Strategic Management

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Organizational Design: Structure, Culture, and Control
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1

What is strategy Implementation?

The part of the strategic management process that concerns the organization, coordination and integration of how work gets done. It is the keyto gaining and sustaining competitive advantage.

2

Accordign to the AFI Framework, described strategy implementation

• Strategy implementation
 Get things done!
 Only way to realize the values of competitive strategies
 Must close the “knowing-doing” gap!
 Key to gain and sustain competitive advantage

3

What is organizational design?

The process of creating, implementing, monitoring and modifying the structure, porcesses, and procedures of an organization.

4

Goals of organizational design

Goal is to translate strategies into realized ones
• Structure
• Processes
• Procedures

5

What are the three key levers that managers have at their disposal when designing their organizations for competitive advantage? And how are they useful.

• Structure
• Culture
• Control
Managers employe these three levers to coordinate work and motivate employees across different levels, functions, and geographies.

6

What is another term for implementation? And why?

Some scholars label implementation as the "Graveyard of Strategy". Because some managers do a good job of anayzing the firm's internal or external environment to formulate a promising business, corporate and global strategy but then fail to implement the chosen strategy successfully.

7

What is the main cause of unsucessful implementation of strategies?

managers are unable to make the necessary changes due to its effects on resource allocation and power distribution within an organization.

8

Alfred Chandler view.

Organizational structure must follow strategy in order for firms to achieve superior performance. To implement a strategy sucessfully, organiational design must be flexible enough to accomodate the formulated strategy and future growth and expansion.

9

What is organizational inertia?

o Resistance to change
 Often leads to failure because of the environmental dynamics: competition, technology, strategy…etc.

10

Name the key elements of organizational structure.

Key building blocks:
Specialization
Formalization
Centralization
Hierarchy

11

Define Specialization.

Specialization: degree to which a task is divided
Division of labor
Example: U.S. Military (Army, Air Force, Navy, Marines)

12

Define Formulation

Formalization: codified rules and formal procedures
Detailed written rules and policies
Examples: NASA, McDonald’s

13

Define Centralization.

Centralization: where the decision is made
Centralized decision making  slow response time and reduced customer satisfaction
Example: BP’s Mexican Gulf Oil Spill

14

Define hierarchy.

Hierarchy: formal, position-based reporting lines
Tall structure vs. flat structure
Tall structure higher degree of centralization
Flat structure  lower degree of centralization
Span of control

15

What is span of control?

The number of employees who directly report to a manager.

16

What are organic organizations?

Organic organizations
Organization form characterized by low degree of specialization and formalization
Flat structure
Decentralized decision making
Uses virtual team due to information technology
Example: Zappos, W. L. Gore, and many high-tech firms

17

What are mechanistic organizations?

Mechanistic organizations
High degree of specialization and formalization
Tall hierarchy
Centralized decision making
Example: McDonald’s

18

What is a simple structured organization?

Small firms with low complexity

Top management makes all important strategic decisions

Low degree of formalization and specialization

A basic organizational structure
Examples: small advertising, consulting, accounting, and law firms

19

What are functional organization?

Functional structure:
Groups of employees with distinct functional areas
The areas of expertise correspond to distinct stages in the company value chain activities
Example: College of Business Administration, School of Management…etc.

Recommended with narrow products/services
Matches well with business-level strategy
Cost leadership  Mechanistic organization
Differentiation  Organic organization
Integration strategy  Ambidextrous organization

20

What are some of the drawback from a functional organizations?

Lacks effective communication channels across departments
Lack of linkage between functions
Often solved the problems by having
cross-functional teams

It cannot effectively address a higher level of diversification

21

Explain Mmltidivisional structure organization?

Consists of several distinct SBUs
Each SBU is independent and led by a CEO
Each CEO of SBUs report to the corporate office
Examples:
Zappos is an SBU under Amazon
Skype is an SBU under Microsoft
Paypal is an SBU under eBay

Companies using M-form structure
GE, Honda

Use with various corporate strategies
Related diversification
Co-opetition among SBUs
Transfer core competences across SBUs
Centralized decision making

Unrelated diversification
Decentralized decision making
Competing for resources

22

Explain a Matrix structure.

A combination of functional and M-form structure
Creation of dual line of authority and reporting lines
Each SBU receives support both horizontally and vertically
Very versatile
Enhanced learning from different SBUs

23

What are some of the shortcoming of Matrix structures?

Difficult to implement
Complexity increases when expanding, especially globally
Unclear reporting structure causes confusion and delays

24

Explain Network structures.

Network structure
Connect centers for expertise

Benefits from communities of practice

Learning and knowledge management

Need corporate support in terms of procedures and policies

25

What is organizational culture?

Organizational culture
Collectively shared values and norms
Value: what is considered important
Norms: appropriate employee behaviors and attitudes
Artifacts: expression of culture in items such as physical design, stories, and celebrations

26

What is socialization as it relate to organization culture?

Socialization
Internalize organization’s value and norms through interactions
Think of Zappos’ core values
GM’s culture became strategic liability

27

What is founder imprinting?

Firm founders set the initial strategy, structure, and culture of an organization by transoforming their vision into reality.

28

Explain cultural change.

Core competency core rigidity
Culture no longer has good fit with the environment
Cultural change is needed

Cultural change
Brings new leadership
Mergers and acquisitions

Culture must be valuable, rare, inimitable, and non-substitutable (RBV)
Causal ambiguity and social complexity

Organizational culture is an important resource!
Southwest Airlines
Friendly and energized employees work collaboratively
Zappos
Deliver WOW through service

Cultural impact on employee behavior
Motivates employees by appealing to their ideas
Strengthen employee commitment, engagement, and effort

Culture is vital to an organization
Stronger founder imprinting leads to higher performance
Effective alignment allows development and refines organizational core competency

29

What are strategic control and reward systems?

Internal governance mechanisms put in place to align the incentives of principals(shareholders) and agents (employees)

30

How are strategic control and rewards system usefulin designing organizations for competitive advantage?

Allows managers to speciy goals, measure progress, and provide feedback.

31

What are input controls?

Mechanism in a straegic control and reward system that seek to define and direct employee behavior through a set of explicit and codified rules and standard operating procedures, considered prior to the value-creating activities.

32

What are output controls?

Mechanism in a straegic control and reward system that seek to guide employee behavior by defining expected results (output), but leave the means to those results open to individual meployees, groups, or SBU's.

33

Define organizational design and list its three components.

Organizational design is the process of creating, implementing, monitoring, and modifying the structure, process, and procedures of an organization.
The key components of organizational design are structure, culture, and control.
The goal is to design an organization that allows mangers to effectively translate their chosen strategy into a realized

34

Explain how organizational inertia can lead to the failure of established firms.

Organizational inertia can lead to the failure of established firms when a tightly coupled system of strategy and structure experiences internal or external shifts.
Firm failure happens through a dynamic, four-step process (see Exhibit 11.2).

35

Define organizational structure and describe its four elements.

An organizational structure determines how firms orchestrate employees’ work efforts and distribute resources. It defines how firms divide and integrate tasks, delineates the reporting relationships up and down the hierarchy, defines formal communication channels, and prescribes how employees coordinate work efforts.
The four building blocks of an organizational structure are specialization, formalization, centralization, and hierarchy (see Exhibit 11.3).

36

Compare and contrast mechanistic versus organic organizations.

Organic organizations are characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making.
Mechanistic organizations are described by a high degree of specialization and formalization, and a tall hierarchy that relies on centralized decision making.
The comparative effectiveness of mechanistic versus organic organizational forms depends on the context.

37

Describe different organizational structures and match them with appropriate strategies.

To gain and sustain competitive advantage, not only must structure follow strategy, but also the chosen organizational form must match the firm’s business strategy.
The strategy–structure relationship is dynamic, changing in a predictable pattern – from simple to functional structure, then to multidivisional (M-form) and matrix structure – as firms grow in size and complexity.
In a simple structure, the founder tends to make all the important strategic decisions as well as run the day-to-day operations.
A functional structure groups employees into distinct functional areas based on domain expertise. Its different variations are matched with different business strategies: cost-leadership, differentiation, and integration (see Exhibit 11.6).
The multidivisional (M-form) structure consists of several distinct SBUs, each with its own profit-and-loss responsibility. Each SBU operates more or less independently from one another, led by a CEO responsible for the business strategy or the unit and its day-to-day operations (see Exhibit 11.7).

38

Describe different organizational structures and match them with appropriate strategies.

The matrix structure is a mixture of two organizational forms: the M-form and the functional structure (see Exhibit 11.10).
Exhibits 11.8 and 11.10 show how best to match different corporate and global strategies with respective organizational structures.

39

Describe the elements of organizational culture, and explain where organizational cultures can come from and how they can be changed.

Organizational culture describes the collectively shared values and norms of its members.
Values define what is considered important, and norms define appropriate employee attitudes and behaviors.
Corporate culture finds its expression in artifacts, which are observable expressions of an organization’s culture.

40

Compare and contrast different strategic control and reward systems.

Strategic control and reward systems are internal governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees).
Strategic control and reward systems allow managers to specify goals, measure progress, and provide performance feedback.
Besides the balanced-scorecard framework, managers can use organizational culture, input controls, and output controls as part of the firm’s strategic control and reward systems.
Input controls define and direct employee behavior through explicit and codified rules and standard operating procedures.
Output control guides employee behavior by defining expected results, but leaves the means to those results open to individual employees, groups, or SBUs


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