1. Strategy Implementation
Governance (BOD)
Is your strategy “implementation-ready”?
How will you use organization structure, controls, and leadership to implement your strategy?

2. Adapted from Hambrick & Fredrickson, 2001, AME 15(4)

3. 5 major questions
Adapted from Hambrick & Fredrickson, 2001, AME 15(4)

4. Staging
sequence of actions

5. IKEA example

6. Test the Quality of Your Strategy
1. Does your strategy fit with what’s going on in the environment?
Is there healthy profit potential where you’re headed? Does your strategy align with the key success factors of your chosen environment?
2. Does your strategy exploit your key resources?
With your particular mix of resources, does this strategy give you a good head start on competitors? Can you pursue this strategy more economically than competitors?
3. Will your envisioned differentiators be sustainable?
Will competitors have difficulty matching you? If not, does your strategy explicitly include a ceaseless regimen of innovation and opportunity creation?
4. Are the elements of your strategy internally consistent?
Have you made choices of arenas, vehicles, differentiators, and staging, and economic logic? Do they all fit and mutually reinforce each other?
5. Do you have enough resources to pursue this strategy?
Do you have the money, managerial time and talent, and other capabilities to do all you envision? Are you sure you’re not spreading your resources too thinly, only to be left with a collection of feeble positions?
6. Is your strategy implementable?
Will your key constituencies allow you to pursue this strategy? Can your organization make it through the transition? Are you and your management team able and willing to lead the required changes?

7. Organizational Structure
Organizational structure specifies procedures, controls, and decision-making authority
It is critical to match organizational structure to the firm’s strategy

8. Stable and Flexible Structures
Stable structures help the firm exploit its current resources
required to consistently and predictably manage the firm’s daily work routines
Flexible structures help the firm explore new resources
explore competitive possibilities
allocate resources to activities that shape competitive advantages needed by the firm

9. Organizational Controls
guide strategy implementation
identify differences between actual & expected results
suggest which corrective actions to take when actual:expected differences are unacceptable

10. Organizational Controls:
Objective criteria
Accounting-based measures include
return on investment
return on assets
Market-based measures include
economic value added
Operational controls provide supporting/related information

11. Matching Control to Strategy
Relative use of controls varies by type of strategy, e.g.,
large diversified firms using cost leadership strategy emphasize financial controls
Single business companies and business units using a differentiation strategy emphasize strategic controls

12. Evolutionary Patterns of Strategy and Organizational Structure
Firms grow in predictable patterns
by volume
by geography
integration (vertical, horizontal)
through product/business diversification
A firm’s growth patterns determine its structural form

13. Evolutionary Patterns of Strategy and Organizational Structure
Organization structure is simply a tool to implement and manage strategies
Firms frequently alter their structure as they grow in size and complexity
Three basic structure types:
simple structure
functional structure
multi-divisional structure (M-form)

14. Strategy and Structure Growth Pattern:
Simple Structure
Simple
Structure

15. Strategy and Structure Growth Pattern:
Simple Structure
Organizational form in which the owner-manager
makes all major decisions directly
monitors all activities
Staff
serves as an extension of the manager’s supervisory authority
Matched with focus strategies and business-level strategies
commonly compete by offering a single product line in a single geographic market

16. Strategy and Structure Growth Pattern:
Simple Structure
Growth creates
complexity
managerial and structural challenges
Owner-managers
commonly lack organizational skills and experience
become ineffective in managing the specialized and complex tasks involved with multiple organizational functions

17. Strategy and Structure Growth Pattern:
Functional Structure
Simple
Structure
Efficient implementation of formulated strategy
Sales Growth-
Coordination and
Control Problems
Functional
Structure

18. Strategy and Structure Growth Pattern:
Functional Structure
Chief Executive Officer (CEO)
limited corporate staff
Functional line managers in dominant organizational areas
production – accounting
marketing – R&D
engineering – human resources
Supports use of business-level strategies and some corporate-level strategies
single or dominant business with low levels of diversification

19. Strategy and Structure Growth Pattern:
Functional Structure
Differences in orientation among organizational functions can
impede communication and coordination
increase the need for CEO to integrate decisions and actions of business functions
facilitate career paths and professional development in specialized functional areas
cause functional-area managers to focus on local versus overall company strategic issues

20. Strategy and Structure Growth Pattern:
Multidivisional Structure
Strategic control
operating divisions
each division is separate business or profit center
Top corporate officer delegates responsibilities to division managers
for day-to-day operations
for business-unit strategy
Appropriate when the firm grows through diversification

21. Strategy and Structure Growth Pattern:
Multidivisional Structure
Three major benefits
corporate officers able to more accurately monitor the performance of each business, which simplifies the problem of control
facilitates comparisons between divisions, which improves the resource allocation process
stimulates managers of poorly performing divisions to look for ways of improving performance

22. Strategy and Structure Growth Pattern:
Multidivisional Structure
Simple
Structure
Efficient implementation of formulated strategy
Multidivisional
Structure
Sales Growth-
Coordination and
Control Problems
Efficient implementation of formulated strategy
Sales Growth-
Coordination and
Control Problems
Functional
Structure

23. Matching Structure and Strategy
Different forms of the functional organizational structure are matched to
cost leadership strategy
differentiation strategy
integrated cost leadership/differentiation strategy
differences in these forms seen in three important structural characteristics
specialization
centralization
formalization

24. Structure for Cost Leadership Strategy
Operations is main function
Process engineering is emphasized over R&D
Large centralized staff
Formalized procedures
Structure is mechanical, job roles highly structured
Office of the President
Centralized Staff
Engineering
Operations
Accounting
Marketing
Personnel

25. Structure for Differentiation Strategy
President and
Limited Staff
R&D
Marketing
New Product
R&D
Marketing
Finance
Operations
Human
Resources
Marketing is the main function for tracking new product ideas
New product R&D is emphasized
Most functions are decentralized
Formalization is limited to foster change and promote new ideas
Overall structure is organic; job roles are less structured

26. Multidivisional Structure
Each division is operated as a separate business
Appropriate for related-diversified businesses
Key task of corporate managers is exploiting synergies among divisions
Managers use a combination of strategic controls and financial controls

27. Multidivisional Structure
Managers try to strike a balance between:
competing among divisions for scarce capital resources
creating opportunities for cooperation to develop synergies
The goal is to maximize overall firm performance
The decision-making of managers in a multi-divisional structure may be:
centralized or decentralized
bureaucratic or non-bureaucratic

28. Multidivisional Structure
Balance on these dimensions may change over time
Structure will evolve over time with:
changes in strategy
degree of diversification
geographic scope
nature of competition

29. Three Variations of the Multidivisional Structure
(M-form)
Cooperative
Form
Competitive
Form
Strategic Business-Unit
(SBU) Form

30. Cooperative Form of Multidivisional Structure:
Related-Constrained Strategy
Headquarters Office
President
Government
Affairs
Legal
Affairs
Corporate
R&D Lab
Strategic
Planning
Corporate
Human
Resources
Corporate
Marketing
Corporate
Finance
Product
Division
Product
Division
Product
Division
Product
Division
Product
Division

31. Cooperative Form of Multidivisional Structure:
Related-Constrained Strategy
Structural integration devices create tight links among all divisions
Corporate office emphasizes centralized strategic planning, human resources, and marketing to foster cooperation between divisions
R&D is likely to be centralized
Rewards are subjective and tend to emphasize overall corporate performance, in addition to divisional performance
Culture emphasizes cooperative sharing

32. SBU Form of Multidivisional Structure:
Related-Linked Strategy
Headquarters Office
President
Corporate
R&D Lab
Strategic
Planning
Corporate
HRM
Corporate
Marketing
Corporate
Finance
SBU
SBU
SBU
Division
Division
Division

33. SBU Form of Multidivisional Structure:
Related-Linked Strategy
Structural integration devices create tight links among all divisions
Corporate office emphasizes centralized strategic planning, human resources, and marketing to foster cooperation between divisions
R&D is likely to be centralized
Rewards are subjective and tend to emphasize overall corporate performance, in addition to divisional performance
Culture emphasizes cooperative sharing

34. Competitive Form of Multidivisional Structure:
Unrelated Diversification Strategy
Headquarters Office
President
Legal
Affairs
Finance
Auditing
Division
Division
Division
Division
Division
Division

35. Competitive Form of Multidivisional Structure:
Unrelated Diversification Strategy
Corporate headquarters has a small staff
Finance and auditing are the most prominent functions in the headquarters to manage cash flow and ensure the accuracy of performance data coming from divisions
The legal affairs function becomes important when the firm acquires or divests assets
Divisions are independent and separate for financial evaluation purposes
Divisions retain strategic control, but cash is managed by the corporate office
Divisions compete for corporate resources

36. Multidivisional Structure: Other Points
Complex multi-divisional structure firms may be simultaneously
centralized and decentralized
depending upon the various business-level strategies employed throughout the firm’s individual businesses
Multi-divisional structure firms use a combination of:
strategic controls
financial controls

37. Characteristics of Various Structural Forms
Structural Characteristics
Cooperative M-Form
SBU
M-Form
Competitive M-Form
Type of
Strategy
Related-
Constrained
Related-
Linked
Unrelated
Diversification
Degree of
Centralization
Centralized at
Corporate Office
Partially Centralized
in SBUs
Decentralized
to Divisions
Use of
Integrating
Mechanisms
Extensive
Moderate
Nonexistent

38. Characteristics of Various Structural Forms
Structural Characteristics
Cooperative M-Form
SBU
M-Form
Competitive M-Form
Divisional
Performance
Appraisal
Subjective
Strategic
Criteria
Strategic &
Financial
Criteria
Objective Financial
Criteria
Divisional
Incentive
Compensation
Linked to
Corporate
Performance
Linked to
Corporate
SBU & Division Performance
Linked to
Divisional
Performance

39. Worldwide Geographic Area Structure:
Multidomestic Strategy
Asia
United
States
product characteristics tailored to local preferences
isolation from global competitiion
establish protected market positions
compete in industry segments most affected by differences among local countries
Multinational
Headquarters
Latin
America
Europe
Australia
Middle
East/
Africa

40. Worldwide Product Divisional Structure:
Global Strategy
Worldwide
Products
Division
Worldwide
Products
Division
standardized products across countries
economies of scope and scale
outsource some primary or support activities to the world’s best providers
decision-making authority centralized in worldwide division headquarters
Global
Corporate
Headquarters
Worldwide
Products
Division
Worldwide
Products
Division
Worldwide
Products
Division
Worldwide
Products
Division

41. Using the Combination Structure:
Transnational Strategy
The combination structure has characteristics and mechanisms that result in an emphasis on both geographic and product structures
local responsiveness (multidomestic strategy)
global efficiency (global strategy)

42. Strategic Network
A strategic network is a grouping of organizations that has been formed to create value through participation in an array of cooperative arrangements, such as alliances and joint ventures
The strategic network seeks to develop a competitive advantage in primary or support activities
A strategic center firm often manages the network

43. Strategic Network strategic center firm engages in four primary tasks
strategic outsourcing (outsources and partners with more firms than do other network members)
competencies (supports each member’s efforts to develop core competencies that can benefit the network)

44. Strategic Network strategic center firm engages in four primary tasks
technology (manages the development and sharing of technology-based ideas among network members)
race to learn (guides participants in efforts to form network-specific competitive advantages)

45. Strategic Network
Strategic
Center
Firm

46. Distributed Strategic Network
International cooperative strategies often require more complex networks
Many large multinational firms form distributed strategic networks with multiple regional strategic centers to manage their array of cooperative arrangements with partner firms
Breaking large networks into multiple manageably-sized networks helps to manage the complexity of maintaining many relationships

47. Distributed Strategic Network
Center
Firm
Main
Strategic
Center
Firm
= Distributed Strategic Center Firms