Matching Structure and Control to Strategy

Structure and Control at the Functional Level Manufacturing (standardization) Strategic activities for improving efficiency, quality (TQM), and customer responsiveness. Traditionally hierarchical structure shifts toward flatter structure Research and development (decentralization) To develop distinctive competencies in innovation and technology to bring products to market. Project teams Sales (output controls) To attain specific sales goals and increase responsiveness to customers. Human Resources (budget control or output control)

Generic Strategy, Structure, and Control Cost Leadership Differentiation Focus Appropriate Structure Functional Product team or matrix Integrating Mechanisms Center on manufacturing Center on R&D or marketing Center on product or customer Output Controls Great use (e.g., cost control) Some use (e.g., quality goals) Some use (e.g., cost and quality) Behavior Controls Some use (e.g., budgets, standardization) Great use (e.g., rules, budgets) Some use (e.g., budgets) Organizational Culture Little use (e.g., quality control circles) Great use (e.g., norms and values)

Designing a Global Structure Multidomestic strategy Local customer responsiveness focus International strategy Centralized at-home R&D and marketing Global strategy Value creation functions dispersed globally to optimal locations Transnational strategy Local responsiveness and global integration

Choices of Structure and Control Systems How to distribute and allocate responsibility between domestic and foreign managers? How to select a horizontal differentiation level that makes the best use of resources and best serves customers? How to choose the right integration mechanism and organizational culture?

Global Strategy/Structure Relationships Multidomestic International Global Transnational Low Need for Coordination High Bureaucratic Costs Centralization of Authority Decentralized to national unit Core competencies centralized, others decentralized to national units Centralized Simultaneously centralized and decentralized Horizontal Differentiation Global-area structure International-division structure Global product-group structure Global-matrix structure, matrix in the mind Need for Complex Integrating Mechanisms Medium Very High Organizational Culture Not important Quite important Important Very important

Global Area Structure

International-Division Structure

Global Product-Group Structure

Global-Matrix Structure  Individual operating companies

Corporate Strategy and Structure and Control Types of Control Corporate Strategy Appropriate Structure Need for Integration Financial Control Behavior Control Organizational Culture Unrelated diversification Multidivisional Low (no exchanges between divisions) Great use (e.g., ROI) Some use (e.g., budgets) Little use Vertical integration Medium (scheduling resource transfers) Great use (e.g., ROI, transfer pricing) Great use (e.g., standard- ization, budgets) Some use (e.g., shared norms and values) Related diversification High (achieving synergies between divisions by integrating roles) Great use (e.g., rules, budgets) Great use (e.g., shared norms, values, common language)

Special Issues in Strategy-Structure Choice Mergers, acquisitions, and structure Recognizing cultural and structure differences. Integration after merger and acquisition Internal new ventures and structure Maintaining the entrepreneurial spirit and aspects. Network structure and the virtual organization Creating a set of strategic alliances with suppliers, manufacturers, and distributors. For example, Nike, Topsy Tail