Competitive Strategy

6. Influencing via Design

By John Sanders
School of Management & Languages
Heriot-Watt University
Lecture format
 Introduction:
 Generating Alternative Strategies SWOT/TOWS Analysis
 What is organisational design/structure?
 Strategy and Structure
 Starting from scratch
 Functional and Multi-Divisional Structures
 Functional and specialist silos
 Vertical Integration
 Horizontal Integration - Horizontal & Network Structures
 Conclusion
Generating Alternative Strategies
 SWOT analysis is a tool for helping assess the
current situation for the firm.
 However, we need to be able to combine the
information in the SWOT analysis in a meaningful
way to generate alternative strategies that we
might pursue.
 The TOWS matrix is a tool designed to match
external opportunities and threats with internal
strengths and weaknesses.
SWOT Analysis

Strengths Weaknesses
Internal 1. 1.
2. 2.
Environment
3. 3.

Opportunities Threats
External 1. 1.
2. 2.
Environment
3. 3.
TOWS Matrix
 Technique used in strategy formulation for
combining
 External analysis
Opportunities
Threats
 Internal analysis
Strengths
Weaknesses
TOWS Matrix
From External Analysis

Opportunities: Threats:
1. 1.
2. 2.
3. 3.

Strengths: SO Strategies
ST Strategies
1. Use strengths to
Use strengths to
2. take advantage
avoid threats
3. of opportunities
From
Internal Analysis WO Strategies
WT Strategies
Weaknesses: Take advantage of
Defensive strategies
1. opportunities by
to minimize
2. overcoming
weaknesses and
3. weaknesses
avoid threats
Organisational Design
 The term organisational design can be defined
narrowly, as the process of reshaping organisation
structure and roles, or it can more effectively be
defined as the alignment of structure, process,
system or standard of measurement

rewards, metrics and talent with the strategy of

the business.
Organisational Design
 The term organisational design also refers to the
physical location and layout of employees within
a company’s premises.
Organisational Design
 Within organisational design we investigate
concepts that in particular encourage
collaboration and the sharing of information
amongst employees, teams, units, departments
and divisions within the same organisation.
Introduction
 The goal of an organisation’s formal structure is to
provide the means for implementing its strategy.
 Put simply, strategy determines what a company needs
to specialise in.
 This translates into a formal plan for grouping activities
to achieve optimal levels of group specialisation and
between group co-ordination.
 The structure of the specialisation embedded in the
formal structure should be tied to the strategy of the
company.
Strategy and Structure
How How can I
should outperform
I run my
business?
the
competition?

Cost leader –
Differentiated product Focus on niche
Undifferentiated
or service
product or service
Structure is a key ingredient of putting stratyegy into action

Strategy and Structure

video 47:30
Bottom-Up Flat Horizontal Structures Vertical Structures Tall Top-Down
wide span narrow span
of control Product, market, of control
Team-Based or geographic Functional
Matrix Structure Structure Structure
structure

Fluid

Democratic A functional structure

Differentiation Strategy Low-Cost Strategy is based on the primary
& Participative activities that have to be
undertaken by an orga-
Few layers of nisation such as produc-
management Complex Structure Simple Structure tion finance & accounting,
marketing, human resour-
Sr. managers inter- ces and research and
developemnt (R&D). This
act with customers structure is usually found
and front-line Decentralised decision-making Centralised decision-making
in smaller cos. or those
employess with narrow rather than
diverse product ranges.
Employee may per- High Differentiation Low Differentiation
form different func- Command and
tions- and may report Control
to several supervisors Creat Silos
rather than the boss High Integration Low Integration
Rigid
Flexible Hierarchical
Able to adapt well Organic Structure Mechanistic Structure Bureaucratic
to change Specialized Functions
Agile Difficult to cope with
Integration - units / divisions function cooperatively, in a harmonious interrelated manner rapid change
Starting from scratch
 What sorts of tasks will the organisation be
required to perform?
 Manufacturing
 Distribution
 Storage
 Marketing
 Sales
 Group tasks into specific jobs
 Results in a division of labour between workers
that is effective and efficient.
Starting from scratch
 Once tasks are grouped into jobs, managers must
decide how to group jobs together.
 Function: people working together with similar
skills, tools or techniques to perform their jobs.
 Functional structure consists of departments such
as marketing, production, and finance.
 Workers can learn from others doing similar tasks.
 Easy for managers to monitor and evaluate workers.
 Functional Structure - is based on the primary activities that have to be undertaken by an organization such as
production, finance & accounting, marketing, human resources and research & development (R&D).

Functional Structure
Advantages
* CEO in touch with all operations
* Reduces / simplifies control mechanisms
* Sr. managers direct hand-on involvement in operations
* Clear definition of roles, responsibilities and accountabilities
* Specialists at senior and middle management levels
(concentration of expertise thus fostering knowledge
of development)
Disadvantages
* Sr. managers over-burdened with routine matters
* Sr. managers might find it hard to take a strategic view of
the organization as a whole; thus can be inflexible
* Difficult to cope with diversity in terms of product or
geography Type text here
* Coordination between functions is difficult; seperate
General Manager functional departments tend to be inward looking - so
called 'functional silos' making it difficult to integrate the
knowledge of different functional specialists

Finance and
Production Sales and marketing Personnel
accounting
department department department
department

Finally, because they are centralised around particular functions, functional structures have a problem at coping with product or
geographical diversity. For example, a central marketing department may try to impose a uniform approach to advertising
regardless of the diverse needs of the organization's various SBUs around the world.

Within multidivisional structures, the divisions themselves may be split into functional departments
Divisionalisation often comes about as an attempt to overcome the problems that functional structures have in dealing
with the diversity of products or geography.

Multi-Divisional Structure
 A division is a collection of functions working
together to produce a product.
Head Office
It aligns a company according to
It coordinates the activities of the individual divisions, which are
company's employees who may make based on geographic locations,
and sell numerous products products or services
or services across multiple Central Services (i.e. finance) For example geographic-
regions, states or countries divisional structure, product-
- product or geographical diversity based divisional structure
Every division is a profit or business
centre - SBU Division A Division B Division C Division D

dissimilar
products;
decentralised
functions Functions Functions Functions Functions

Within multidivisional structures, the divisions themselves may be split into functional departments
 Type text here

Functional and specialist silos

 Integration is difficult because specialisation
within groups creates differentiation in the goals
and behaviours of these groups, which hampers
co-ordination between groups.

Seperate fucntional depart-

ments tend to be inward
looking - the so called
'functional silos' - making
it difficult to integrate the
knowledge of the different
functional specialists
Matrix Management is used to break silos

Functional and specialist silos

Departments operate as individual business units or entities within the organization.
Any management system that is unable to operate with any other system. It's closed off from other
systems within the organization. Is there any conflicting departmental goals ?!

Customer services Manufacturing Marketing Finance

Highest possible standard of Few products with long Build income and
Offer customers choice via
service and support 24 x 7 set-up times variety (i.e. proliferation) reduce costs

Managers are responsible for one specific department within an organization and each
manager has different priorities, responsibilities and vision. Often, managers are not
aware of the priorities and goals of other departments and there is little communication,
.collaboration and teamwork between these business units
Functional Silos: Friends!
Integration - units / divisions function cooperatively in a harmonious interrelated manner; to coordinate
or blend into a functioning or unified whole; Organizational integration supports a co.'s resilience
(flexibility; adaptability) to external forces such as economy, technology, political factors, social

Vertical Integration Organizational Integration factors and stakeholders

 Organisational integration occurs along two

dimensions - vertical and horizontal. Targeting advantageous
fpartnership with other firms;

 Integration via the vertical dimension occurs

merger, joint venture,

through the hierarchy of authority.

 In traditional structures, each group of specialised
activities has a common boss that takes
responsibility for the functioning and
Organizational integration is the extent to which organiza-
performance of the group.tional components rapidly and adequately respond and/or
adapt to each other while pursuing common organizational
goals (Bakri and Pinsonneault, 2005)
 Co-ordination between the managers within the
group occurs through the common boss.
Organizational integration is achieved when organizational goals are aligned between the external and internal influences. Orga-
nizational alignment promotes collaboration and teamwork across all areas of work internally within the organization. So, to achieve
organizational integration, a co. must align itself with its strategy, culture , staff skills, technology, structure and management style
with its goal.
 Vertical Integration
Crossuntional teams

Cross-funtional teams can support

creativity and innovation
Horizontal Integration
 Integration via the horizontal (or lateral)
dimension occurs via integrating mechanisms
 Integrating mechanisms generate communication
and co-ordination directly between
manager/specialists of different groups without
the direct need to go through the chain of
command (vertical hierarchy).
Horizontal Integration Integration Mechanisms

a) Liaison
Marketing Production

Marketing Production
b) Task Force or Team

Research and
Engineering Development
Horizontal Integration Integration Mechanisms
c) Integrating Role

Camera Division Integrating Role Photocopying Division

Manager or project team responsible for integration

The Matrix structure - is a combination of structures which could take the form of product and geographical divisions
or functional and divisional structures operating in tandem; it combines different structural dimensions simultaneously.

Horizontal Structures Popular approach for organising modern cos

particularly those involved in creative or high-
technology industries

Less Hierarchical
Team-based structure Less Structured The authority of a functional
More Fluid manager flows vertically
It is a blend of the
projectized and the downwards, and the authority of
functional organization CEO the project manager flows
structure sideways PM - Project Manager
FM - Functional Manager
Advantages
* Integrate knowledge
- efective at knowledge
management as they Research and Sales and Logistics &
Engineering
allow seperate areas
of knowledge to be development Marketing procurement PM & FM
integrated across org-
anizational boundries
Power
* Flexible - they allow different & Authority
dimensions of the organisation to
be mixed together; they are
particularly attractive to cos.
opearting globally because of the membership maybe fluid
STRONG
possible mix between local and
global dimensions
cross-fuctional teams
will work on various
with specialists moving
from one team to
BALANCED
Disadvantages
projects important to
the co's purpose such
another to lend their
expertise, as and if
WEAK
* Length of time to take decisions as product develop. required
* Unclear job & task respon- or process Balance between
sibilities improvements vertival and horizontal
*Unclear cost & profit respon-
sibilities reporting
* High degrees of conflict Teams (composition is important, i.e. Belbin’s model)
Belbin - approach to profiling people on the basis of personality types, to identify their strengths and weaknesses as the members of a team
Since these authorities flow downward and sideways, this structure
is called the MATRIX ORGANISATION STRUCTURE
The Matrix structure - is a combination of structures which could take the form of product and geographical divisions
or functional and divisional structures operating in tandem; it combines different structural dimensions simultaneously

Example: Varian-Tem refer to video posted on Canvas

minute 35:20

Varian Medical Systems UK

 Varian-Tem Limited relies on a team-based organizational

to achieve its strategic purpose

design. Each team is responsible for a specific product

group. Team members have a high degree of autonomy
and are cross-trained. trained in more than one role or skill
 Self-directed work teams and organized around work
processes
wide span of control; employees are given lots of
 Very flat span of control responsibilities

 Very little formalization

.Varian Medical Systems’ equip the world with new tools for fighting cancer
Matrix structure replaces formal lines of authority with 'cross-matrix'relationships

Horizontal structures
Matrix team-based structure
President

Marketing Vice Pres. Programming Vice Pres Research Vice Pres

Videogames Videogames Basic Research

Videogames
Chief Engineer Supervisor
Sales Manager

Videogames Product Team Applications and Testing

Supervisor

Memory Products Memory Products Memory Products

Sales Manager Chief Programmer Research Supervisor

Memory Product Team

Memory Products
International Manager
Customer Service Procurement
Manager Supervisor
Advertising Manager
Horizontal structures
Project team-based structure
President Targeting advantageous
fpartnership with other firms;
merger, joint venture,

Finance Engineering Marketing Purchasing

Department Department Department Department
Financial
Project Manager
Accountant Product
Market New
Designer
Researcher Product A
Buyer
Budget
Analyst Draftsperson Advertising Project Manager
Specialist New
Buyer Product B
Management
Accountant Electrical Project Manager
Designer Market New
Planner Buyer Product C
Network Organizational Structure - is the one in which more than one organization combine to produce a good or
service. These organisations can get into partnership for a particular venture, or one organization can hire others
to handle one or more of its functions (outsourcing); i.e. marketing, production, sales and so on. Outsourcing is done

Network Structure Boundless; Highly Flexible

by organizations pursuing network structure.

The figure explains the fundamentals of a network It does not represent a firm's attribute (charateristic or inherit part)
structure. In the middle, there is the 'core company' but can be considered as a different organizational form. Tech-
that outsources or initiates the partnership in a nology and globalization both support this type of organization
network. It might not have
Managers
play a vita Flat Structure even a permanent
office
role in controlling
the internal as
well as Uber
external Hollywood
relationships Amazon
eBay
Core

Virtual organization is one whose members (individuals; groups;

Example - H&M organizational units or entire organizations) are geographically
(core company) apart, usually working by computers, emails and groupware
(electronic linking) while appearing to others to be a single,
Generic Network Spider Web unified organization
with a real physical location
Advantages (firm with outsourced (no core firm;
* Clearer focus
* Less hierarchical functions) virtual organization)
* More flat Disadvantages Involve detached and disseminated (spread throughout)
* More decentralized * Wider span of control; loss of control ! entities (individuals or groups or cos.) and requiring
* More flexible * Lack of secrecy (the outsourced firm may information technology to support their work and com-
* Lower costs also be doing work with competition) munication
* Sacrificing of profit
Conclusion
 Designing organisational structures involves are
Type text here

large measure of trial and error

trimming
 Patching and pruning occurs
 Demand fluctuations
 People and resources under or over perform
 Organisational restructuring
 Patching and pruning can create ad-hoc arrangements
that result in inefficiencies such as duplication of
effort
 Successful organisational structures are not
created instantaneously but emerge over time
 Conclusion
Product development Targeting advantageous
partnership with other firms;
Honda is another example
Canon merger, joint venture, strategic
alliance

Core product Core product

Cross-funtional teams
support creativity and Basic camera Printers
innovation

Precision Micro
Optics
Mechanics Electronics

New core product

Autofocus camera
Conclusion
Consistent with Prahalad and Hamel’s (1990) notion of core
competencies a core competency is the combination of resources and skills that distinguish a firm in a marketplace
creating its competitive advantage

 Long-term intent, strategic vision and leadership

 Shifts in priority
 Share resources
 Flexibility (mindset)
 reconfigure & reallocate
 Cross-functional or team based structure knowledge; skills, expertise,
creativity

 Targeting
 strategic alliances
 joint ventures
 outsourcing activities