hill and jones chapter 12 slides

8/2/2019 Hill and Jones Chapter 12 Slides

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ChapterTwelve

Implementing

Strategy inCompanies

That Compete

in a SingleIndustry


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Copyright Houghton Mifflin Company. All rights reserved. 12 | 2

Implementing StrategyThrough Organizational Design

Organizational Design: the process of selecting the rightcombination of organizational structure, control systems,and culture to pursue a business model successfully.

Organizational StructureAssigns employees to specific value creation tasks and roles

To coordinate and integrate the efforts of all employees

Strategic Control SystemsA set of incentives to motivate employees

To provides feedback on performance so corrective actioncan be taken

Organizational CultureThe collection of values, norms, beliefs, and attitudes shared

within an organizations

To control interactions within and outside the organization


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Implementing StrategyThrough Organizational Design

Figure 12.1

Organizational structure, control, and culture shape peoplesbehaviors, values, and attitudes and determine how they willimplement an organizations business model and strategies.


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Building Blocks ofOrganizational Structure

Grouping tasks, functions, and divisions

How best to group tasks into functions andfunctions into business units or divisions tocreate distinctive competencies and pursue a

particular strategyN Allocating authority and responsibility

How to allocate authority and responsibility tothese functions and divisions

Integration and integrating mechanismsHow to increase the level of coordination orintegration between functions and divisions asa structure evolves and becomes morecomplex


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Grouping Tasks, Functionsand Divisions

Organizational structure follows the range andvariety of tasks that an organization pursues.

Companies group people and tasks intofunctions, and then functions into divisions. A function is a collection of people who work together and

perform similar tasks or hold similar positions.

A division is a way of grouping functions to allow an

organization to better serve its customers. Handoffs are the work exchanges between people,

functions, and subunits.

Bureaucratic costs result from the inefficienciessurrounding these handoffs.

Choice of structure is made on ability to implementcompanys business model and strategies successfully:


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Allocating Authorityand Responsibility

Organizational Structure

Decision Making: Centralized versusDecentralized

Delegating and empowering employees

Centralized decisions

To economize on bureaucratic costs and effectivelycoordinate the activities, company must develop aclear and unambiguous hierarchy of authority

Principle of the Minimum Chain of Command:Choose hierarchy with the fewest levels ofauthority necessary to use organizational

resources efficiently and effectively


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Tall and Flat Structures

Figure 12.2


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Integration andIntegrating Mechanisms

Direct contact

Liaison roles

Teams

Integration and integrating mechanisms are used toincrease communication and coordination amongfunctions and divisions

The greater the complexity of an

organizations structure, the greater theneed for formal coordination among

people, functions, and divisions.


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Strategic Control Systems

Characteristics of an effective control system:

Flexible

Provides accurate information

Timely

The formal target-setting, measurement, andfeedback systems to evaluate whether a companyis implementing its strategy successfully

Measures should be tied to the goals ofdeveloping distinctive competencies inefficiency, quality, innovativeness, and

responsiveness to customers.


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Steps in Designingan Effective Control System

Figure 12.3


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Levels of Organizational Control

Figure 12.4Controls at each level should providethe basis on which managers at lowerlevels design their controls systems.


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Personal Control Managers question and probe to better understand

subordinates. The result is more possibilities for learning to occur

and competencies to develop. Output Control Set appropriate performance goals for each

division, department, and employee, then measureactual performance relative to these goals.

Behavior Control Establish standardization, predictability, and

accuracy by creating a system of rules to directactions and/or behaviors of divisions, functions, orindividuals.

Types ofStrategic Control Systems


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Using Information Technology

Behavior control

IT standardizes behavior through the use ofa consistent, cross-functional software

platform. Output control

IT allows all employees or functions to usethe same software platform to provide

information on their activities. Integrating mechanism

IT provides people at all levels and acrossall functions with more information.


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Organization Culture

Culture and Stategic Leadership

Traits of Strong and Adaptive Corporate

Culture



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Building Distinctive Competencies atthe Functional Level

Functional Structure advantages: People doing similar functions can learn from one another.

People can monitor each other and improve work processes.

Managers have greater control over organizational activities.

Managing is easier with separately managed specialized groups.

Role of Strategic Control

Managers and employees can monitor and improve operatingprocedures.

Easier to apply output control.

Developing Culture Managers must implement functional strategy and develop

incentive systems to allow each function to succeed.

Most companies group people and tasks around afunctional structure on the basis of their commonexpertise or because they use the same resources.


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Functional Structure

Figure 12.5


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Functional Structureand Bureaucratic Costs

Communication problems Stem from differences in goal orientations and outlooks

Measurement problems Difficulties measuring contribution as product range widens

Customer problems Satisfying customer needs and coordinating value-chain functions

Location problems Functional structure not the best way to handle regional diversity

when selling or producing in multiple locations

Strategic problems These problems mean a company has outgrown its structure

Consider a more complex structure or outsourcing options.

Whenever different functions work together, bureaucraticcosts arise because of communication and measurement

problems arising from the handoffs across the functions.


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Implementing Strategyin a Single Industry

Effective strategy implementation andorganization design at the business level: Increases differentiation, adds value for customers,

allows for a premium price Reduces bureaucratic costs associated with

measurement and communications problems

Effective organization design often meansmoving to a more complex structure that:

Economizes on bureaucratic costs Increase revenue from product differentiation

Lowers overall cost structure by obtaining economies ofscope or scale

Implementation begins at the functional level


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Implementing Cost Leadershipand Differentiation

Pursuing a cost leadership approach The aim is to become the lowest cost producer in

the industry

Reducing costs across all functions

Lowering cost structure while preserving its abilityto attract customers

Continuously monitoring for effective operation In practice, the functional structure is the most suitable for

cost leadership.

Implementing a differentiation approach Design organization structure around the source of

distinctive competency, differentiated products,and customer groups.


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How Organizational DesignIncreases Profitability

Figure 12.6


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Product Structure:Implementing a Wide Product Line

Implementing a broad product structure: Group the overall product line into

product groups

Centralize support value chain functions

to lower costs Divide support functions into product-

oriented teams who focus on the needsof one specific product group.

Measure the performance of each product

group separately from the others Closely link rewards to performance of

product group


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Nokias Product Structure

Figure 12.7


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Market Structure: IncreasingResponsiveness to CustomerGroups

Increasing responsiveness to customer

groups: Identify the needs of each customer group.

Group people and functions by customer or marketsegments.

Make different managers responsible for

developing products for each group of customers. Establish market structure brings managers and

employees closer to specific groups of customers.

Market structure focuses on the ability to meet the needsof distinct and important sets of customers or differentcustomer groups.


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Market Structure

Figure 12.8


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Geographic Structure:Expanding Nationally

Expanding nationally geographic structure More responsive to needs of regional customers

Can achieve a lower cost structure and economiesof scale

Provides more coordination and control than afunctional structure through the regionalhierarchies

Geographic regions may become the basis for groupingorganizational activities when companies expandnationally through internal expansion, horizontalintegration, or mergers.


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Geographic Structure

Figure 12.9


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Matrix and Product-TeamStructures

Matrix structure Value chain activities are grouped by

function andby product or project

Flat and decentralized

Promotes innovation and speed

Norms and values based on

innovation and product excellence

Product-team structure Tasks divided along product or project lines

Functional specialists are part of permanentcross-functional teams

In fast-changing, high-tech environments, competitivesuccess depends on fast mobilization of company skillsand resources to ensure that product development andimplementation meet customer needs.


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Matrix Structure

Figure 12.10


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Product-Team Structure

Figure 12.11


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Focusing on aNarrow Product Line

Focusing on a narrow product line:

Focusers tend to have higher production costs Has to develop some form of distinctive

competency

Structure and controls systems need to be: Inexpensive to operate

Flexible enough to allow distinctive competency

Focuser normally adopts a functional structure

focused company concentrates on developing anarrow range of products aimed at one or two marketsegments as defined by type of customer or location.


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Restructuring Streamlining hierarchy of and reducing number of

levels Downsizing the workforce to lower operating costs Reasons to restructure and downsize:

Change in the business environment Excess capacity Bureaucratic costs: organization grew too tall and inflexible To improve competitive advantage and stay on top

Reengineering

Fundamental rethinking and radical redesign ofbusiness processes to achieve dramaticimprovements

Focuses on processes (which cut across functions),not on functions

Restructuring and Reengineering

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