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Strategic management Lecture 11 Corporate strategy and the structure of the organizations.

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1 Strategic management Lecture 11 Corporate strategy and the structure of the organizations

2 Organisation structure and design Resource allocation and control Managing strategic change Strategy evaluation and selection Strategic options Bases of strategic choice Strategic choice Strategy implemen- tation Strategic analysis Resources, competences and capability Expectations and purposes The environment Process of strategic management

3 Development of Apple’s structure 1. Stage: entrepreneurial startup 2, Stage: Small business 3. Stage: Multimational busuiness Jobs and Wozniak entrepreneurs Part-time workers Jobs and Wozniak Owner and managers Purchasing agent Sales supervisor Production supervisor Accountant Board CEO MarketingProduction Sales Finance

4 Why Have a Structure? All businesses have to organise what they do All businesses have to organise what they do A clear structure makes it easier to see which part of the business does what A clear structure makes it easier to see which part of the business does what There are many ways to structure a business There are many ways to structure a business

5 The Basic Tasks of Organization THE ORGANIZATIONAL CHALLENGE : To design structure & systems that:  Permit specialization  Facilitate coordination by grouping individuals & link groups with systems of communication, decision making, & control  Create incentives to align individual & firm goals Achieving high levels of productivity requires SPECIALIZATION Specialization by individuals necessitates COORDINATION For coordination to be effective requires COOPERATION But goals of employees == goals of owners THE AGENCY PROBLEM

6 Organization design Organization design is the process of beveloping an organization sttructure. The organizaton structure consist of four elements: 1. The assignment of taska and responsibilities that define the jobs of individuals and units, 2. The clustering of individual positions into units and units into departments and larger units to form an organization’s hierarchy, 3. The various mechanisms required to facilitate vertical coordunation, such as the number of individual reporting to any given managerial position and degree of delegation of authority, 4. The various mechanisms needed to fostar horizontal coordination, such as task forcas and interdepartnemtal teams

7 Job-design A job: is a collection of tasks performed in support of organizational objectives. A job: is a collection of tasks performed in support of organizational objectives. The jobs are defined by the job description: specification of task activities associated with a particular job The jobs are defined by the job description: specification of task activities associated with a particular job There are four major approaches to job design: There are four major approaches to job design: Job simplification: The process of configuring jobs so that jobholders have only a small number of narrow activities to perform, Job rotation: Practice of periodically shifting workers through a set of jobs, Job enlargement: Allocatioion of a wilder variety of similar task to a job, Job enrichment: the process of ungrading and increase of the decisionmaking authority of the jobholder

8 Some Key Terms Define of jobs Define of jobs Span of control Span of control Empowerment, and delegation Empowerment, and delegation Chain of command Chain of command Groupings of activities Groupings of activities Flat or tall structure Flat or tall structure Hierarchy Hierarchy

9 Span of Control This term is used to describe the number of employees that each manager/supervisor is responsible for. The span of control is said to be wide if a superior is in charge of many employees and narrow if the superior is in charge of a few employees.

10 Empowerment is the process of enabling or authorizing an individual to think, behave, take action, and control work and decision making in autonomous ways. It is the state of feeling self-empowered to take control of one's own destiny. Empowerment

11 A system whereby authority passes down from the top through a series of executive positions or military ranks in which each is accountable to the one directly superior. Chain of command

12 Groupings: a w ays to s tructure a b usiness By function: arranging the business according to what each section or department does By product or activity: organising according to the different products made By area: geographical or regional structure

13 Groupings: a w ays to s tructure a b usiness By customer: where different customer groups have different needs By process: where products have to go through stages as they are made What are the advantages/disadvantages of different types of business structure?

14 Tall Structure Organisation In its simpl i est form a tall organisation has many levels of management and supervision. There is a “long chain of command” running from the top of the organisation eg Chief Executive down to the bottom of the organisation eg shop floor worker.

15 Diagram: Tall Structure

16 AdvantagesDisadvantages Employees can be closely supervised. There is a clear management structure. The function of each layer will be clear and distinct. There will be clear lines of responsibility and control. There is a narrow span of control. The freedom and responsibility of employees (subordinates) is restricted. Decision making could be slowed down Communication has to take place through many layers of management. High management costs

17 Flat Structure Organisation In contrast to a tall organisation, a flat organisation will have relatively few layers or just one layer of management. This means that the “Chain of Command” from top to bottom is short and the “span of control is wide”. Due to the small number of management layers, flat organisations are often small organisations.

18 Diagram: Flat Structure

19 Advantages of flat Organisations Disadvantages of flat Organisations More/Greater communication between management and workers. Better team sprit. Less bureaucracy and easier decision making. Fewer levels of management:include s benefits – lower management costs. Workers may have more than one manager/boss. May limit the growth of the organisation. Structure limited to small organisations. Function of each department/person could be blurred and merge into the job roles of others.

20 Hierarchical Organisation In a hierarchical organisation employees are ranked at various levels within the organisation, each level is one above the other. At each stage in the chain, one person has a number of workers directly under them, within their span of control. The chain of command (ie the way authority is organized) is a typical pyramid shape

21 Evolution of the Modern Corporation The business environment Organizational consequences Strategic changes Late 19th century Early 19th century Early 20th century Local marketsFirms specialized &Small firms. Transport slowfocused on localSimple manage- Limited mechanizationmarketsment structures Introduction of Geographical andFunctional struct- railroads, telegraphvertical expansionures. Line/staff industrializationseparation. Accou- nting systems Excess capacity inProduct &Development of distribution. Growthmultinationalmultidivisional of financial institut-diversification corporation ions & world trade

22 A Functional Structure

23 A Multidivisional Structure

24 A Multinational Matrix Structure

25 Strategic apex Operating core Middle line Techno structure Support staff Ideology The building blocks of organisations

26 Organizational iceberg model Overt organization Covert organization These components are: Publicly observable Generally rational, Cognitiveli derived These conponents are: Hidden, Generally affective, Emotionally derived Structure, Job-description, span of control, rules, roles Emergent power and influence pattern, Emotional feeling, Group norms Individual role perception, Needs, and desires

27 A Transnational Structure Exploits knowledge across borders Exploits knowledge across borders Gets the best of multi-domestic and global strategy Gets the best of multi-domestic and global strategy High local responsiveness High local responsiveness High global coordination High global coordination National units operate independently, but are a source of ideas and capabilities for the whole organisation National units operate independently, but are a source of ideas and capabilities for the whole organisation National/regional units achieve greater scale economies by specialising National/regional units achieve greater scale economies by specialising Corporate centre manages global network Corporate centre manages global network

28 Diagram: Hierarchical Organisation

29 AdvantagesDisadvantages Authority and responsibility and clearly defined Clearly defined promotion path. There are specialists managers Employees are very loyal to their department within the organisation. The organisation can be bureaucratic and respond slowly to changing customer needs and the market Communication across various sections can be poor especially horizontal communication. Departments can make decisions - rivalry

30 Matrix ( or project-based) organisations A Matrix structure organisation contains teams of people created from various sections of the business. These teams will be created for the purposes of a specific project and will be led by a project manager. Often the team will only exist for the duration of the project and matrix structures are usually deployed to develop new products and services.

31 The Matrix structure

32 The advantages of a matrix include Individuals can be chosen according to the needs of the project. The use of a project team which is dynamic and able to view problems in a different way as specialists. Project managers are directly responsible for completing the project within a specific deadline and budget. The disadvantages include A conflict of loyalty between line managers and project managers over the allocation of resources. If teams have a lot of independence can be difficult to monitor. Costs can be increased if more managers (ie project managers) are created through the use of project teams.

33 The most important people are the employees who are at the forefront of serving the customers. The rest of the hierarchy is there to enable the employees to do their job. So rather than the workers being responsible to their bosses, the bosses are there to service the needs of the workers as they go about their company’s business.

34 Pros and Cons of Different Structures This depends on the business type, size and structure used This depends on the business type, size and structure used Let’s look at a functional structure: Let’s look at a functional structure: ProductionMarketingAccountsPersonnelIT Chief Executive Board of Directors

35 Functional Structure Advantages Specialisation – each department focuses on its own work Specialisation – each department focuses on its own work Accountability – someone is responsible for the section Accountability – someone is responsible for the section Clarity – know your and others’ roles Clarity – know your and others’ roles Disadvantages Closed communication could lead to lack of focus Closed communication could lead to lack of focus Departments can become resistant to change Departments can become resistant to change Coordination may take too long Coordination may take too long Gap between top and bottom Gap between top and bottom

36 An Example of Organisation by Product/Activity Imaging and Printing Group Personal Systems Group Enterprise Systems Group HP Services HP Financial Services Hewlett Packard

37 Organisation by Product/Activity Advantages Clear focus on market segment helps meet customers’ needs Clear focus on market segment helps meet customers’ needs Positive competition between divisions Positive competition between divisions Better control as each division can act as separate profit centre Better control as each division can act as separate profit centreDisadvantages Duplication of functions (e.g. different sales force for each division) Duplication of functions (e.g. different sales force for each division) Negative effects of competition Negative effects of competition Lack of central control over each separate division Lack of central control over each separate division

38 Organisation by Area Hewlett-Packard’s Headquarters Worldwide Americas Houston, Texas Europe, Middle East, Africa Geneva, Switzerland Asia Pacific Hong Kong Hewlett Packard

39 Organisation by Area Advantages Advantages Serve local needs better Serve local needs better Positive competition Positive competition More effective communication between firm and local customers More effective communication between firm and local customers Disadvantages Disadvantages Conflict between local and central management Conflict between local and central management Duplication of resources and functions Duplication of resources and functions

40 Other Organisational Structures By Customer: By Customer: Similar effects to structuring by product By Process: By Process: Similar to structuring by function

41 Organising for Success – Outline (1) Key challenges in organising for success Key challenges in organising for success Control, knowledge management, coping with change, response to globalisationControl, knowledge management, coping with change, response to globalisation Structural types of organisations Structural types of organisations Strengths and weaknessesStrengths and weaknesses Organisational processes Organisational processes Planning systems, performance targetsPlanning systems, performance targets Management of internal and external relationships Management of internal and external relationships Help or hinder successHelp or hinder success

42 Organising for Success – Outline (2) Three reinforcing strands for organising configurations Three reinforcing strands for organising configurations Structure, processes and relationshipsStructure, processes and relationships Implications of configurations for organisational performance and change Implications of configurations for organisational performance and change

43 Multinational Structures

44 Comparison of Structures Challenge ChallengeStructureControlChangeKnowledgeGlobalisation Functional******* Multidivisional******* Holding******* Matrix********** Transnational*********** Team******* Project********* Exh 8.6 adapted

45 Strategic Planning

46 Financial Control

47 Strategic Control

48 Configurational Dilemmas

49


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