STRATEGIC MANAGEMENT AND BUSINESS POLICY Structural implementation (c) Dr. Azhar Kazmi 2008

STRATEGIC MANAGEMENT AND BUSINESS POLICY Strategy Implementation Activating Strategies ( Last Session) Structural Implementation (This Session) Behavioral Implementation (Next) Functional and Operational Implementation (4th session) (c) Dr. Azhar Kazmi 2008

Learning objectives - 1 Discuss organisation structure from the viewpoint of strategy implementation Examine how the different stages of the development of organisations help to determine structure Describe the different types of structures used for strategy implementation Observe the emerging forms of structures being devised to meet emerging challenges Review the subject matter of organisational design and organisational change in the context of strategy implementation (c) Dr. Azhar Kazmi 2008

Learning objectives - 2 Describe the structures used for implementing different types of business strategies Describe the structures used for implementing different types of corporate strategies Study the evolution of systems and processes within organisations Establish linkages between the characteristics of information, control and reward systems that fit the requirements of strategies being implemented (c) Dr. Azhar Kazmi 2008

Structural considerations From a strategy implementation standpoint, an organisation structure is the arrangement of tasks and sub-tasks required to implement a strategy. Organisation structure specifies three key components as below. It identifies formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers. It specifies the grouping of individuals into departments and of departments into the total organisation. It consists of design of systems to ensure effective communication, coordination, and integration of efforts across departments. (c) Dr. Azhar Kazmi 2008

Vertical and horizontal structures Vertical structure dominant: Specialised tasks Hierarchy of authority Rules and regulations Vertical communication and formal reporting systems Centralised decision making Emphasis on efficiency Horizontal structure dominant: Shared tasks Flexible authority Few rules and regulations Horizontal communication and sharing of information Decentralised decision-making Emphasis on learning (c) Dr. Azhar Kazmi 2008

Interrelationship between structure and strategy determines affects (c) Dr. Azhar Kazmi 2008

Why is structural implementation needed? Strategic plan is implemented New strategies put in place Performance declines Effectiveness is reduced Implementation of new strategies Structure is changed Performance improves Mismatches occur (c) Dr. Azhar Kazmi 2008

Environment, strategy, structure, and effectiveness (c) Dr. Azhar Kazmi 2008

Stages of development of organisations Stage I organisations-Small scale, owner-manager, Stage II organisations –bigger than I, bigger scope of business, usually functional based, Stage III organisations-Large, widely scattered, having plants and units at different places, divisional structure Stage IV organisations-Huge, multi-product, multi- plant set up, many SBU (c) Dr. Azhar Kazmi 2008

Types of organisational structures Entrepreneurial Functional Divisional SBU Matrix Network Other types of structures: Product-based, customer-based, process-based, geographic, and entrepreneurial structures (c) Dr. Azhar Kazmi 2008

Entrepreneurial Structure . (c) Dr. Azhar Kazmi 2008

Functional Structure . (c) Dr. Azhar Kazmi 2008

Divisional Structure . (c) Dr. Azhar Kazmi 2008

SBU Organisational Structure . (c) Dr. Azhar Kazmi 2008

Matrix Structure . (c) Dr. Azhar Kazmi 2008

Network Organization . (c) Dr. Azhar Kazmi 2008

Emerging forms of structures Horizontal organisations are based on structure that corresponds to the process of providing product or service to the customer rather than the functions that the organisations perform. Delaminated matrices are combinations of horizontal organisations with functional structure. Mechanistic structures are rigid, hierarchical, suited to stable conditions while organic structures are flexible arrangements, adapting to conditions of rapid change and innovation. The structure of an organisation may consist of the characteristics of mechanistic and organic structures in different parts making it an ambidextrous organisation structure (c) Dr. Azhar Kazmi 2008

Interorganisational relationship of a biotechnology consortium (c) Dr. Azhar Kazmi 2008

Organisational design and change Organisation design has two dimensions: Structural dimensions-Formalisation, Specialization, Hierarchy, Centralization, personnel ratios, Contextual dimensions-Environment, Goals& Strategy, Culture, Technology, Size Organisational change has two dimensions: Structural changes Accompanying behavioural changes (c) Dr. Azhar Kazmi 2008

Steps in organisation design Identification of key activities necessary to be performed for the achievement of objectives and realisation of mission through the formulated strategy. Grouping of activities that are similar in nature and need a common set of skills to be performed. Choice of structure that could accommodate the different groups of activities. Creation of departments, divisions, etc. to which the group of activities could be assigned. Establishing interrelationship between different departments for the purpose of coordination and communication. (c) Dr. Azhar Kazmi 2008

Organisation design for business strategies CEO Fin HRM Mktg Oper Centralised staff R&D Structure for attaining cost leadership Structure for attaining differentiation (c) Dr. Azhar Kazmi 2008

Suggested structure for implementing related diversification CEO PR Legal Corporate Finance Corporate HRM Corporate Marketing Corporate Operation Strategic Business Unit D Strategic Business Unit C Strategic Business Unit B Strategic Business Unit A (c) Dr. Azhar Kazmi 2008

Suggested structure for implementing unrelated diversification CEO Corporate Finance Corporate HRM Corporate Legal Corporate PR Division A Division B Division C Division D (c) Dr. Azhar Kazmi 2008

Structures for internationalisation strategy Global Strategy Global Product Structure International International division structure Transnational Global Matrix Structure Multidomestic Global Geographic Structure Pressures for local responsiveness Pressures for cost reduction (c) Dr. Azhar Kazmi 2008

Evolution of systems and processes within organisations Defining the major tasks required to implement a strategy Grouping tasks on the basis of common skill requirements or activities in value chain Sub-division of responsibility and delegation of authority to perform tasks Coordination of divided responsibility Design and administration of the information system Design and administration of the control system Design and administration of the appraisal system Design and administration of the motivation system Design and administration of the reward system Design and administration of the development system Design and administration of the planning system. (c) Dr. Azhar Kazmi 2008

Generic strategies and key dimensions of computerised information system Stability Rigid policy stance Mainframe computers Transaction processing systems Retrenchment  Growth Flexible policy stance Microcomputers Decision support systems Adapted from J.C. Camillus and A.L. Lederer "Corporate strategy and the design of computerised information systems" in Sloan Management Review, Spring 1985, pp.35-42. (c) Dr. Azhar Kazmi 2008

The control cycle (c) Dr. Azhar Kazmi 2008

____________________________________________________________________________ Predominant system characteristics vis-à-vis strategic continuum and structural alternatives Nature of economy =============== Environmental characteristics Strategic continuum Structural alternatives --------------------------- Information system Control system Reward system Controlled, protected, and regulated =============== Certain, stable, and predictable Stability / controlled growth Entrepreneurial / Functional --------------------------- Efficiency-orientation Formal-direct / mechanistic Efficiency-based; monetary, informal, internal focused Globalised, liberalised, and privatised ================= Unstable, volatile, and bewildering Focused expansion / selective divestment Divisional / SBU / alternate and new forms ----------------------------- Decisional-orientation Informal-indirect/ organic Non-monetary, formal, external-focused (c) Dr. Azhar Kazmi 2008

Next Session Behavioral Implementation Reading: Chapter-12 Case Study: Infosys Technologies (c) Dr. Azhar Kazmi 2008