1. Implementing Strategy in Companies That Compete in a Single Industry
Chapter 12
Implementing Strategy in Companies That Compete in a Single Industry

2. Learning objectives
Understand how organizational design requires managers to select the right combination of organizational structure, control, and culture
Discuss how effective organizational design enables a company to increase product differentiation, reduce its cost structure, and build competitive advantage

3. Organizational Design
Process of deciding how a company should create, use, and combine organizational structure, control systems, and culture
To pursue a business model successfully
Organizational structure: Means through which a company assigns employees to specific tasks and roles that are to be linked together to increase:
Efficiency, quality, and innovation
Responsiveness to customers

4. Organizational Design
Control system: Provides managers with incentives for employees as well as feedback on how the company performs
Organizational culture: Specific collection of values, norms, beliefs, and attitudes that:
Are shared by people and groups in an organization
Control the way people interact with each other and with stakeholders outside the organization

5. Implementing Strategy through Organizational Design

6. Grouping tasks, functions, and divisions
Function - Collection of people who work together and perform the same types of tasks
Amount and complexity of handoffs increase with growth of the organization
Handoffs - Transfers among people, functions, and subunits
Division - Way of grouping functions to allow an organization to better produce and transfer its goods and services to customers

7. Allocating Authority and Responsibility
Clear and unambiguous chain of command that defines each manager’s relative authority
Hierarchy of authority
Number of subordinates reporting directly to a particular manager
Span of control

8. Tall and Flat Structures

9. Tall Organizations Limitations Communication problems
Long time taken in decision making and adherence
Distortion of commands and orders
Increases expenses
Limitations
Principle of the minimum chain of command: Company should design its hierarchy with the fewest levels of authority necessary to use organizational resources effectively
Solution

10. Integrating Mechanisms
Ways to increase communication and coordination among functions and divisions
Direct contact
Liaison roles
Teams: Formation of a group that represents each division or department:
Facing a common problem
With a goal of finding a solution to the problem

11. Strategic Control
Design a system that sets ambitious goals and targets for all managers and employees
Management by objectives: Employees are encouraged to help set their own goals
Managers manage by exception, intervening only when they sense something is not going right

12. Strategic Control Systems
Mechanism that allows managers to monitor and evaluate:
Whether their business model is working as intended
How their business model could be improved
Basic structure of competitive advantage
Control and efficiency
Control and quality
Control and innovation
Control and responsiveness to customers

13. Steps in Designing an Effective Strategic Control System

14. Levels of Organizational Control

15. Types of Strategic Control Systems
Way one manager shapes and influences the behavior of another in a face-to-face interaction in the pursuit of a company’s goals
Personal control
Establishes performance goals and then measures performance relative to these goals
Output control
Establishes comprehensive system of rules that specify the appropriate behavior through:
Operating budget
Standardization
Rules and procedures
Behavior control

16. Organizational Culture
Specific collection of values and norms shared by people and groups in an organization
Organizational socialization - Describes how people learn organizational culture
Culture and strategic leadership
Organization’s founder and top managers help create its organizational culture and provide strategic leadership
Shared values and common culture increase integration and improve coordination among members

17. Adaptive Corporate Cultures
Innovative culture that encourages and rewards middle- and lower-level managers for taking the initiative to achieve organizational goals
Common value sets
Values promoting a bias for action
Values stem from nature of the organization’s mission
Values determine how to operate the organization

18. Developing Culture at the Functional Level
Functional strategy improves efficiency and quality
Production
Develops distinctive competencies in innovation, quality, and excellence that result in products that fit customers’ needs
R&D
Monitor sales behavior
Encourage high responsiveness to customers to develop sophisticated output and behavior controls
Sales

19. How Organizational Design Increases Profitability

20. Implementing Cost Leadership and Differentiation
Choosing a combination compatible with lowering cost structure while preserving ability to attract customers
Implementing cost leadership
Company must design its structure, control, and culture around the particular source of its competitive advantage
Makes it difficult to standardize activities and increases the bureaucratic costs
Implementing differentiation