organizational structure

Ch11-1 Chapter 11 Organizational Structure and Controls Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western College Publishing Ch11-2 Competitiveness Chapter 3 Internal Environment Chapter 2 External Environment The Strategic The Strategic Management Management Process Process The Strategic The Strategic Management Management Process Process Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Inputs Strategic Actions Strategic Outcomes Ch11-3 Structure Types Structure Types All organizations require some form of organizational All organizations require some form of organizational structure to implement and manage their strategies structure to implement and manage their strategies Firms frequently alter their structure as they grow in Firms frequently alter their structure as they grow in size and complexity size and complexity Three basic structure types: Three basic structure types: Functional Structure Functional Structure Multi-divisional Structure (M-form) Multi-divisional Structure (M-form) Simple Structure Simple Structure Ch11-4 Strategy & Structure Strategy & Structure Growth Patterns Growth Patterns Sales Growth Coordination Sales Growth Coordination and Control Problems and Control Problems Sales Growth Coordination Sales Growth Coordination and Control Problems and Control Problems Efficient implementation Efficient implementation of formulated strategy of formulated strategy Efficient implementation Efficient implementation of formulated strategy of formulated strategy Multidivisional Multidivisional Structure Structure Multidivisional Multidivisional Structure Structure Efficient implementation Efficient implementation of formulated strategy of formulated strategy Efficient implementation Efficient implementation of formulated strategy of formulated strategy Sales Growth Coordination Sales Growth Coordination and Control Problems and Control Problems Sales Growth Coordination Sales Growth Coordination and Control Problems and Control Problems Functional Functional Structure Structure Functional Functional Structure Structure Simple Simple Structure Structure Simple Simple Structure Structure Ch11-5 Simple Structure Simple Structure Owner / Manager Owner / Manager Owner/Manager makes all major decisions Owner/Manager makes all major decisions directly and monitors all activities directly and monitors all activities Difficult to maintain this structure as Difficult to maintain this structure as the firm grows in size and complexity the firm grows in size and complexity Ch11-6 * Production * Production * Finance * Finance * Engineering * Engineering * Accounting * Accounting * Sales & Marketing * Sales & Marketing * Human Resources * Human Resources Functional Structure Functional Structure First stage beyond a Simple Structure First stage beyond a Simple Structure Appropriate for single or dominant-business firms Appropriate for single or dominant-business firms Allows specialization of tasks Allows specialization of tasks Overcomes information processing limits of Overcomes information processing limits of single owner/manager single owner/manager Functional department heads report to Chief Functional department heads report to Chief Executive Officer who integrates decisions and Executive Officer who integrates decisions and actions from a company-wide point of view actions from a company-wide point of view Risks conflicts between myopic function managers Risks conflicts between myopic function managers Ch11-7 Production Production Finance Finance Engineering Engineering Accounting Accounting Sales & Sales & Marketing Marketing Human Human Resources Resources Functional Structure Functional Structure Chief Executive Officer Chief Executive Officer Corporate Corporate Finance Finance Corporate Corporate R&D R&D Corporate Corporate Marketing Marketing Corporate Corporate Human Human Resources Resources Strategic Strategic Planning Planning Ch11-8 Marketing Marketing Engineering Engineering Operations Operations Personnel Personnel Accounting Accounting Functional Structure for Functional Structure for Cost Leadership Cost Leadership Strategy Strategy Office of the President Office of the President Centralized Centralized Staff Staff • Operations is main function Operations is main function • Process engineering is Process engineering is emphasized rather than new emphasized rather than new product R&D product R&D • Formalized procedures allow Formalized procedures allow for low-cost culture for low-cost culture • Structure is mechanical; job Structure is mechanical; job roles are highly structured roles are highly structured Relatively large Relatively large centralized staff centralized staff coordinates coordinates functions functions Ch11-9 Marketing Marketing New New Product Product R&D R&D Operations Operations Human Human Resources Resources Finance Finance R&D R&D Marketing Marketing Functional Structure for Functional Structure for Differentiation Differentiation Strategy Strategy President and President and Limited Staff Limited Staff • Marketing is the main function for tracking new product ideas Marketing is the main function for tracking new product ideas • New product R&D is emphasized New product R&D is emphasized • Most functions are decentralized Most functions are decentralized • Formalization is limited to foster change and promote new ideas Formalization is limited to foster change and promote new ideas • Overall structure is organic; job roles are less structured Overall structure is organic; job roles are less structured Ch11-10 Multi-Divisional Structure Multi-Divisional Structure Each division is operated as a separate business Each division is operated as a separate business Appropriate for related-diversified businesses Appropriate for related-diversified businesses Key task of corporate managers is exploiting synergies Key task of corporate managers is exploiting synergies among divisions among divisions Managers use a combination of strategic controls and Managers use a combination of strategic controls and financial controls financial controls Managers try to strike a balance between: Managers try to strike a balance between: Competing among divisions for scarce capital resources Competing among divisions for scarce capital resources Creating opportunities for cooperation to develop synergies Creating opportunities for cooperation to develop synergies The goal is to maximize overall firm performance The goal is to maximize overall firm performance [...]... Accounting Sales & Marketing Division Human Resources Ch11-12 Variations of the Multi-Divisional Structure Multi-Divisional Multi-Divisional Structure Structure (M-form) (M-form) Cooperative Cooperative Form Form Related-Constrained Strategy Strategic Business Unit Strategic Business Unit (SBU) Structure (SBU) Structure Related-Linked Strategy Competitive Competitive Form Form Unrelated /Holding Company...Multi-Divisional Structure The decision-making of managers in a MultiDivisional structure may be: Centralized or Decentralized Bureaucratic or Non-bureaucratic 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 Ch11-11 Multi-Divisional Structure Chief Executive Officer... allocates financial resources cooperatively • The organization is like a centralized federation Ch11-23 Evolution of Multi-Divisional Structure A Transnational International Strategy is likely to utilize a structure and that results in emphasis on both geographic and product structures Ch11-24 Strategic Networks A Strategic Network is a grouping of organizations that has been formed to create value through... Performance Division & SBU Performance Ch11-18 Evolution of Multi-Divisional Structure Chief Executive Officer Chief Executive Officer Corporate Office (Staff) Corporate Office (Staff) North America Europe Asia Latin America Product A Product B Product C Product D Africa Australia Product A Ch11-19 Evolution of Multi-Divisional Structure Chief Executive Officer Chief Executive Officer Corporate Office... federation Ch11-21 Evolution of Multi-Divisional Structure Chief Executive Officer Chief Executive Officer Corporate Office (Staff) Corporate Office (Staff) Product A Product B Product C Product D A Structural evolution based on Product lines usually implies a Global International Strategy Ch11-22 Implementation of a Global Strategy Worldwide Product Divisional Structure Worldwide Worldwide Products Products... corporate office • Divisions compete for corporate resources Ch11-16 Multi-Divisional Structure The choice between centralization and decentralization is frequently based on the business-level strategy implemented in each division Differentiation Cost Leadership Decentralization Centralization Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized , depending upon... 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 Ch11-17 Attributes of Various Structural Forms Structural Characteristics Cooperative M-Form SBU M-Form Competitive M-Form Type... D Africa Australia A Structural evolution based on Geographic lines usually implies a Multi-Domestic International Strategy Ch11-20 Implementation of a Multidomestic Strategy Worldwide Geographic Area Structure United United States States Asia Asia Latin Latin America America Multinational Multinational Headquarters Headquarters Australia Australia Europe Europe Middle Middle East/ East/ Africa Africa . Functional Structure Structure Functional Functional Structure Structure Simple Simple Structure Structure Simple Simple Structure Structure Ch11-5 Simple Structure Simple Structure Owner. types: Functional Structure Functional Structure Multi-divisional Structure (M-form) Multi-divisional Structure (M-form) Simple Structure Simple Structure Ch11-4 Strategy & Structure Strategy & Structure Growth. ideas • Overall structure is organic; job roles are less structured Overall structure is organic; job roles are less structured Ch11-10 Multi-Divisional Structure Multi-Divisional Structure Each