© 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 2 Strategy, Organization Design and Effectiveness

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organization Direction, Design, and Effectiveness

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Purpose Strategic intent - organization’s energies and resources are directed toward a focused, unifying, and compelling goal Operative Goals Overall Performance Resources Market Employee Development Innovation and Change Productivity Mission Competitive Advantage Core Competence

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Importance of Goals Official goals and mission statements describe a value system –Legitimize the organization Operative goals serve several purposes –Employee direction and motivation –Decision guidelines –Standards of performance

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Selecting Strategy A strategy is a plan for interacting with the competitive environment Managers must select specific strategy design Models exist to aid in formulating strategy: –Porter’s Five Forces –Miles and Snow’s Strategy Typology

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Porter’s Competitive Five Forces Managers should understand forces in industry and environment –The Threat of New Entrants –The Power of Suppliers –The Power of Buyers –The Threat of Substitutes –Rivalry among Existing Competitors Porter suggests that companies adopt strategies based on five forces analysis

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Porter’s Competitive Strategies

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Miles and Snow’s Strategy Typology Prospector –Learning orientation; flexible, fluid, decentralized structure –Values creativity, risk-taking, and innovation Defender –Efficiency orientation; centralized authority and tight cost control –Emphasis on production efficiency, low overhead Analyzer –Balances efficiency and learning; tight cost control with flexibility and adaptability –Emphasis on creativity, research, risk-taking for innovation Reactor –No clear organizational approach; design characteristics may shift abruptly depending on current needs Managers should seek to formulate strategy that matches the demands of the external environment.

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How Strategy Affects Organization Design Managers must design the organization to support the firm’s competitive strategy. Strategy impacts internal organization characteristics

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Contingency Factors Affecting Organization Design

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Assessing Organizational Effectiveness →Managers must evaluate goals →Effectiveness can be difficult to measure →Managers determine what to measure Effectiveness takes into consideration a range of variables at both the organizational and departmental levels.

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sample Goals Profitability –The positive gain from business operations or investments Market Share –The proportion of the market the firm is able to capture relative to competitors Growth –The ability of the organization to increase its sales, profits, or clients Social Responsibility –How well the organization serves the community Product Quality –The ability of the organization to achieve high quality products/services

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Resource and Internal Process Goals Resource-based indicators look at the inputs regarding processes –The use of tangible and intangible resources in operations (i.e. supplies, people) Internal processes must be measured for effectiveness –Operational efficiency –Growth and development of employees

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Contingency Approaches to the Measurement of Organizational Effectiveness

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Balance Scorecard Approach

© 2010 South-Wetern/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Design Essentials Organization exist for a purpose Strategic intent include competitive advantage and core competence Strategies may include many techniques There are models to aid in the development of strategy Organizational effectiveness must be assessed No approach is suitable for every organization