1. Implementing Strategy: Creating Effective Organizational Designs
Chapter Ten
Implementing Strategy: Creating Effective Organizational Designs

2. After studying this chapter, you should have a good understanding of:
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Learning Objectives
After studying this chapter, you should have a good understanding of:
The importance of organizational structure and the concept of the “boundary-less” organization in implementing strategies
The growth patterns of major corporations and the relationship between a firm’s strategy and its structure
Each of the traditional types of organizational structure—simple, functional, divisional, and matrix
The relative advantages and disadvantages of traditional organizational structures
The implications of a firm’s international operations for organizational structure
The different types of boundary-less organizations—barrier-free, modular, and virtual—and their relative advantages and disadvantages

3. Growth Patterns of Large Corporations
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Growth Patterns of Large Corporations
Exhibit 10.1
Phase 1
Strategy: Low revenue base; simple product-market scope
Structure: Simple
Phase 2
Strategy: Increase in revenues; engage in vertical integration (backward and/or forward)
Structure: Functional
Phase 3
Strategy: Expand into new, related product-markets and/or geographical areas
Structure: Divisional
Phase 4
Strategy: Expand into international markets
Structure: International Division, Geographic Area, Worldwide Product Division, Worldwide Functional, or Worldwide Matrix

4. Functional Structure: Advantages and Disadvantages
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Exhibit 10.2
Functional Structure: Advantages and Disadvantages
Chief Executive Officer or President
Manager Production
Manager Engineering
Manager Marketing
Manager R&D
Manager Personnel
Manager Accounting
Lower-level managers, specialists, and operating personnel

5. Divisional Structure: Advantages and Disadvantages
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Exhibit 10.3
Divisional Structure: Advantages and Disadvantages
Chief Executive Officer or President
Corporate Staff
Division A
General Manager
Division B
Division C
Manager Production
Manager Engineering
Manager Marketing
Manager R&D
Manager Personnel
Manager Accounting
Organized similarly to Division 1
Lower-level managers, specialists, and operating personnel

6. Matrix Structures: Advantages and Disadvantages
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Matrix Structures: Advantages and Disadvantages
Exhibit 10.4
Chief Executive Officer or President
Corporate Staff
Manager Administration and Human Resources
Manager Projects
Manager Manufacturing
Manager Engineering
Manager Marketing
Manager Public Relations
Project A
Project B
Project C
Project D

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Functional, Divisional, and Matrix Structures: Advantages and Disadvantages
Exhibit 10.5
Functional Structure
Advantages
Disadvantages
Pooling of specialists enhances coordination and control
Centralized decision making enhances an organizational perspective across functions
Efficient use of managerial and technical talent
Career paths and professional development in specialized areas are facilitated
Differences in functional area orientation impede communication and coordination
Tendency for specialists to develop short-term perspective and overly narrow functional orientation
Functional area conflicts may overburden top level decision makers
Difficult to establish uniform performance standards
Divisional Structure
Advantages
Disadvantages
Increases strategic and operational control, permitting corporate-level executives to address strategic issues
Quick response to environmental changes
Increased focus on products and markets
Minimizes problems associated with sharing resources across functional areas
Facilitates development of general managers
Increased costs incurred through duplication of personnel, operations, and investment
Dysfunctional competition among divisions may detract from overall corporate performance
Difficulty in maintaining uniform corporate image
Overemphasis on short-term performance
Matrix Structure
Advantages
Disadvantages
Increases market responsiveness through collaboration and synergies among professional colleagues
Allows more efficient utilization of resources
Improves flexibility, coordination, and communication
Increases professional development through broader range of responsibility
Dual reporting relationships can result in uncertainty regarding accountability
Intense power struggles may lead to increased levels of conflict
Working relationships may be more complicated and human resources duplicated
Excessive reliance on group processes and teamwork may impede timely decision making

8. Pros and Cons of the Barrier-Free Structures
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Exhibit 10.6
Pros and Cons of the Barrier-Free Structures
Pros
Cons
Leverages the talents of all employees
Enhances cooperation, coordination, and information-sharing among functions, divisions, SBUs, and external constituencies
Enables a quicker response to market changes through a single-goal focus
Can lead to coordinated “win-win” initiatives with key suppliers, customers, and alliance partners.
Difficult to overcome political and authority boundaries both inside and outside the organization
Lacks strong leadership and common vision which can lead to coordination problems.
Time-consuming and difficult-to-manage democratic processes
Lacks high levels of trust which can impede performance

9. Pros and Cons Of Modular Structures
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Exhibit 10.7
Pros and Cons Of Modular Structures
Pros
Cons
Directs a firm’s managerial and technical talent to the most critical activities
Maintains full strategic control over most critical activities—core competencies
Achieves “best in class” performance at each link in the value chain
Leverages core competencies by outsourcing with smaller capital commitment
Encourages information sharing and accelerates organizational learning
Inhibits common vision through reliance on outsiders
Diminishes future competitive advantages if critical technologies or other competences are outsourced
Increases the difficulty of bringing back into the firm activities that now add value due to market shifts
May lead to an erosion of cross-functional skills
Decreases operational control and potential loss of control over a supplier

10. Pros and Cons of Virtual Structure
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Exhibit 10.8
Pros and Cons of Virtual Structure
Pros
Cons
Enables the sharing of costs and skills
Enhances access to global markets
Increases market responsiveness
Creates a “best of everything” organization since each partner brings core competencies to the alliance
Encourages both individual and organizational knowledge-sharing and accelerates organizational learning
Harder to determine where one company ends and another begins due to close interdependencies among players
Leads to potential loss of operational control among partners
Results in loss of strategic control over emerging technology
Requires new and difficult-to-acquire managerial skills