Strategic management
Lecture 11
Corporate strategy and the
structure of the organizations
Process of strategic management
Expectations
and purposes
Resources,
competences
and capability
The
environment
Strategic
analysis
Bases of
strategic
choice
Strategic
choice
Strategy
implementation
Strategic
options
Strategy
evaluation
and selection
Managing
strategic
change
Organisation
structure
and
design
Resource
allocation
and
control
Development of Apple’s structure
1. Stage: entrepreneurial startup
Jobs and Wozniak
entrepreneurs
Part-time workers
Jobs and Wozniak
Owner and managers
2, Stage: Small business
Sales supervisor
Purchasing agent
Production supervisor
Accountant
Board
3. Stage: Multimational busuiness
CEO
Marketing
Production
Sales
Finance
Why Have a Structure?
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All businesses have to organise
what they do
A clear structure makes it easier to see
which part of the business does what
There are many ways
to structure a business
The Basic Tasks of Organization
Achieving high levels of productivity requires SPECIALIZATION
Specialization by individuals necessitates COORDINATION
For coordination to be effective requires COOPERATION
But goals of employees == goals of owners
THE AGENCY PROBLEM
THE ORGANIZATIONAL CHALLENGE:
To design structure & systems that:
 Permit specialization
 Facilitate coordination by grouping individuals &
link groups with systems of communication,
decision making, & control
 Create incentives to align individual & firm goals
Organization design
Organization design is the process of beveloping an
organization sttructure. The organizaton structure consist
of four elements:
1.
The assignment of taska and responsibilities that define
the jobs of individuals and units,
2.
The clustering of individual positions into units and units
into departments and larger units to form an
organization’s hierarchy,
3.
The various mechanisms required to facilitate vertical
coordunation, such as the number of individual reporting
to any given managerial position and degree of
delegation of authority,
4.
The various mechanisms needed to fostar horizontal
coordination, such as task forcas and interdepartnemtal
teams
Job-design
A job: is a collection of tasks performed in
support of organizational objectives.
 The jobs are defined by the job description:
specification of task activities associated with a
particular job
 There are four major approaches to job design:
Job simplification: The process of configuring jobs
so that jobholders have only a small number of
narrow activities to perform,
Job rotation: Practice of periodically shifting
workers through a set of jobs,
Job enlargement: Allocatioion of a wilder variety of
similar task to a job,
Job enrichment: the process of ungrading and
increase of the decisionmaking authority of the
jobholder
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Some Key Terms
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Define of jobs
Span of control
Empowerment, and delegation
Chain of command
Groupings of activities
Flat or tall structure
Hierarchy
Span of Control
•This term is used to describe the
number of employees that each
manager/supervisor is responsible for.
•The span of control is said to be wide if a
superior is in charge of many employees
and narrow if the superior is in charge of a
few employees.
Empowerment
•Empowerment is the process of enabling
or authorizing an individual to think,
behave, take action, and control work and
decision making in autonomous ways.
•It is the state of feeling self-empowered to
take control of one's own destiny.
Chain of command
A system whereby authority passes down
from the top through a series of executive
positions or military ranks in which each is
accountable to the one directly superior.
Groupings: a ways to structure a
business
• By function: arranging the business
according to what each section
or department does
• By product or activity: organising
according to the different products
made
• By area: geographical or regional
structure
Groupings: a ways to structure a
business
• By customer: where different customer
groups have different needs
• By process: where products have to go
through stages as they are made
• What are the advantages/disadvantages
of different types of business structure?
Tall Structure Organisation
•In its simpliest form a tall organisation has
many levels of management and supervision.
•There is a “long chain of command” running
from the top of the organisation eg Chief
Executive down to the bottom of the
organisation eg shop floor worker.
Diagram: Tall Structure
Diagram: Tall Structure
Advantages
•Employees can be
closely supervised.
•There is a clear
management structure.
• The function of
each layer will be
clear and distinct.
•There will be clear
lines of
responsibility and
control.
•There is a narrow
span of control .
Disadvantages
• The freedom and
responsibility of
employees
(subordinates) is
restricted.
• Decision making
could be slowed
down
•Communication has
to take place through
many layers of
management.
•High management
costs
Flat Structure Organisation
•In contrast to a tall organisation, a flat
organisation will have relatively few layers or
just one layer of management.
•This means that the “Chain of Command”
from top to bottom is short and the “span of
control is wide”.
• Due to the small number of management
layers, flat organisations are often small
organisations.
Diagram: Flat Structure
Diagram: Flat Structure
Advantages of flat
Organisations
•More/Greater
communication
between management
and workers.
•Better team sprit.
•Less bureaucracy
and easier decision
making.
•Fewer levels of
management:include
s benefits – lower
management costs.
Disadvantages of
flat Organisations
•Workers may have
more than one
manager/boss.
• May limit the
growth of the
organisation.
•Structure limited to
small organisations.
•Function of each
department/person
could be blurred and
merge into the job
roles of others.
Hierarchical Organisation
•In a hierarchical organisation employees are
ranked at various levels within the
organisation, each level is one above the
other.
• At each stage in the chain, one person
has a number of workers directly under
them, within their span of control.
•The chain of command (ie the way authority
is organized) is a typical pyramid shape
Evolution of the Modern Corporation
The business
environment
Strategic
changes
Organizational
consequences
Early
19th
century
Local markets
Transport slow
Limited mechanization
Firms specialized &
focused on local
markets
Small firms.
Simple management structures
Late
19th
century
Introduction of
railroads, telegraph
industrialization
Geographical and
vertical expansion
Functional structures. Line/staff
separation. Accounting systems
Early
20th
century
Excess capacity in
distribution. Growth
of financial institutions & world trade
Product &
multinational
diversification
Development of
multidivisional
corporation
A Functional Structure
A Multidivisional Structure
A Multinational Matrix Structure
The building blocks of organisations
Strategic
apex
Support
staff
Techno
structure
Middle
line
Operating core
Ideology
Organizational iceberg model
•These components are:
•Publicly observable
•Generally rational,
•Cognitiveli derived
Overt organization
Structure,
Job-description,
span of control,
rules, roles
These conponents are:
•Hidden,
•Generally affective,
•Emotionally derived
Covert organization
Emergent power and
influence pattern,
Emotional feeling,
Group norms
Individual role
perception,
Needs, and desires
A Transnational Structure
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Exploits knowledge across borders
Gets the best of multi-domestic and global
strategy
High local responsiveness
High global coordination
National units operate independently, but
are a source of ideas and capabilities for
the whole organisation
National/regional units achieve greater
scale economies by specialising
Corporate centre manages global network
Diagram: Hierarchical Organisation
Advantages
•Authority and
responsibility and
clearly defined
•Clearly defined
promotion path.
There are specialists
managers
• Employees are very
loyal to their
department within the
organisation.
Disadvantages
•The organisation can
be bureaucratic and
respond slowly to
changing customer
needs and the market
•Communication
across various sections
can be poor especially
horizontal
communication.
•Departments can
make decisions rivalry
Matrix ( or project-based)
organisations
•A Matrix structure organisation contains
teams of people created from various
sections of the business.
•These teams will be created for the
purposes of a specific project and will be
led by a project manager.
•
•Often the team will only exist for the
duration of the project and matrix
structures are usually deployed to develop
new products and services.
The Matrix structure
The advantages of a matrix include
•Individuals can be chosen according to the needs
of the project.
•The use of a project team which is dynamic and
able to view problems in a different way as specialists.
• Project managers are directly responsible for
completing the project within a specific deadline and
budget.
The disadvantages include
•A conflict of loyalty between line managers and
project managers over the allocation of resources.
•If teams have a lot of independence can be difficult
to monitor.
•Costs can be increased if more managers (ie
project managers) are created through the use of
project teams.
•The most important people are the
employees who are at the forefront of serving
the customers.
•The rest of the hierarchy is there to enable
the employees to do their job.
• So
rather than the workers
being
responsible to their bosses, the bosses are
there to service the needs of the workers as
they go about their company’s business.
Pros and Cons of Different
Structures
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This depends on the business type,
size and structure used
Let’s look at a functional structure:
Board of Directors
Chief Executive
Production
Marketing
Accounts
Personnel
IT
Functional Structure
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Advantages
Specialisation – each 
department focuses
on its own work
Accountability –

someone is
responsible for the
section
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Clarity – know your
and others’ roles
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Disadvantages
Closed
communication
could lead to lack
of focus
Departments can
become resistant
to change
Coordination
may take too long
Gap between top
and bottom
An Example of Organisation
by Product/Activity
Hewlett Packard
Imaging and
Printing Group
Personal
Systems Group
Enterprise
Systems Group
HP Services
HP Financial
Services
Organisation by
Product/Activity
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Advantages
Clear focus on
market segment
helps meet
customers’ needs
Positive competition
between divisions
Better control as
each division can act
as separate profit
centre
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Disadvantages
Duplication of
functions (e.g.
different sales force
for each division)
Negative effects of
competition
Lack of central
control over each
separate division
Organisation by Area
Hewlett-Packard’s
Headquarters Worldwide
Hewlett Packard
Americas
Houston, Texas
Europe, Middle East, Africa
Geneva, Switzerland
Asia Pacific
Hong Kong
Organisation by Area
Advantages
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Serve local needs
better
Positive competition
More effective
communication
between firm and local
customers
Disadvantages
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Conflict between local
and central
management
Duplication of
resources and
functions
Other Organisational
Structures
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By Customer:
Similar effects to structuring
by product
By Process:
Similar to structuring by function
Organising for Success – Outline (1)
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Key challenges in organising for
success
• Control, knowledge management, coping
with change, response to globalisation
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Structural types of organisations
• Strengths and weaknesses
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Organisational processes
• Planning systems, performance targets
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Management of internal and external
relationships
• Help or hinder success
Organising for Success – Outline (2)
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Three reinforcing strands for organising
configurations
• Structure, processes and relationships
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Implications of configurations for
organisational performance and change
Multinational Structures
Comparison of Structures
Challenge Control
Structure
Functional
Change
Knowledge
Globalisation
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Holding
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Matrix
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Multidivisional
Transnational
Team
Project
Exh 8.6 adapted
Strategic Planning
Financial Control
Strategic Control
Configurational Dilemmas
Inverting the organisational pyramid
Customers/markets/competition
Technology
Legislation
Employees
Management
Champions of
Change
Shareholders
Economy/
finance