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Implementing Strategy in Companies That Compete in a Single Industry

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Presentation on theme: "Implementing Strategy in Companies That Compete in a Single Industry"— Presentation transcript:

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

2 Overview Strategy implementation
How a company should create, use, and combine organizational structure, control systems, and culture to pursue strategies that lead to a competitive advantage and superior performance

3 Implementing Strategy

4 Six Organization Shapers
Buyer Power Buyers are gaining power and learning how to use it Variety and solutions Customers do not want bundle of products and services They want them integrated into a solution The Internet The web site becomes a single face to the customer forcing functions to integrate

5 Six Organization Shapers
Multiple dimensions (of organizations) Functions, products, geographies (old) Segments, solutions, channels, processes (new) Change Rapid change requires management to re-learn and re-decide To make more decisions more frequently It requires more decentralized management and networks of decision makers

6 Six Organization Shapers
More variety, more comprehensive solutions – FASTER! Shorter lead times, shorter cycle times Speed is a force for decentralization Can you think of examples?

7 Competitive Advantage
An organization design that facilitates Variety, Change, Speed, and Integration is a source of competitive advantage It is difficult to execute but also difficult to copy

8 Tradeoffs Hype Teamwork, reengineering, virtual organizations etc.
There has been an overselling of credible ideas Teamwork, reengineering, virtual organizations etc. Any organizational design requires tradeoffs and will have positives and negatives

9 The Star Model Strategy People Structure Rewards Processes

10 The Star Model Strategy Is the company’s formula for winning!
Goals, mission, objectives, values Delineates products, markets, value proposition, competitive advantage First part of the model to be addressed Establishes criteria for choosing among different organizational forms Drives resource allocation

11 Structure Specialization Shape Distribution of power
Type and number of job specialties Shape Span of control – flat vs. tall structures Distribution of power Centralization vs. decentralization Departmentalization Function, product, process, market or geography

12 Processes Vertical processes Horizontal (or lateral) processes
Business planning, budgeting, resource allocation decisions Horizontal (or lateral) processes Designed around the work flow Cross functional Value chain emphasis

13 Rewards Purpose Some Issues
To align the goals of the employees with the goals of the organization Some Issues Individual vs. Team Function vs. Cross function (‘citizenship’) Monetary vs. Non-monetary rewards Rewards must be congruent with other parts of organization design

14 People Human resources Must also develop organizational capabilities
Recruiting, selection, rotation, training, development Creating the skills and mind-sets needed to implement the strategy (culture) Must also develop organizational capabilities Flexibility, ability to work with others Knowledge management

15 Implications Structure is only one facet of design Congruence
Structure usually overemphasized status and power issues Processes, rewards, and people are becoming more important Congruence Different strategies lead to different organizations! All policies must be aligned and in harmony

16 Matching strategy and structure
Departmentalization Departments arise when org size>24 Consider: Functional Product Market Geographical Process Hybrid What are the (dis)advantages of each?

17 Five Types of Lateral Processes
Voluntary (or informal) Rotation, interdept events, co-location, mirror image depts, consistent reward system E-coordination Formal group Full-time integrators Project managers, brand managers, process managers etc. Matrix organization Level of coordination grows but so does cost and difficulty of implementation

18 Types of Strategic Control System
Personal control Face-to-face interaction Output control Performance goals for each division, department, and employee Behavior control Rules and procedures to direction actions or behaviors of divisions, functions, and individuals Operating budget Standardization

19 Strategic Reward Systems
Based on strategy managers must decide which behaviors to reward A control system measures those behaviors and links the reward structure to them

20 Organizational Culture
Culture and strategic leadership Traits of strong and adaptive corporate cultures Bias for action Sticking with what the organization does best Motivating employees to do their best Anything else? Is culture a control mechanism?

21 How Organizational Design Increases Profitability

22 Restructuring and Reengineering
Restructuring involves Streamlining hierarchy of authority and reducing number of levels Downsizing the workforce to reduce costs Reasons Change in the business environment Excess capacity Organization grew too tall and inflexible; bureaucratic costs To improve competitive advantage and stay on top

23 Restructuring and Reengineering (cont’d)
Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements Focuses not on functions, but on processes (which cut across functions)

24 Exercises Wal-Mart Control System Soft Drink Restructure

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