1. Types of organizations a.Functional b.Product, business unit c.Matrix, network, virtual proximity d.Program/project/

2. Nature of Responsibility Center Mission Support Expense Cost Profit (1) contribution margin, (2) direct business unit profit, (3) controllable business unit profit, (4) income before taxes, (5) net income Investment ERA (residual income) vs. ROI

3. Strategy DRIVES Structure 1. Key questions (depends on organizational level) 2. Product-market strategy (single mission, related missions, unrelated missions) 3. Mission portfolio evaluation (build, hold, harvest, divest?) 4. Competitive strategy (low price/cost; high- value, rapid product development)

4. effective execution of different product-market strategies require different task priorities a. intensity of competitive rivalry b. bargaining power of buyers c. bargaining power of suppliers d. threat from substitutes e. threat from new entry

5. Transfer Prices a. balanced prices (1) market or opportunity cost, (2) fully-distributed average cost, (3) average variable cost or direct cost, (4) marginal/incremental cost, (5) negotiated or bargained, 6) multipart tariffs b. unbalanced prices c. arbitration, public-utility type regulation, reassignment of assets

6. Incentives 1. Financial rewards 2. Psychological and social rewards 3. Design considerations –a. size of bonus relative to salary –b. bonus based on? –c. performance criteria –d. time period –e. weights given nonfinancial criteria –f. benchmarks –g. degree of subjectivity –h. form of bonus payment 4. High-powered vs. low-powered incentives

18. Think Again.