Transcript Slide 1

Strategy Implementation
 What must we do to put the strategy in
place, execute it proficiently, and
produce good results?
 Creating FITS between strategy and
external environment and creating FITS
inside the organization
 Control, coordination, and motivation
issues
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Components of the Strategy
Execution/Implementation Process
The Action
Agenda for
Implementing
Strategy
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The Strategic Management Process
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Chapter 11: Organizational Structure
(OS) and Controls
 Overview:
Define organizational structure and controls
 Describe the relationship between strategy & structure
 Describe the functional structures for businesslevel strategies
 Describe three versions of the multi-divisional (M-form)
structure for different diversification strategies
 Describe structures implementing three international
strategies
 Describe the differences between strategic, financial
and behavioral controls
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Organizational Structure & Controls
 Organizational structure and controls provide
framework within which strategies are used
 Different structures and controls are required to
effectively implement different strategies
 Must match structure and controls to strategy and
strategy implementation
 Fit between strategy and structure affects above
average returns and performance
 Better fit = Better performance
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Organizational Structure & Controls
 Organizational Structure
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Specifies the firm’s formal reporting relationships, procedures,
controls, authority, and decision-making processes
In other words, specifies work to be done and how to do it
Effective use of firm’s strategies facilitated when structure is
properly aligned
Structure should allow for both
 Structural stability: Capacity firm requires to consistently and
predictably manage its daily work routines
Structural flexibility: Opportunity to explore competitive
advantages firm will need to be successful in the future
Structure is a critical component of effective strategy
implementation
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Organizational Structure & Controls
 Some structural characteristics defined
 Specialization
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Centralization
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Concerned with the type and number of jobs required to
complete work
Degree to which decision-making authority is retained at
higher managerial levels
Formalization
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Degree to which formal rules and procedures govern work
 Other structural characteristics
 Authority, Responsibility, Degree of Integration, how
Coordination is achieved, Reporting relationships,
Standardization
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The Relationship Between Strategy and
Structure
 Modifying current strategy or selecting a new one calls for
changes to organizational structure
 Reciprocal relationship - change to one causes change in
the other
 No one structure is superior to the others
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No best or optimal structure for all firms
 Strategy-structure fit can lead to a competitive advantage
and above average returns
 Structure must match strategy
 Structural choice should be based on control, coordination,
and motivation issues
 Several structure forms can be used to implement
strategies
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Strategy and Structure
 Three major types of organizational structures
 Simple
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Owner-manager makes all major decisions and monitors all
activities
Informal relationships, few rules, limited task specialization
Matched with focus strategies and business-level strategies
As firm grows more complex, need to add layers and controls
Functional
Multidivisional (M-form)
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Strategy and
Structure
Growth Pattern
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Functional Structure for Implementing
a Cost Leadership Strategy
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Functional Structure for Implementing
a Differentiation Strategy
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Three Variations of the
Multidivisional Structure
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Cooperative Form of the Multidivisional Structure
for Implementing a Related Constrained Strategy
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SBU Form of the Multidivisional Structure for
Implementing a Related Linked Strategy
•Structural integration among divisions within SBUs, but independence across SBUs
•Strategic planning may be the most prominent function in headquarters for managing the strategic
planning approval process of SBUs for the president
•Each SBU may have its own budget for staff to foster integration
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•Corporate headquarters staff serve as consultants to SBUs and divisions, rather than having direct input
to product strategy, as in the cooperative form
Competitive Form of the Multidivisional Structure
for Implementing an Unrelated Strategy
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Additional Characteristics of the Multidivisional
Structure (Table 11.1)
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Worldwide Geographic Area Structure for
Implementing a Multidomestic Strategy
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Worldwide Product Divisional Structure for
Implementing a Global Strategy
•The HQ circle indicates centralization to coordinate information flow among worldwide divisions
•Corporate HQ uses many intercoordination devices to facilitate global economies of scale and scope
•Corporate HQ also allocates financial resources in a cooperative way
•High formalization, global integration
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Hybrid Form of the Combination Structure for
Implementing a Transnational Strategy
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Assets and operations may be centralized/decentralized
Functions may be integrated/nonintegrated
Relationships may be formal/informal
Coordination mechanisms may leverage efficiency/flexibility
Mandates to subsidiaries may be global/specialized-contribution/ localized-implementation
There are competing objectives
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Matches between Cooperative Strategies
and Strategic Network Structures
 Network strategy: Partners
form several alliances in order
to improve the performance of
the alliance network itself
through cooperative endeavors
 Strategic network: Group of
firms that form [around core] to
create value to participating in
multiple cooperative
arrangements
 Business-level
complementary alliances
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Vertical and Horizontal
CSAs
Used to facilitate product &
market diversification
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Franchising
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Organizational Structure & Controls
 Organizational Controls
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Guide the use of strategy, indicate how to compare actual
results with expected results, and suggest corrective actions
to take when the difference is unacceptable
Are an important aspect of structure
Help managers recognize when it is time to adjust structure
Firms use strategic, financial, and behavioral controls to
support their strategies
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The relative use of these types of controls varies by type of
strategy
Must properly balance the use of them
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Organizational Structure & Controls
 Strategic Controls: largely subjective criteria intended to verify
that the firm is using appropriate strategies for the conditions in
the external environment and the company’s competitive
advantages
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Concerned with fit between what firm might do vs. what it can do
Used to evaluate degree to which firm focuses on the requirements
to implement its strategies
Help the firm understand what it takes to be successful
Focus on the content of strategic actions
Emphasized by firms pursuing differentiation at business level,
related diversification at corporate level, and using a multidomestic
international strategy
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Organizational Structure & Controls
 Financial Controls: largely objective criteria used to
measure firm’s performance against previously established
quantitative standards
 Usually accounting or market-based measures
 ROI, ROA, economic value added
 Involves comparison of current performance with past
performance and with industry averages and
competitors’ performance
 Focus on short-term financial outcomes
 Emphasized by firms pursuing low cost strategy at
business level, unrelated diversification at corporate
level, and using a global international strategy
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Organizational Structure & Controls
 Behavioral Controls: the regulation of activities and
behaviors within organizations
 Used to adjust or bring about conformity to
specifications or objectives
 Can be achieved through the use of culture, structure,
rewards, and policies/procedures
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Includes controlling ethical behavior
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