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STRATEGIC MANAGEMENT
Lecture 13
Dr. John Kraft
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2. Copyright © Houghton Mifflin Company. All rights reserved.
Opening Case
Avon is Calling
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3. Managing Corporate Strategy Through the Multidivisional Structure
A company competing across industries and countries confronts a new set of problems and has to make a new series of organizational design decisions for a global and multinational business.
The Multidivisional Structure
Divisions
Responsible for day-to-day operations
Self-contained – with a full set of value-chain functions
May share value-chain functions with other divisions
Corporate headquarters staff
Monitor divisional activities
Exercise financial control over each division
Strategic responsibilities
Addresses the problems and economizes the costs of managing the handoffs between value-chain functions across industries.
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4. Managing Corporate Strategy Through the Multidivisional Structure
Functional or product structures are not sufficient when a company enters new industries
Multidivisional structure innovations
Divisions (operating responsibility)
Corporate headquarters staff to monitor divisions (strategic responsibility)
Each division may be organized differently
Source: Publisher’s PowerPoint, Ch13-Slide 2
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5. Multidivisional Structure
Figure 13.1
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Strategy in Action
SAP’s ERP Systems
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7. Global Matrix Structure
Source: Publisher’s PowerPoint, Ch13-Slide 20
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8. Related Diversification
Principle benefits of related diversification come from transferring, sharing, or leveraging functional resources or skills and some exchange of distinctive competencies across divisions.
Gains derived from the transfer, sharing, or leveraging across divisions
 R&D knowledge  Industry information  Customer bases
Output control difficult as businesses share resources
Not easy to measure performance of individual divisions
Integration and control at divisional level required
Incentives and rewards for cooperation necessary
High bureaucratic costs
The aim is to design structure and control systems to maximize strategic benefits while economizing on costs.
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9. Corporate Strategy and Structure and Control
Table 13.1
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Running Case
How Wal-Mart Implemented Global Expansion
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Strategy in Action
Nestlé’s Global Structure
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12. Implementing Strategy Across Countries
Multidomestic strategy
Local responsiveness; decentralized control
International strategy
Centralized R&D and marketing; other functions are decentralized
Global strategy
Cost reductions; centralized functions
Transnational strategy
Local responsiveness and cost reduction
Source: Publisher’s PowerPoint, Ch13-Slide 11
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13. Global Strategy/Structure Relationships
Table 13.2
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14. Implementing a Localization Strategy
A company pursuing a localization strategy generally operates with a global area structure, establishing overseas divisions in regions or countries:
Value creation activities duplicated in every region or country of operation
Decentralized authority in each overseas division
Managers at global headquarters evaluate performance of overseas divisions
No integrating mechanisms needed
No global organizational culture
Duplication of specialist activities raises costs
Companies using a localization strategy lose many of the benefits of operating globally.
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15. Global-Area Structure
Figure 13.2
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16. Implementing International Strategy
International division structure
Used when a company sells domestically made products in markets abroad
Foreign sales organization added to existing structure; same control system
Customization is minimal
Subsidiary handles local sales and distribution
Behavior controls keep the home office informed
International division coordinates flow of different products across different countries
Domestic and overseas managers may compete for control of strategy making
Source: Publisher’s PowerPoint, Ch13-Slide 15
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17. International Division Structure
Source: Publisher’s PowerPoint, Ch13-Slide 16
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18. Global Division Structure
Figure 13.3
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19. Global-Matrix Structure
Figure 13.5
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20. Global Product-Division Structure
Source: Publisher’s PowerPoint, Ch13-Slide 18
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Strategy in Action
Oracle’s New Approach to Control
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Strategy in Action
Li & Fung’s Global Supply Chain Management
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Closing Case
Ford CEO
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Real World
“HK John Waynes on New Battlefield”
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End of Lecture 13
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