11/30/2015

Session 10

STRATEGY AND STRUCTURE

Three levels of domestic strategies

Corporate Level strategy
To enter new domains & defend own domain by managing
competencies across business level strategies
Business level strategy
To combine functional core competencies to defend
domain
Function level strategy
To develop & strengthen capabilities in one or more
functions

11/30/2015

Two generic strategies

Low cost strategy focused versus diffused
Differentiation strategy focused versus
diffused

Strategy, structure & culture

Cost strategy:
Mechanistic structures
Cultural values around economy, frugality, speed
in process/turnaround

Differentiation strategy:
Organic structures
Cultural values around innovation,
responsiveness, customer orientation

11/30/2015

Corporate level strategy

Integration strategy integrate supply chains
and/or distribution chains
Diversification strategy related or unrelated
diversification

Corporate level strategy, structure &

culture
Integration strategy & related diversification

Division structure based on markets or geographies

Communication across divisions & division-corporate office
Large and active Corporate Office
Strong integrating roles based on hierarchy, liaison, integrating
teams/committees
Culture based on common norms of sharing information, supporting
each division, low competition

Unrelated diversification
Loosely coupled structure, with semi-independent divisions/holding
companies - conglomerates
Small corporate office, mainly in higher policy making functions
Often unique culture & structure suited to the particular domain
appropriate for individual divisions

11/30/2015

GLOBAL STRUCTURES

Main issue
How to coordinate and how much to
coordinate across the geographies?
Centralization versus decentralization
Formalization versus informal means

Role of type of business

Role of national cultures

11/30/2015

Structures for global business

Multi-domestic structure
International structure: core competencies
centralized (e.g. R&D, marketing)
Global structure: main value creation activities
centralized at lowest cost location
Transnational structure: matrix
Main trade-off:
Responsiveness versus efficiency
Decentralization versus centralization

Need for integration

Trade-offs in global business

Transnational

Global
product
group
International

Multi-domestic

Local responsiveness

11/30/2015

Transnational corporations
Assets and resources dispersed globally and
highly specialized
Dynamic, changing structures, responsive to
needs
Subsidiary managers often initiate ideas,
innovations and strategy
Unification and coordination achieved through
culture, shared vision, values, management style;
formal structural mechanisms, though important
not necessarily primary means

Matrix structure - variants

Matrix as a process, temporary, transitory
membership
Matrix as a more permanent feature, with
functional overlay
Hybrid structures
Multidivisional matrix structure

11/30/2015

Matrix structures
Top management
(outside matrix)

Input side
manager
Demand
side
manager

Matrix

Overlay

2-boss matrix
manager

Matrix form

Summary:
Tries to take advantage of functional expertise of functional form and merges with
requirements of project/product

Advantages:

Disadvantages:

Efficient due to resource sharing

Strong project/product focus
Easier post-project transition
Flexible
Dysfunctional conflict between managers
Infighting between different managers
Stressful for participants
Slow, as decisions are consensus based

Example: R&D or software development teams for different clients

11/30/2015

The Matrix structure When appropriate

Environmental uncertainty:
Issue: Individuals cant be at two places in same time (customer
requirements), and have multiple specialization (functional
requirements).
Solution: Dual focus and thereby dual command
Task uncertainty:
Issue: Uncertain task environment arising from rate of environmental change and ensuing unpredictability,
increasing complexity of products/services offered,
increasing interdependence between producing units to cater to the job.

Solution: High information processing capacity.

Pressures for economics of scale:
Issue: effectively utilize scarce them and deliver on cost/quality
Solution: Rotation and sharing of scarce human resources across
tasks