Strategy Implementation

Strategy and Structure

• WHY STRUCTURE FOLLOWS STRATEGY
• Changes in strategy may require
– New structure for successful implementation
• Research results indicate
– Organizational structure affects performance
– Structure merits reassessment whenever strategy
changes
– New strategy likely entails different kills & key activities
• How work is structured is a means to an end -- Not
an end in itself!
WHY STRUCTURE FOLLOWS
STRATEGY
Structure is a tool for
Facilitating execution of strategy
Helping to achieve performance targets
“Harnessing” individual efforts
Coordinating performance of diverse tasks
 Matching Structure to Strategy
Guidelines for helping structure to fit strategy:
•Pinpoint primary activities, comps, caps nb to strategy
•Decide on balance between internal & outsourced
•Primary activities, caps & critical units as building blocks of
structure
•Degree of authority needed to manage each unit
•Co-ordination mechanisms
•Relationship with external environment
 Strategy critical activities
• Identify critical and primary activities
important for strategy implementation
• When company adopts market leader strategy
critical tasks include: low cost
producer,special promotional appeal,tight
quality control,special design
• Critical tasks for hitech industries:R&D,pdt
development,market research
 Understanding relation among
activities
 Relationship among critical, supportive and
routine activities should be analyzed and
scrutinize
 Grouping activities into organization units
 Approaches to organization
structures
• Simple
• Functional
• Product
• Geographic
• Decentralised
• SBU
• Matrix
 Strategy Implementation

 Organization Structures

• Simple Structure

 Owner-manager makes decisions.

President  Little specialization of tasks.
 Few rules, little formalization.
 Advantages:
- Provides high flexibility
- Rapid product introduction
- Few coordination problems
Employees
 Disadvantages
• Cannot respond to increasing demand beyond
point
• Excessive dependence on owner manager
who is not a professional
• Applicable to small markets or for less
demand products
 Organization structure

• Functional structure

President
Legal
Accounting
Affairs

HRM Finance Marketing R&D Production

 Strategy Implementation

 Organization structure
• Functional structure

 Advantages

- Centralized control of operations

- Promotes in-depth functional expertise
- Enhances operating efficiency where tasks are routine

 Disadvantages

- Functional coordination problems

- Inter-functional rivalry
- Overspecialization and narrow viewpoints
- Hinders development of cross-functional experience
- Slower to respond in turbulent environments
 Organization structure

• Product-divisional structure

President
Government Legal
Affairs Affairs

Corporate
Corporate Strategic Corporate Corporate
Human
R&D Lab Planning Marketing Finance
Resources

Product Product Product Product Product

Division Division Division Division Division
 Strategy Implementation

 Organization structure
• Product-divisional structure

 Organization based on products versus functions

 Each division is a separate business in which day-to-day

decisions are delegated to divisional managers.

 Divisions are managed using strategic controls – detailed

knowledge of firm operations allows managers to remain actively
involved.
 Overdiversification leads to inability to process detailed information
and a reliance on financial controls to evaluate managers.
 Strategy Implementation

 Organization structure
• Product-divisional structure

 Advantages

- Decentralized decision making

- Each business is organized around products
- Puts profit/loss accountability on managers
- Facilitates rapid response to environmental changes
- Allows efficient management of a large number of units

 Disadvantages

- May lead to costly duplication of functions

- Inter-divisional rivalry
- Corporate managers may lose in-depth understanding
 • Matrix Structure President

R&D Production Marketing Finance

Business Specialists Specialists Specialists Specialists

Project

Business Specialists
Specialists Specialists Specialists
Project

Business
Specialists Specialists Specialists Specialists
Project
 Strategy Implementation

 Organization structure
• Matrix structure

 Contains aspects of both functional and product-divisional

structures.
 Advantages:
- Creates checks and balances between competing viewpoints
- Promotes holistic view of the firm
- Encourages cooperation and consensus building
 Disadvantages:

- Very complex and costly

- Shared authority increases communication time
- Difficult to respond rapidly
- May promote bureaucracy and reduce innovation (in large firms).