Strategic Implementation
Strategic
Management
(BA 491)
STRATEGIC MANAGEMENT
McGraw-Hill/Irwin
Creating Effective
Organizational
Designs
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Three Aspects of Implementation
• Functional policies/processes
• Culture
• Structure
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Functional Policies & Processes
• What does each functional area need to
do to support company-wide strategies?
• Production/Operations
• Marketing
• Accounting and Finance
• Research and Development
• Human Resource Management
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3
Organizational Culture
• Culture is the pattern of values and
beliefs shared by the organization’s
members.
• Exists at two levels:
• Surface level of symbols, stories, heroes,
slogans, and ceremonies
• Deeper level of values and norms
• Culture needs to be aligned with, or at
least not antagonistic with, strategy.
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4
Traditional Forms of Organizational
Structure
• Organizational structure refers to formalized
patterns of interactions that link a firm’s
• Tasks
• Technologies
• People
• Structure provides a means of balancing two
conflicting forces
• Need for the division of tasks into meaningful
groupings
• Need to integrate the groupings for efficiency and
effectiveness
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5
Dominant Growth Patterns of Large
Corporations
Strategies leading
to new structure
Growth in revenues
and employees
Dominant growth
path for U.S. firms
Diversification in
unrelated areas
Vertical integration
Diversification into
related products
and markets
International
expansion
Increase
relatedness of
products and
markets
Related
diversification
International
Expansion
International
expansion
Increase relatedness of
products and markets
Related
diversification
Source: Adapted from J. R. Galbraith and R. K. Kazanjian, Strategy Implementation: The Role of Structure and
Process, 2nd ed. (St. Paul, MN: West Publishing Company, 1986), p. 139.
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Patterns of Growth of Large Corporations:
Simple Structure
• Simple structure is the oldest and most
common organizational form
• Staff serve as an extension of the top executive’s
personality
• Highly informal
• Coordination of tasks by direct supervision
• Decision making is highly centralized
• Little specialization of tasks, few rules and
regulations, informal evaluation and reward system
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Patterns of Growth of Large Corporations:
Functional Structure
Lower-level managers, specialists, and operating personnel
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Patterns of Growth of Large Corporations:
Functional Structure
• Found where there is a single or closely related
product or service, high production volume, and
some vertical integration
Advantages
• Enhanced coordination and
control
• Centralized decision making
• Enhanced organizationallevel perspective
• More efficient use of
managerial and technical
talent
• Facilitated career paths and
development in specialized
areas
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Disadvantages
• Impeded communication and
coordination due to
differences in values and
orientations
• May lead to short-term
thinking (functions vs.
organization as a whole
• Difficult to establish uniform
performance standards
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Divisional Structure
Lower-level managers, specialists,
and operating personnel
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Divisional Structure
• Organized around products, projects, or
markets
• Each division includes its own functional
specialists typically organized into departments
• Divisions are relative autonomous and consist
of products and services that are different from
those of other divisions
• Division executives help determine productmarket and financial objectives
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Divisional Structure
Advantages
• Separation of strategic and
operating control
• Quick response to important
changes in external
environment
• Minimal problems of sharing
resources across functional
departments
• Development of general
management talent is
enhanced
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Disadvantages
• Can be very expensive
• Can be dysfunctional
competition among divisions
• Can be a sense of a “zerosum” game that discourages
sharing ideas and resources
among divisions
• Differences in image and
quality may occur across
divisions
• Can focus on short-term
performance
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Divisional Structure
• Strategic business unit (SBU) structure
• Divisions with similar products, markets, and/or
technologies are grouped into homogenous SBUs


Task of planning and control at corporate office is more
manageable
May become difficult to achieve synergies across SBUs
• Holding company structure (conglomerate)
• Appropriate when the businesses in a corporation’s
portfolio do not have much in common


Lower expenses and overhead, fewer levels in the hierarchy
Inherent lack of control and dependence of CEO-level
executives on divisional executives
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Matrix Structure
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Matrix Structure
• A combination of the functional and divisional
structures
• Individuals who work in a matrix organization
become responsible to two managers
• The project manager
• The functional area manager
Advantages
Disadvantages
• Facilitates the use of
specialized personnel,
equipment and facilities
• Provides professionals with a
broader range of responsibility
and experience
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• Can cause uncertainty and
lead to intense power
struggles
• Working relationships become
more complicated
• Decisions may take longer
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International Operations: Implications for
Organizational Structure
• Three major contingencies influence
structure adopted by firms with
international operations
• Type of strategy driving the firm’s foreign
operations
• Product diversity
• Extent to which the firm is dependent on
foreign sales
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International Operations: Implications for
Organizational Structure
• Structures used to manage international
operations
• International division
• Geographic-area division
• Worldwide functional
• Worldwide product division
• Worldwide matrix
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