Transcript Strategic Management: Competitiveness and Globalization

Strategy Implementation
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Governance (BOD)
Is your strategy “implementationready”?
How will you use organization
structure, controls, and leadership
to implement your strategy?
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Adapted from Hambrick & Fredrickson, 2001, AME 15(4)
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5 major questions
Adapted from Hambrick & Fredrickson, 2001, AME 15(4)
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Staging
sequence of actions
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IKEA example
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Test the Quality of Your Strategy
1. Does your strategy fit with what’s going on in the environment?
Is there healthy profit potential where you’re headed? Does your strategy align with the key
success factors of your chosen environment?
2. Does your strategy exploit your key resources?
With your particular mix of resources, does this strategy give you a good head start on
competitors? Can you pursue this strategy more economically than competitors?
3. Will your envisioned differentiators be sustainable?
Will competitors have difficulty matching you? If not, does your strategy explicitly include a
ceaseless regimen of innovation and opportunity creation?
4. Are the elements of your strategy internally consistent?
Have you made choices of arenas, vehicles, differentiators, and staging, and economic
logic? Do they all fit and mutually reinforce each other?
5. Do you have enough resources to pursue this strategy?
Do you have the money, managerial time and talent, and other capabilities to do all you
envision? Are you sure you’re not spreading your resources too thinly, only to be left with a
collection of feeble positions?
6. Is your strategy implementable?
Will your key constituencies allow you to pursue this strategy? Can your organization make
it through the transition? Are you and your management team able and willing to lead the
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required changes?
Organizational Structure
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Organizational structure specifies
procedures, controls, and decisionmaking authority
It is critical to match organizational
structure to the firm’s strategy
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Stable and Flexible Structures
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Stable structures help the firm exploit its
current resources
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required to consistently and predictably
manage the firm’s daily work routines
Flexible structures help the firm explore
new resources
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explore competitive possibilities
allocate resources to activities that shape
competitive advantages needed by the firm
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Organizational Controls
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Organizational controls
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guide strategy implementation
identify differences between actual &
expected results
suggest which corrective actions to
take when actual:expected differences
are unacceptable
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Organizational Controls:
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Objective criteria
Accounting-based measures
include
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Market-based measures include
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return on investment
return on assets
economic value added
Operational controls provide
supporting/related information
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Matching Control to Strategy
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Relative use of controls varies by type of
strategy, e.g.,
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large diversified firms using cost leadership
strategy emphasize financial controls
Single business companies and business units
using a differentiation strategy emphasize
strategic controls
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Evolutionary Patterns of Strategy and
Organizational Structure
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Firms grow in predictable patterns
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by volume
by geography
integration (vertical, horizontal)
through product/business diversification
A firm’s growth patterns determine its
structural form
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Evolutionary Patterns of Strategy and
Organizational Structure
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Organization structure is simply a tool to
implement and manage strategies
Firms frequently alter their structure as
they grow in size and complexity
Three basic structure types:
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simple structure
functional structure
multi-divisional structure (M-form)
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Strategy and Structure Growth
Pattern: Simple Structure
Simple
Structure
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Strategy and Structure Growth
Pattern: Simple Structure
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Organizational form in which the ownermanager
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Staff
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makes all major decisions directly
monitors all activities
serves as an extension of the manager’s
supervisory authority
Matched with focus strategies and
business-level strategies
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commonly compete by offering a single
product line in a single geographic market
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Strategy and Structure Growth
Pattern: Simple Structure
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Growth creates
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complexity
managerial and structural challenges
Owner-managers
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commonly lack organizational skills and
experience
become ineffective in managing the specialized
and complex tasks involved with multiple
organizational functions
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Strategy and Structure Growth
Pattern: Functional Structure
Simple
Structure
Efficient implementation
of formulated strategy
Sales GrowthCoordination and
Control Problems
Functional
Structure
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Strategy and Structure Growth
Pattern: Functional Structure
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Chief Executive Officer (CEO)
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Functional line managers in dominant
organizational areas
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limited corporate staff
production
marketing
engineering
– accounting
– R&D
– human resources
Supports use of business-level strategies
and some corporate-level strategies
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single or dominant business with low levels of
diversification
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Strategy and Structure Growth
Pattern: Functional Structure
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Differences in orientation among
organizational functions can
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impede communication and coordination
increase the need for CEO to integrate
decisions and actions of business functions
facilitate career paths and professional
development in specialized functional areas
cause functional-area managers to focus on
local versus overall company strategic issues
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Strategy and Structure Growth
Pattern: Multidivisional Structure
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Strategic control
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Top corporate officer delegates responsibilities
to division managers
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operating divisions
each division is separate business or profit center
for day-to-day operations
for business-unit strategy
Appropriate when the firm grows through
diversification
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Strategy and Structure Growth
Pattern: Multidivisional Structure
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Three major benefits
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corporate officers able to more accurately monitor
the performance of each business, which simplifies
the problem of control
facilitates comparisons between divisions, which
improves the resource allocation process
stimulates managers of poorly performing divisions
to look for ways of improving performance
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Strategy and Structure Growth
Pattern: Multidivisional Structure
Simple
Structure
Efficient implementation
of formulated strategy
Multidivisional
Structure
Sales GrowthCoordination and
Control Problems
Functional
Structure
Efficient
implementation
of formulated
strategy
Sales GrowthCoordination and
Control Problems
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Matching Structure and Strategy
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Different forms of the functional
organizational structure are matched to
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cost leadership strategy
differentiation strategy
integrated cost leadership/differentiation strategy
differences in these forms seen in three
important structural characteristics
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specialization
centralization
formalization
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Structure for Cost Leadership
Strategy
• Operations is main function
• Process engineering is
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Office of the President
emphasized over R&D
Large centralized staff
Formalized procedures
Structure is mechanical, job
roles highly structured
Engineering
Centralized Staff
Accounting
Operations
Marketing
Personnel
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Structure for Differentiation Strategy
President and
Limited Staff
R&D
New Product
R&D
Marketing
Marketing
Operations
Finance
Human
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 and promote new ideas
• Overall structure is organic; job roles are less structured
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Multidivisional Structure
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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
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Multidivisional Structure
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Managers try to strike a balance between:
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competing among divisions for scarce capital
resources
creating opportunities for cooperation to develop
synergies
The goal is to maximize overall firm
performance
The decision-making of managers in a multidivisional structure may be:
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centralized or decentralized
bureaucratic or non-bureaucratic
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Multidivisional Structure
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Balance on these dimensions may change
over time
Structure will evolve over time with:
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changes in strategy
degree of diversification
geographic scope
nature of competition
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Three Variations of the Multidivisional
Structure
Multidivisional
Structure
(M-form)
Cooperative
Form
Competitive
Form
Strategic Business-Unit
(SBU) Form
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Cooperative Form of Multidivisional
Structure: Related-Constrained Strategy
Headquarters Office
President
Government
Affairs
Legal
Affairs
Corporate
R&D Lab
Strategic
Planning
Corporate
Human
Resources
Product
Division
Product
Division
Product
Division
Corporate
Marketing
Corporate
Finance
Product
Division
Product
Division
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Cooperative Form of Multidivisional
Structure: Related-Constrained Strategy
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Structural integration devices create tight links
among all divisions
Corporate office emphasizes centralized strategic
planning, human resources, and marketing to
foster cooperation between divisions
R&D is likely to be centralized
Rewards are subjective and tend to emphasize
overall corporate performance, in addition to
divisional performance
Culture emphasizes cooperative sharing
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Related-Linked Strategy
SBU Form of Multidivisional Structure:
Headquarters Office
Corporate
R&D Lab
President
Strategic
Planning
Corporate
HRM
SBU
Division
Corporate
Marketing
Corporate
Finance
SBU
Division
Division
Division
SBU
Division
Division
Division
Division
Division
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SBU Form of Multidivisional Structure:
Related-Linked Strategy
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Structural integration devices create tight links
among all divisions
Corporate office emphasizes centralized strategic
planning, human resources, and marketing to
foster cooperation between divisions
R&D is likely to be centralized
Rewards are subjective and tend to emphasize
overall corporate performance, in addition to
divisional performance
Culture emphasizes cooperative sharing
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Competitive Form of Multidivisional
Structure: Unrelated Diversification Strategy
Headquarters Office
President
Legal
Affairs
Finance
Division
Division
Division
Division
Auditing
Division
Division
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Competitive Form of Multidivisional
Structure: Unrelated Diversification Strategy
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Corporate headquarters has a small staff
Finance and auditing are the most prominent
functions in the headquarters to manage cash
flow and ensure the accuracy of performance data
coming from divisions
The legal affairs function becomes important
when the firm acquires or divests assets
Divisions are independent and separate for
financial evaluation purposes
Divisions retain strategic control, but cash is
managed by the corporate office
Divisions compete for corporate resources
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Multidivisional Structure: Other
Points
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Complex multi-divisional structure firms
may be simultaneously
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centralized and decentralized
depending upon the various business-level
strategies employed throughout the firm’s
individual businesses
Multi-divisional structure firms use a
combination of:
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strategic controls
financial controls
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Characteristics of Various Structural
Forms
Structural
Characteristics
Cooperative
M-Form
SBU
M-Form
Competitive
M-Form
Type of
Strategy
RelatedConstrained
RelatedLinked
Unrelated
Diversification
Degree of
Centralization
Centralized at
Corporate
Office
Partially
Centralized
in SBUs
Decentralized
to Divisions
Extensive
Moderate
Nonexistent
Use of
Integrating
Mechanisms
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Characteristics of Various Structural
Forms
Structural
Characteristics
Cooperative
M-Form
SBU
M-Form
Competitive
M-Form
Divisional
Performance
Appraisal
Subjective
Strategic
Criteria
Strategic &
Financial
Criteria
Objective
Financial
Criteria
Divisional
Incentive
Compensation
Linked to
Corporate
Performance
Linked to
Linked to
Corporate
Divisional
SBU & Division Performance
Performance
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Worldwide Geographic Area
Structure: Multidomestic Strategy
Asia
Latin
America
United
States
Multinational
Headquarters
Australia
Middle
East/
Africa
Europe
• product characteristics
tailored to local
preferences
• isolation from global
competitiion
– establish protected
market positions
–compete in industry
segments most
affected by
differences among
local countries
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Worldwide Product Divisional
Structure: Global Strategy
• standardized products
across countries
• economies of scope
and scale
• outsource some
Global
Worldwide
Worldwide primary or support
Products
Products
Corporate
activities to the
Division
Division
Headquarters
world’s best providers
• decision-making
authority centralized
Worldwide
Worldwide
Products
Products
in worldwide division
Division
Division
headquarters
Worldwide
Products
Division
Worldwide
Products
Division
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Using the Combination Structure:
Transnational Strategy
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The combination structure has
characteristics and mechanisms that
result in an emphasis on both geographic
and product structures
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local responsiveness (multidomestic strategy)
global efficiency (global strategy)
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Strategic Network
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A strategic network is a grouping of
organizations that has been formed to create
value through participation in an array of
cooperative arrangements, such as alliances
and joint ventures
The strategic network seeks to develop a
competitive advantage in primary or support
activities
A strategic center firm often manages the
network
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Strategic Network
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strategic center firm engages in four
primary tasks
strategic outsourcing (outsources and partners
with more firms than do other network members)
competencies (supports each member’s efforts to
develop core competencies that can benefit the
network)
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Strategic Network
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strategic center firm engages in four
primary tasks
technology (manages the development and
sharing of technology-based ideas among network
members)
race to learn (guides participants in efforts to form
network-specific competitive advantages)
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Strategic Network
Strategic
Center
Firm
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Distributed Strategic Network
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International cooperative strategies often
require more complex networks
Many large multinational firms form
distributed strategic networks with multiple
regional strategic centers to manage their
array of cooperative arrangements with
partner firms
Breaking large networks into multiple
manageably-sized networks helps to manage
the complexity of maintaining many
relationships
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Distributed Strategic Network
Main
Strategic
Strategic
Center
Center
Firm
Firm
= Distributed Strategic Center Firms
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