MGT

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CHAPTER 12

IMPLEMENTING STRATEGY IN COMPANIES THAT COMPETE IN A SINGLE INDUSTRY

LEARNING OBJECTIVES §  Understand how organiza>onal design requires managers to select the right combina>on of organiza>onal structure, control, and culture

§  Discuss how effec>ve organiza>onal design enables a company to increase product differen>a>on, reduce its cost structure, and build compe>>ve advantage

LEARNING OBJECTIVES §  Explain why it is so important that managers keep the organiza>onal hierarchy as flat as possible and what factors determine the way they decide to centralize or decentralize authority

§  Explain the many advantages of a func>onal structure and why and when it becomes necessary to u>lize a more complex form of organiza>onal structure

LEARNING OBJECTIVES §  Differen>ate between the more complex forms of organiza>onal structures managers adopt to implement specific kinds of business-‐level strategies

FIGURE 12.1 -‐ IMPLEMENTING STRATEGY THROUGH ORGANIZATIONAL DESIGN

GROUPING TASKS, FUNCTIONS, AND DIVISIONS §  Func>on -‐ Collec>on of people who work together and perform the same types of tasks

§  Amount and complexity of handoffs increase with growth of the organiza>on §  Handoffs -‐ Transfers among people, func>ons, and subunits

§  Division -‐ Grouping func>ons to allow an organiza>on to be[er produce and transfer its goods and services to customers

ALLOCATING AUTHORITY AND RESPONSIBILITY

•  Clear and unambiguous chain of command that defines each manager’s relative authority

Hierarchy of authority

•  Number of subordinates reporting directly to a particular manager

Span of control

FIGURE 12.2 -‐ TALL AND FLAT STRUCTURES

INTEGRATING MECHANISMS §  Ways to increase communica>on and coordina>on among func>ons and divisions §  Direct contact §  Liaison roles §  Teams: Forma>on of a group that represents each division or department: § Facing a common problem § With a goal of finding a solu>on to the problem

FIGURE 12.3 -‐ STEPS IN DESIGNING AN EFFECTIVE STRATEGIC CONTROL SYSTEM

FIGURE 12.4 -‐ LEVELS OF ORGANIZATIONAL CONTROL

TYPES OF STRATEGIC CONTROL SYSTEMS

Personal control Output control

Behavior control

ORGANIZATIONAL CULTURE §  Specific collec>on of values and norms shared by people and groups in an organiza>on

§  Organiza>onal socializa>on -‐ Describes how people learn organiza>onal culture

§  Culture and strategic leadership §  Organiza>on’s founder and top managers help create its organiza>onal culture and provide strategic leadership

§  Shared values and common culture increase integra>on and improve coordina>on among members

ADAPTIVE CORPORATE CULTURES §  Innova>ve culture that encourages and rewards middle-‐ and lower-‐level managers for taking the ini>a>ve to achieve organiza>onal goals

§  Common value sets §  Values promo>ng a bias for ac>on §  Values stem from nature of the organiza>on’s mission §  Values determine how to operate the organiza>on

FIGURE 12.5 -‐ FUNCTIONAL STRUCTURE

STRATEGIC CONTROL §  Designs a system that sets ambi>ous goals and targets for all managers and employees

§  Management by objec0ves: Employees are encouraged to help set their own goals §  Managers manage by excep>on, intervening only when they sense something is wrong

DEVELOPING CULTURE AT THE FUNCTIONAL LEVEL

•  Functional strategy improves efficiency and quality

Production

•  Develops distinctive competencies in innovation, quality, and excellence that result in products that fit customers’ needs

R&D

•  Monitor sales behavior •  Encourage high responsiveness to customers to

develop sophisticated output and behavior controls

Sales

FUNCTIONAL STRUCTURE, BUREAUCRATIC COSTS AND OUTSOURCING §  Areas leading to increased bureaucra>c costs §  Communica>on and measurement problems §  Customer and loca>on problems §  Strategic problems §  Outsourcing §  Avoids communica>on and measurement problems §  Allows a company to focus on competencies leading to compe>>ve advantage

§  Economizes on bureaucra>c costs

FIGURE 12.6 -‐ HOW ORGANIZATIONAL DESIGN INCREASES PROFITABILITY

FIGURE 12.7 -‐ NOKIA’S PRODUCT STRUCTURE

FIGURE 12.8 -‐ MARKET STRUCTURE

FIGURE 12.9 -‐ GEOGRAPHIC STRUCTURE

FIGURE 12.10 -‐ MATRIX STRUCTURE

FIGURE 12.11 -‐ PRODUCT-‐TEAM STRUCTURE

RESTRUCTURING AND REENGINEERING §  Restructuring: Process by which a company: §  Streamlines its hierarchy of authority §  Reduces the number of levels in its hierarchy to a minimum to lower opera>ng costs

§  Reengineering: Process of redesigning business processes to achieve drama>c improvements in performance §  Such as cost, quality, service, and speed