1. Chapter 13
IMPLEMENTING STRATEGY IN COMPANIES THAT COMPETE ACROSS INDUSTRIES AND COUNTRIES
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2. Managing Corporate Strategy With Multidivisional Structure
Self-contained – full set of value-chain functions
May share value-chain functions with other divisions
Corporate headquarters staff
Monitor divisional activities
Exercise financial control over each division
Strategic responsibilities
Addresses problems and economizes costs of managing handoffs between value-chain functions across industries
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3. Multidivisional Structure
Figure 13.1
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4. Research suggests large companies that adopt a multidivisional structure outperform those that retain the functional structure.
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5. Advantages of a Multidivisional Structure
Enhanced corporate financial control
Profitability of divisions clearly visible
Corporate office is ‘investor’ channeling funds to high-yield uses
Enhanced strategic control
Frees corporate managers from business-level responsibilities
Corporate managers deal with wider strategic issues
Profitable long-run growth- Overcomes organizational limit to growth
Stronger pursuit of internal efficiency
Can compare one division against another
In better position to identify inefficiencies
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6. Problems in Implementing Multidivisional Structure
Establishing divisional-corporate authority relationship
Restrictive financial controls lead to short-run focus
Competition for resources
Transfer pricing
Duplication of functional resources
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7. Unrelated Diversification
Operates as ‘portfolio’ of independent businesses
Divisions have considerable autonomy
No integration among divisions necessary
Businesses bought/sold as conditions change
Corporate culture meaningless
No exchanges or linkages among divisions
Easiest/cheapest strategy to manage
Lowest level of bureaucratic costs
Controls to evaluate divisional performance easily and accurately
Each division evaluated by output controls, e.g. ROIC
Sophisticated accounting controls
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8. Vertical Integration
Vertically integrated company requires centralized control – in order to achieve benefits from sequential flow of resources from one division to next.
Bureaucratic costs more complex & expensive than unrelated diversification
Multidivisional structure provides necessary controls to achieve benefits from control of resource transfers
Must strike balance between centralized/decentralized control
Divisions must have input regarding resource transfer
Integration is managed through combination of corporate & divisional controls
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9. Related Diversification
Principle benefits of related diversification come from transferring, sharing, or leveraging functional resources or skills and some exchange of distinctive competencies across divisions.
Gains derived from transfer, sharing, or leveraging across divisions
Output control difficult as businesses share resources
Integration/control at divisional level required
Incentives/rewards for cooperation necessary
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10. Corporate Strategy, Structure & Control
Table 13.1
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11. Implementing Strategy Across Countries
Localization
Local responsiveness
Decentralized control in each country it operates
International
Centralized R&D & marketing in home country
Other value creation functions are decentralized
Global standardization
Oriented towards cost reductions
Centralized functions at optimal global location
Transnational
Local responsiveness and cost reduction
Select best global location to achieve these objectives
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12. Implementing Localization Strategy
Company pursuing localization strategy generally operates with global area structure, establishing overseas divisions in regions or countries.
Value creation activities duplicated in every region or country of operation
Decentralized authority in each overseas division
Managers at global headquarters evaluate performance of overseas divisions
No integrating mechanisms needed
No global organizational culture
Duplication of specialist activities raises costs
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13. Global-Area Structure
Figure 13.2
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14. Company shifts to international strategy when it decides to sell domestically made products in markets abroad.
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15. Implementing International Strategy
Add foreign sales organizations to existing structure using same control system
Product customization minimal
Subsidiary handles local sales & distribution
System of behavior controls set up to keep home office informed
Global divisions coordinate flow of different products across different countries
This arrangement of tasks and roles reduces transaction of managing handoffs across countries and world regions.
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16. Global Division Structure
Figure 13.3
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17. Implementing Global Standardization Strategy
Company locates manufacturing & other value-chain activities at global location will allow it to increase efficiency, quality, & innovation using global product-group structure.
Focus on centralized control by product group. This makes it difficult for different product divisions to trade information and knowledge.
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18. Global Product-Group Structure
Figure 13.4
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19. Many companies implemented global-matrix structure to lower global cost structures & differentiate activities.
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20. Implementing Transnational Strategy
Decentralized control provides flexibility for local issues
Product & corporate managers at HQ have centralized control to coordinate activities on global level
Knowledge & experience can be transferred
Global corporate culture is created
IT integration provides coordination
Task of integrating & controlling a global-matrix structure can be difficult.
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21. Global-Matrix Structure
Figure 13.5
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22. Entry Mode & Implementation
Internal new venturing- needs to give new-venture managers autonomy & motivation needed to develop new products.
Joint ventures- allocating authority & responsibility is first major issue when companies share resources to collaborate on development of new business model to compete in new market or industry.
Mergers & acquisitions- profitability of mergers & acquisitions depends on structure & control systems companies adopt to integrate & manage them.
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23. Role of Information Technology
IT having increasingly important effects on way multi-business companies implement strategies:
Promotes development of functional competencies
Enables transfer of knowledge across functional groups
Improves knowledge base employees draw on
Provides mechanism to promote collaboration
Allows new ideas to be transmitted easily & quickly
Provides managers with real-time capability
Allows managers to flatten organization
Permits greater decentralization
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24. Strategic Outsourcing & Network Structure
Increases efficiency of relationships
Business-to-Business (B2B) networks
Network structure
Avoids high bureaucratic costs of complex structure
Allows formation of strategic alliances with foreign suppliers & gives access to low-cost foreign sources of inputs
Implications of IT for strategy implementation are still evolving as new hardware & software reshape companies’ business models & strategies.
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