategy usually
employs a decentralized
structure and emphasizes
Product R&D and Sales
& Marketing

Sales & Human

Finance Production R&D Accounting
Marketing Resources
 A Process-Oriented Functional Structure

General Manager

Foundry & Screw Customer

Inspection
Castings Machining Service

Milling & Finishing & Loading & Billing &

Grinding Heat Treating Shipping Accounting

Transparency 11-11
 Evolution
Evolution of
of Multi-Divisional
Multi-Divisional Structure
Structure
Chief Executive Officer

Corporate Office (Staff)

Product A Product B

Transparency 11-12
 Evolution
Evolution of
of Multi-Divisional
Multi-Divisional Structure
Structure
Chief Executive Officer

Corporate Office (Staff)

Product A Product B

Sales & Human

Finance Production Engineering Accounting
Marketing Resources

Transparency 11-13
 Evolution
Evolution of
of Multi-Divisional
Multi-Divisional Structure
Structure
Chief Executive Officer

Corporate Office (Staff)

Product A Product B

Sales & Human

Finance Production Engineering Accounting
Marketing Resources

Sales & Human

Finance Production Engineering Accounting
Marketing Resources
Transparency 11-14
 Evolution
Evolution of
of Multi-Divisional
Multi-Divisional Structure
Structure
Chief Executive Officer

Corporate Office (Staff)

Product A Product B Product C Product D

North
Europe Asia
America

Sales & Human

Finance Production Engineering Accounting Resources
Marketing
Transparency 11-15
Multi-Divisional Corporate Structures (MDS)

MDS Corp. Strategy

Cooperative Form Related-Constrained

Strategic Business
Related-Linked
Unit (SBU) Structure
Unrelated /Holding
Competitive Form
Company
Cooperative Form MDS (Related-Constrained Strategy)

Headquarters

President

Gov’t Affairs Legal Affairs

Corp. Strategic Corp. Corp. Corp.

R&D Planning HRM Mktg Finance

Product Product Product Product Product

Division Division Division Division Division
 Options for Supplementing the Basic
Organization Structure
• Cross-functional task forces
• Self-contained work teams
• Special project teams
• Venture team approach
• Process teams
• Contact managers
• Relationship managers
 A Matrix Organization Structure
President

Head Head Head Head

R&D Manufacture Marketing Finance

Venture R&D Production Marketing Finance

Manager 1 Specialists Specialists Specialists Specialists

Venture R&D Production Marketing Finance

Manager 2 Specialists Specialists Specialists Specialists

Venture R&D Production Marketing Finance

Manager 3 Specialists Specialists Specialists Specialists

Venture R&D Production Marketing Finance

Manager 4 Specialists Specialists Specialists Specialists
Transparency 11-19
 SBU’s
SBU’s Help
Help to
to Solve
Solve Complexity
Complexity Issues
Issues
Chief Executive Officer

Corporate Office (Staff)

Strategic Strategic Strategic Strategic

Business Business Business Business
Unit A Unit B Unit C Unit D

Division Division Division

Strategic Business Units (SBUs) are used to organize

related businesses into groups for strategy development
 Competitive Form MDS (Unrelated Strategy)

Headquarters

President

Legal Corp. Corp.

Affairs Auditing Finance

Division Division Division Division Division

Transparency 11-21
 Attributes
Attributes of
of Various
Various Structural
Structural Forms
Forms
Structural Cooperative SBU Competitive
Characteristics M-Form M-Form M-Form
Type of Related- Mixed Related Unrelated
Strategy Constrained or Unrelated
Degree of Centralized at Centralized Decentralized
Centralization Corporate Office in SBUs to Division
Use of Extensive Moderate Nonexistent
Integrating
Mechanisms Synergies Synergies Synergies
Divisional Subjective/ Strategic &
Performance Financial
Strategic Financial Criteria
Appraisal Criteria Criteria
Divisional Linked to Linked to Linked to
Incentive Corporate Corporation, Divisional
Compensation Performance Division & SBU Performance
 International
International Multi-Divisional
Multi-Divisional Structures
Structures
Chief Executive Officer

Corporate Office (Staff)

Product A Product B Product C Product D

A Structure based on Product lines implies a

Global International Strategy
 International
International Multi-Divisional
Multi-Divisional Structures
Structures
Chief Executive Officer

Corporate Office (Staff)

North Latin
Europe Asia Africa Australia
America America

Product A Product B Product C Product D

A Structural based on Geographic lines implies a

Multi-Domestic International Strategy
 Strategic
Strategic Networks
Networks

Critical Functions of Strategic Center Firm (SCF):

Strategic Outsourcing

Capability Development

Technology Sharing

Building Linkages to Facilitate Learning

 A
A Strategic
Strategic Network
Network

Network Firms (NF)

Strategic Center Firm (SFF)

 A
A Strategic
Strategic Network
Network

Network
Firms
SCF

SCF Manages
Strategic Outsourcing
 Strategic
Strategic Networks
Networks

Strategic Center Firm’s function:

Technology Sharing (TS)
Manage development and sharing of TS among
partners

Capability Development & Learning (CDL)

Develop CDL and promote sharing among partners

A
A Strategic
Strategic Network
Network

SCF Promotes
TS & CDL
A
A Strategic
Strategic Network
Network
 A
A Distributed
Distributed Strategic
Strategic Network
Network

Main Strategic
Center Firm

Distributed Strategic Center Firms

A
A Distributed
Distributed Strategic
Strategic Network
Network
A
A Distributed
Distributed Strategic
Strategic Network
Network

Main
SCF