1. Organizational Structure &
Controls
Chapter 12
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2. Chapter 3
External
The Strategic .
Strategic Management
Inputs
Environment
The Strategic Management
Process Strat. Intent .
Chapter 4
Internal
Strat. Mission
Process
Environment
Strategy Formulation Strategy Implementation
Strategic Actions
Chapter 5 Chapter 6 Chapter 7 Chapter 11 Chapter 12
Bus. - Level Competitive Corp. - Level Corporate Structure
Structure
Strategy Dynamics Strategy Governance & Control
& Control
Chapter 8 Chapter 9 Chapter 10 Chapter 13 Chapter 14
Acquisitions & International Cooperative Strategic Entrepreneurship
Restructuring Strategy Strategies Leadership & Innovation
Outcomes
Strategic
Chapter 2 Chapter 1 Feedback
Above Average Strategic
Returns Competitiveness
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3. Organizational Structure & Controls
Knowledge Objectives:
• Define organizational structure & controls &
discuss the difference between strategic &
financial controls.
• Describe the relationship between strategy &
structure.
• Discuss the functional structures used to
implement business-level strategies.
• Explain the use of three versions of the
multidivisional (M-Form) structure to implement
different diversification strategies.
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4. Organizational Structure & Controls
Knowledge Objectives cont’d…
2. Discuss the organizational structures used to
implement three international strategies.
3. Define strategic networks & strategic centre
firms.
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5. Organizational Structure
• Organizational structure & the controls that are a
part of it affect firm’s performance.
• When the firm’s strategy isn’t matched with the
most appropriate structure & controls,
performance declines.
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6. Organizational Structure
• Specifies the firm’s formal reporting relationships,
procedures, controls & authority, and decision
making process.
• Influences how managers work & the decisions
resulting from that work.
• Specifies the work to be done & how to do it
given the firm’s strategy or strategies.
• Provides the stability a firm needs to successfully
implement it’s strategies & maintain it’s
competitive advantages.
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7. Organizational Structure
•Structural Stability: Provides the capacity the
firm requires to consistently & predictably
manage it’s daily work routines.
• Structural Flexibility: Provides the opportunity to
explore competitive possibilities & allocate
resources to activities that will shape the
competitive advantages of the firm that it will
need to be successful in the future.
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8. Organizational Controls
• Guide the use of strategy.
• Indicate how to compare actual results with
expected results.
• Suggest corrective action when the differences
between actual & expected results are
unacceptable.
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9. Strategic Controls
•Concerned with examining the fit between
what the firm might do and what it can do.
•Evaluate the degree to which the firm
focuses on the requirements to implement it’s
strategies.
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10. Financial Controls
• Largely financial objective criteria used to
measure the firm’s performance against
previously established quantitative standards.
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11. 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:
Simple Structure
Functional Structure
Multi-divisional Structure (M-form)
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12. Strategy & Structure Multidivisional Structure
Growth Patterns Sales Growth
Coordination & Control Problems
Efficient implementation
of formulated strategy
Functional Structure
Sales Growth
Coordination & Control Problems
Efficient implementation
of formulated strategy
Simple Structure
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13. Simple Structure
Owner / Manager
Owner/Manager makes all major decisions
directly and monitors all activities.
Difficult to maintain this structure as
the firm grows in size and complexity.
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14. Functional Structure
First stage beyond a Simple Structure
Fine for single or dominant-business firms
Allows specialization of tasks
* Production * Engineering * Sales & Marketing
* Finance * Accounting * Human Resources
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 conflicts between myopic functional
managers
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15. Functional Structure
Chief Executive Officer
Corporate
Corporate Corporate Strategic Corporate
Human
R&D Finance Planning Marketing
Resources
Sales & Human
Finance Production Engineering Accounting
Marketing Resources
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16. Functional Structure for
Cost Leadership Strategy
Office of the President
• Operations are the main function
• Formalized procedures allow for Relatively
low-cost culture Centralized large
• Structure is mechanical; job roles Staff centralized
are highly structured staff
• Process engineering is emphasized coordinates
rather than new product R&D functions
Engineering Marketing Operation Personnel Accounting
s
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17. Functional Structure for
Differentiation Strategy
President and
Limited Staff
R&D Marketing
New Product Human Finance
Marketing Operations
R&D 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 & promote new ideas.
• Overall structure is organic; job roles are less structured.
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18. 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.
Managers try to strike a balance between:
Competing among divisions for scarce capital resources
and
Creating opportunities for cooperation to develop synergies
The goal is to maximize overall firm performance.
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19. Multi-Divisional Structure
The decision-making of managers in a Multi-
Divisional structure may be:
Centralized or Decentralized
Bureaucratic or Non-bureaucratic
Balance on these dimensions may change over
time.
Structure will evolve over time with:
Changes in strategy Geographic scope
Degree of diversification Nature of competition
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20. Multi-Divisional Structure
Corp.
Head Chief Executive Officer
quarters
Corporate
Corporate Corporate Strategic Corporate
Human
R&D Finance Planning Marketing
Resources
Division Division Division Division
Sales & Human
Finance Production Engineering Accounting
Marketing Resources
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21. Three Variations of the
Multi-Divisional Structure
Multi-Divisional
Structure
(M-form)
Cooperative Strategic Business Unit Competitive
Form (SBU) Structure Form
Related- Related- Unrelated
Constrained Linked /Holding
Strategy Strategy Company
Strategy
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22. Cooperative Form
Related-Constrained Strategy
Corp. Headquarters President
Government Legal
Affairs Affairs
Corporate Strategic Corporate Corporate Corporate
Planning Human Marketing Finance
R&D Lab Resources
Product Product Product Product Product
Division Division Division Division Division
• Structural integration devices create tight links among divisions
• Large corporate office with R&D likely to be emphasized
• Culture emphasizes cooperative sharing
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23. Product & Functional Matrix
Each Unit reports to Senior
Dimensions Each Project has
2Management
Functional AND Project Functional Units
Managers
Operations Marketing Finance People
Manager Operations Marketing Finance People
Product A Unit Unit Unit Unit
Manager Operations Marketing Finance People
Product B Unit Unit Unit Unit
Manager Operations Marketing Finance People
Product C Unit Unit Unit Unit
Manager Operations Marketing Finance People
Product D Unit Unit Unit Unit
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24. SBU Form Related-Linked Strategy
Corp.
President
Headquarters
Corporate
Corporate Corporate Strategic Corporate
Human
R&D Finance Planning Marketing
Resources
Strategic Strategic Strategic Strategic
Business Business Business Business
Unit A Unit B Unit C Unit D
Division Division Division Division Division Division
• Structural integration exists among divisions within, but not across SBUs.
• Each SBU may have its own budget for staff to foster integration.
• Corp. headquarter’s staff serve as consultants to SBUs & divisions.
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25. Competitive Form
Unrelated /Holding Company Strategy
Corp.
Headquarters
President
Legal Finance Auditing
Affairs
Division Division Division Division Division
• Corporate headquarters (HQ) has a small staff.
• Finance and auditing are the most prominent functions in the HQ.
• Divisions are independent & separate for financial evaluation.
• Divisions retain strategic control, but cash is managed by the corporate
office.
• Divisions compete for corporate resources.
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26. Characteristics of Diversification Strategies
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27. Worldwide Geographic Area Structure:
Multidomestic Strategy
• Product characteristics
United
Canada tailored to local
States preferences
• Isolation from global
competition
Latin Multinational – establish protected
Europe
America Headquarters market positions,
compete in industry
– segments most
Middle affected by
Asia East/ differences among
Africa local countries
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28. Worldwide Product Divisional Structure:
Global Strategy
Worldwide Worldwide • Standardized products
Products Products across countries
Division Division
• Economies of scope
and scale
• Outsource some
Worldwide Global Worldwide primary or support
Products Corporate Products
Division Division activities to the world’s
Headquarters best providers
• Decision-making
Worldwide Worldwide authority centralized in
Products Products worldwide division
Division Division
headquarters
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29. 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.
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30. A Strategic Network
Strategic
Centre
Firm
Centre firm is engaged in four primary tasks –
Strategic Outsourcing, Competencies, Technology &
A Race to Learn.
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31. The Primary tasks of the Strategic Centre Firm
Strategic Outsourcing: Outsourcing and partnering
with more firms than the other network firms.
Competencies: Seeks ways to support each
member’s efforts to develop core competencies that
can benefit the network.
Technology: Responsible for managing the
development & 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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32. A Distributed
Strategic Main
Strategic
Network 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.
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