Chapter Two

Strategy, Organization Design,

and Effectiveness

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 Goals and
Strategy
Environment Size

Culture Technology
Structure
1. Formalization
2. Specialization
3. Hierarchy of Authority
4. Centralization
5. Professionalism
6. Personnel Ratios

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Introduction
 This week we will discuss the types of
goals and the required strategies to
reach the goals.
 Measuring the effectiveness of
organizations.
 How to design an effective
organization?

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Introduction
 An organization is created to achieve
some purpose.
 It’s purpose and direction are
determined by the top managers.
 A goal represents a result or end point
which organizational efforts are
directed.

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Top Management Role in
Organization Direction, Design, and
Effectiveness
External Environment
Opportunities Organization
Threats Design
Uncertainty
Resource Availability Structural Form – Effectiveness
learning vs.
Strategic Direction efficiency Outcomes
Information and Resources
Define Select control systems Efficiency
CEO, Top mission, operational Production Goal attainment
Management official goals, technology
goals Competing values
competitive Human resource
Team strategies policies,
incentives
Organizational
culture
Internal Situation Interorganizational
Strengths linkages
Weaknesses
Distinctive Competence
Leadership Style
Past Performance

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Top Managers
 The choices of the top managers about goals,
strategies and org.design have a big effect on
organizational performance.
 Are the goals & strategy of the organizations
fixed over time???
 Chaos & stability
 Being ready to change the goals & strategies
is vitally important.

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Goal Type and Purpose

Type of Goals Purpose of Goals

Official Goals, mission: Legitimacy

Operative goals: Employee direction and motivation

Decision guidelines
Standard of performance

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Mission
 The overall goal for an organization is often
called mission (the reason for existence).
 Describes the shared values and beliefs.
 Sometimes called as official goals.
 Mission statements are written statements.
 Serve as a communication tool – What are we
trying to achieve?

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Operative Goals
 Operative goals describe short run specific
measurable outcomes.
1. Overall Performance: Net income,
earnings per share, return on investment,
….. The others are growth and output
volume.
2. Resources: The acquisition of needed
materials, labor & financial resources from
the environment.
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The Importance of Goals
 Can provide employees a sense of
direction.
 Can motivate employees through goal
accomplishment.
 Guide employees decision making.
 Provide a standart for assesment.

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© 2004 2-10
Top Management Role in
Organization Direction, Design, and
Effectiveness
External Environment
Opportunities Organization
Threats Design
Uncertainty
Resource Availability Structural Form – Effectiveness
learning vs.
Strategic Direction efficiency Outcomes
Information and Resources
Define Select control systems Efficiency
CEO, Top mission, operational Production Goal attainment
Management official goals, technology
goals Competing values
competitive Human resource
Team strategies policies,
incentives
Organizational
culture
Internal Situation Interorganizational
Strengths linkages
Weaknesses
Distinctive Competence
Leadership Style
Past Performance

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© 2004 2-11
A FRAMEWORK FOR SELECTING
STRATEGY AND DESIGN

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Goals & Strategies
 A strategy is a plan for interacting with the
competitive environment to achieve organizational
goals.
 Goals define where the organization wants to go &
strategies define how it will get there.

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 Formulating Strategies

Similar activities
Different activies
more efficiently
than the
than its
competitors
competitiors do.
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 Porter’s Competitive Strategies
Low Cost COMPETITIVE ADVANTAGE Uniqueness

Low-costleadership
Low-cost leadership Differentiation
Differentiation
Broad

COMPETITIVE
SCOPE
Focused
Focused
Focusedlow-cost
Focused low-cost
Narrow Differentiation
Differentiation
leadership
leadership

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© 2004 2-15
Porter’s Competitive Strategies
1. Differentiation: Organizations attempt to
distinguish their products or services from
others in the industry. Targets customers
who are not particularly concerned with
price.
 Can reduce rivalary with competitors.
 Fight off the threat of substitute products.
 R&D expenses are required.

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Porter’s Competitive Strategies
2. Low-Cost Leadership: These strategies
try to increase market share by
emphasizing low cost compared to
competitors. Same quality with lower
prices.
 Cost-reductions
 Efficiency of the facilities
 Produce more to decrease costs.
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Porter’s Competitive Strategies
3. Focus: To concentrate on specific
buyer group or regional market. The
organization will try to achieve either a
low-cost advantage or differentiation
advantage within narrowly defined
market.

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Miles & Snow’s Strategy Typology
 Managers seek to formulate strategies that
will be congruent with the external
environment.
 A fit between internal organization
characteristics, strategy & organizational
environment.
1. Prospector: Innovate, take risks, seek out
new opportunities and grow. This strategy is
suited to a dynamic, growing environment,
where creativity is more important than
efficiency.
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Miles & Snow’s Strategy Typology
2. Defender: Opposite of prospector strategy. This strategy
seeks to hold current customers. Concerned with internal
efficiency. This strategy can be successfull when the
organization exists in a declining industry or a stable
environment.
3. Analyzer: Tries to maintain a stable business while
innovating. Marketing old products with the new ones.
4. Reactor: Respond to environmental threats and opportunities
in an ad hoc fashion. Top management has not defined a
long-range plan or given explicit mission or goal. Try to meet
immediate needs.

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How Strategies Affect
Organization Design

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Porter Competitive Strategies
 Differentiation
 Learning orientation; flexible, strong horizontal coordination.
 Strong capability in research
 Rewards employee creativity, risk-taking and innovation.
 Low-Cost Leadership
 Efficiency orientation, strong central authority; tight cost
control, detailed control reports.
 Standart operating procedures.
 Highly efficient procurement & distribution systems.
 Close supervision, routine tasks, limited employee
empowerment.

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Miles and Snow’s
Strategy Typology
 Prospector
 Learning orientation; flexible, fluid, decentralized
structure
 Strong capability in research
 Values creativity, risk-taking, and innovation
 Defender
 Efficiency orientation; centralized authority and tight
cost control
 Emphasis on production efficiency, low overhead
 Close supervision; little employee empowerment

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© 2004 2-23
Miles and Snow’s
Strategy Typology (cont’d)
 Analyzer
 Balances efficiency and learning; tight cost
control with flexibility and adaptability
 Efficient production for stable product lines;
emphasis on creativity, research, risk-taking for
innovation
 Reactor
 No clear organizational approach; design
characteristics may shift abruptly depending on
current needs
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© 2004 2-24