Strategic Management

1. Organizational Structure & Controls Chapter Twelve © 2006 by Nelson, a division of Thomson Canada Limited.

2. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Ch. 12: Org. Structure & Controls Strategic Competitiveness

9. Structure Types All organizations require some form of organizational structure to implement and manage their strategies. Firms frequently alter their structure as they grow in size and complexity. Three basic structure types: Functional Structure Multi-divisional Structure (M-form) Simple Structure

10. Strategy & Structure Growth Patterns Simple Structure Functional Structure Efficient implementation of formulated strategy Multidivisional Structure Efficient implementation of formulated strategy Sales Growth Coordination & Control Problems Sales Growth Coordination & Control Problems

11. Simple Structure Owner/Manager makes all major decisions directly and monitors all activities. Difficult to maintain this structure as the firm grows in size and complexity. Owner / Manager

12. Functional Structure * Production * Finance * Engineering * Accounting * Sales & Marketing * Human Resources First stage beyond a Simple Structure Fine for single or dominant-business firms Allows specialization of tasks Overcomes information processing limits of single owner/manager Functional department heads report to Chief Executive Officer who integrates decisions & actions from a company-wide point of view. Risks conflict between myopic functional managers

13. Functional Structure Production Finance Engineering Accounting Sales & Marketing Human Resources Chief Executive Officer Corporate Finance Corporate R&D Corporate Marketing Corporate Human Resources Strategic Planning

16. Multi-Divisional Structure 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. The goal is to maximize overall firm performance. Competing among divisions for scarce capital resources Creating opportunities for cooperation to develop synergies Managers try to strike a balance between: and

17. Multi-Divisional Structure Balance of these dimensions may change over time The decision-making of managers in a Multi-Divisional structure may be: Structure will evolve over time with: Changes in strategy Degree of diversification Geographic scope Nature of competition Centralized or Decentralized Bureaucratic or Non-bureaucratic

18. Multi-Divisional Structure Corp. Head quarters Division Division Division Division Chief Executive Officer Corporate Finance Corporate R&D Corporate Marketing Strategic Planning Corporate Human Resources Production Finance Engineering Accounting Sales & Marketing Human Resources

19. Three Variations of the Multi-Divisional Structure Multi-Divisional Structure (M-form) Related-Constrained Strategy Related-Linked Strategy Unrelated /Holding Company Strategy Cooperative Form Strategic Business Unit (SBU) Structure Competitive Form

21. Product & Functional Matrix 2 Dimensions Each Unit reports to Functional AND Project Managers Each Project has Functional Units Product Functional Operations Unit Marketing Unit Finance Unit People Unit Operations Unit Marketing Unit Finance Unit People Unit Operations Marketing Finance People Operations Unit Marketing Unit Finance Unit People Unit Operations Unit Marketing Unit Finance Unit People Unit Manager Product A Manager Product B Manager Product C Manager Product D Senior Management

24. Characteristics of Diversification Strategies Structural Characteristics Centralization Of Operations Use of Integrating Mechanisms Divisional Performance Appraisal Divisional Incentive Compensation Type of Strategy Cooperative M-Form SBU M-Form Competitive M-Form Centralized at Corporate Office Centralized in SBUs Decentralized to Division Linked to Corporate Performance Linked to Corporation, Division & SBU Linked to Divisional Performance Extensive Synergies Moderate Synergies Nonexistent Synergies Financial Criteria Strategic & Financial Criteria Subjective/ Strategic Criteria Related- Constrained Related Linked Unrelated

27. Strategic Networks A Strategic Network is a grouping of organizations that has been formed to create value via participation in a set of cooperative arrangements (such as a strategic alliance). A Strategic Centre firm often manages the network The Strategic Centre firm identifies actions that increase the opportunity for each firm to achieve success through its participation in the network. The Strategic Centre firm creates incentives that reduce the probability of any single firm taking advantage of its network partners.

28. A Strategic Network Strategic Centre Firm Centre firm is engaged in four primary tasks – Strategic Outsourcing, Competencies, Technology & A Race to Learn.

30. A Distributed Strategic Network Main Strategic Centre Firm Distributed Strategic Centre Firms International Cooperative Strategies often require more complex networks. Many large multinational firms form distributed strategic networks with multiple regional strategic centres to manage their array of cooperative arrangements with partner firms. Breaking big networks into multiple manageably-sized ones helps to manage the complexity of maintaining many relationships.

31. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Ch. 12: Org. Structure & Controls Strategic Competitiveness