MODULE-7 INSTITUTIONALIZING THE STRATEGY. INTRODUCTION STRUCTURE,LEADERSHIP,CULTURE. STRUCTURAL CONSIDERATION AND ORGANISATIONAL LEADERSHIP.

There are three elements of institutionalizing the strategy Structure: The focus will be on organizational structure, the formal reporting and responsibilities within a company Leadership: The focus will shift to the leadership of top management in the accomplishment of strategic management. Culture: It will focus on organizational culture

Structural consideration There are five basic types currently used in business firm. 1. Simple 2. Functional 3. Divisional 4. Strategic business unit 5. Matrix

Simple and functional organizational structure model A. Simple structure B. functional structure Owner manager Employees Chief executive officer Production Marketing Engineering Staff functions Finance/Accounting personnel

Advantages and disadvantages of simple organization structure Facilitates control of all the business activities. Rapid decision making and ability to change with market signals. Simple and informal motivation/reward/control system

Disadvantages Very demanding on the owner-manager. Increasingly inadequate as volume expands. Does not facilitate development of future managers. Tends to focus owner-manager on day to day matters and not on future strategy.

Advavatages and disadvantages of functional structure Efficiency through specialization. Improved development of functional expertise. Differentiates and delegates day to day operating decisions. Retains centralized control of strategic decisions.

Disadvantages Promotes narrow specialization and potential functional rivalry or conflict. Difficulty in functional coordination and interfunctional decision making. Staff-line conflict. Limits internal development of general managers.

Divisional organizational structure model Chief executive officer Vice president Administrative service Vice president Operating support General manager Division A General manager Division B A General manager Division C Marketing Production/ operation personnel Accounting/control Division planning personnel Accounting/control Division planning personnel Accounting/control Division planning Marketing

Advantages and disadvantages of divisional organizational structure Coordination and rapid response. Strategy development and implementation. Frees chief executive officer for broader strategic decision making. Sharply focuses accountability for performance. Retains functional specialization within each division. Good training ground for strategic managers.

Disadvantages Problem with the extent of authority given to division managers. Potential for policy inconsistencies between divisions. Problem of arriving at a method to distribute corporate overhead costs that is acceptable to different division managers with profit responsibility.

Strategic business unit organizational structure model Chief executive officer Group vice president SBU1 Group vice president SBU2 Group vice president SBU3 Vice president Administrative service Vice president Operating support Divisions ABC DEFGH I

Advantages and disadvantages of strategic business unit Improves coordination between divisions. Facilitates the distinct and in-depth business planning. Channels accountability to distinct business units.

Disadvantages Places another layer of management between the divisions and the corporate management. The role of the group vice president can be difficult to define. Difficulty in defining the degree of autonomy for the group vice presidents and division managers.

Matrix organizational structure model Chief executive officer vice president Engineering vice president Production vice president Purchasing vice president Administration Project manager A Project manager B Project manager C Engineering staff Engineering staff Engineering staff Production staff Production staff Production staff Purchasing Agent Purchasing Agent Purchasing Agent Administration coordinator Administration coordinator Administration coordinator

Matrix organizational structure Advantages and disadvantages Accommodates a wide variety of project oriented business activity. Good training ground for strategic managers. Maximizes efficient use of functional managers. Fosters creativity and multiple sources diversity. Broader middle management exposure to strategic issue for the business.

Disadvantages Dual accountability can create confusion and contradictory policies. Necessitates tremendous horizontal and vertical coordination.

Organizational leadership It is essential element in effective strategy implementation. and two leadership issues are of fundamental importance here: 1. The role of the chief executives officer. And 2. The assignment of key managers.

Selective blend Current executives via Promotion and transfer Where skills match new roles; otherwise, seek Skills and experience via outsiders Turnover Outsiders should be a High priority to provide New skills, and motivation Stability Current executives and internal promotions Should be a major emphasis in order to reward, retain, and Develop managerial talent. Reorientation Outsiders are important To replace weaknesses And “communication Seriousness" current executives should be a Priority where possible Via promotion,transfer,or role clarification. Changes required to Implement new strategy Many Few Assessment of past organizational performance EffectiveIneffective Four managerial assignment situations