1. Organizational Structure and Controls Organizational Structure and Controls ©2000 South-Western College Publishing

2. Structure Types All organizations require some form of organizational structure to implement and manage their strategies Firms frequently alter their structure as they grow in size and complexity Three basic structure types: Functional Structure Multi-divisional Structure (M-form) Simple Structure

3. Strategy & Structure Growth Patterns Sales Growth Coordination and Control Problems Sales Growth Coordination and Control Problems Efficient implementation of formulated strategy Efficient implementation of formulated strategy MultidivisionalStructureMultidivisionalStructure Efficient implementation of formulated strategy Efficient implementation of formulated strategy Sales Growth Coordination and Control Problems Sales Growth Coordination and Control Problems FunctionalStructureFunctionalStructure SimpleStructureSimpleStructure

4. Simple Structure Owner / Manager Owner/Manager makes all major decisions directly and monitors all activities Difficult to maintain this structure as the firm grows in size and complexity

5. * Production * Finance * Engineering * Accounting * Sales & Marketing * Human Resources Functional Structure First stage beyond a Simple Structure Appropriate for single or dominant-business firms Allows specialization of tasks Overcomes information processing limits of single owner/manager Functional department heads report to Chief Executive Officer who integrates decisions and actions from a company-wide point of view Risks conflicts between myopic function managers

6. ProductionFinanceEngineeringAccounting Sales & MarketingHumanResources Functional Structure Chief Executive Officer Corporate Finance Corporate R&D Corporate Marketing Corporate Human Resources Strategic Planning

7. MarketingEngineeringOperationsPersonnel Accounting Functional Structure for Cost Leadership Strategy Functional Structure for Cost Leadership Strategy Office of the President CentralizedStaff Operations is main function Operations is main function Process engineering is emphasized rather than new product R&D Process engineering is emphasized rather than new product R&D Formalized procedures allow for low-cost culture Formalized procedures allow for low-cost culture Structure is mechanical; job roles are highly structured Structure is mechanical; job roles are highly structured Relatively large centralized staff coordinates functions

8. Marketing New Product R&D Operations HumanResources Finance R&DMarketing Functional Structure for Differentiation Strategy Functional Structure for Differentiation Strategy President and Limited Staff Marketing is the main function for tracking new product ideas Marketing is the main function for tracking new product ideas New product R&D is emphasized New product R&D is emphasized Most functions are decentralized Most functions are decentralized Formalization is limited to foster change and promote new ideas Formalization is limited to foster change and promote new ideas Overall structure is organic; job roles are less structured Overall structure is organic; job roles are less structured

9. Multi-Divisional Structure Each division is operated as a separate business Appropriate for related-diversified businesses Key task of corporate managers is exploiting synergies among divisions Managers use a combination of strategic controls and financial controls Managers try to strike a balance between: Competing among divisions for scarce capital resources Creating opportunities for cooperation to develop synergies The goal is to maximize overall firm performance

10. Multi-Divisional Structure Balance on these dimensions may change over time The decision-making of managers in a Multi- Divisional structure may be: Centralized or Decentralized Bureaucratic or Non-bureaucratic Changes in strategy Degree of diversification Geographic scope Nature of competition Structure will evolve over time with:

11. DivisionDivisionDivisionDivision ProductionFinanceEngineeringAccounting Sales & MarketingHumanResources Multi-Divisional Structure Chief Executive Officer Corporate Finance Corporate R&D Corporate Marketing Strategic Planning Corporate Human Resources

12. PresidentPresident Strategic Business Unit A SBU Form Related-Linked Strategy Corporate Finance Corporate R&D Corporate Marketing Strategic Planning Corporate Human Resources DivisionDivisionDivision Strategic Business Unit C DivisionDivisionDivision Strategic Business Unit B Strategic Business Unit D Structural integration exists among divisions within SBUs, but not across SBUs Structural integration exists among divisions within SBUs, but not across SBUs Each SBU may have its own budget for staff to foster integration Each SBU may have its own budget for staff to foster integration Corporate headquarters staff serve as consultants to SBUs and divisions Corporate headquarters staff serve as consultants to SBUs and divisions

13. Competitive Form Unrelated /Holding Company Strategy PresidentPresident LegalAffairs Finance Corporate headquarters has a small staff Corporate headquarters has a small staff Finance and auditing are the most prominent functions in the headquarters Finance and auditing are the most prominent functions in the headquarters Divisions are independent and separate for financial evolution purposes Divisions are independent and separate for financial evolution purposes Divisions retain strategic control, but cash is managed by the corporate office Divisions retain strategic control, but cash is managed by the corporate office Divisions compete for corporate resources Divisions compete for corporate resources Auditing DivisionDivisionDivisionDivisionDivision

14. Cost Leadership DecentralizationDifferentiationCentralization Multi-Divisional Structure The choice between centralization and decentralization is frequently based on the business-level strategy implemented in each division Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized, depending upon the various business-level strategies employed throughout the firm’s individual businesses Multi-Divisional structure firms use a combination of: Financial Controls Strategic Controls

15. A Structural evolution based on Geographic lines usually implies a Multi-Domestic International Strategy Evolution of Multi-Divisional Structure North America Australia EuropeAsia Latin America Africa Product A Product B Product C Product D Chief Executive Officer Corporate Office (Staff)

16. Implementation of a Multidomestic Strategy WorldwideGeographicAreaStructure MultinationalHeadquartersMultinationalHeadquartersAsiaAsiaUnitedStatesUnitedStatesLatinAmericaLatinAmericaEuropeEurope AustraliaAustraliaMiddleEast/AfricaMiddleEast/Africa Green circles indicate decentralization of operations Green circles indicate decentralization of operations Emphasis is on differentiation by local demand to fit a culture Emphasis is on differentiation by local demand to fit a culture Corporate headquarters coordinates financial resources among independent subsidiaries Corporate headquarters coordinates financial resources among independent subsidiaries The organization is like a decentralized federation The organization is like a decentralized federation

17. Product A Product B Product C Product D A Structural evolution based on Product lines usually implies a Global International Strategy Evolution of Multi-Divisional Structure Chief Executive Officer Corporate Office (Staff)

18. Implementation of a Global Strategy WorldwideProductDivisionalStructure Green circle indicates centralization to coordinate information flow among worldwide products Green circle indicates centralization to coordinate information flow among worldwide products Headquarters uses many intercoordination devices to facilitate global economies of scale and scope Headquarters uses many intercoordination devices to facilitate global economies of scale and scope Headquarters also allocates financial resources cooperatively Headquarters also allocates financial resources cooperatively The organization is like a centralized federation The organization is like a centralized federation MultinationalHeadquartersMultinationalHeadquartersWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivision WorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivisionWorldwideProductsDivision

19. Strategic Networks A Strategic Network is a grouping of organizations that has been formed to create value through participation in an array of cooperative arrangements, such as a strategic alliance A Strategic Center Firm often manages the network The Strategic Center Firm identifies actions that increase the opportunity for each firm to achieve success through its participation in the network The Strategic Center Firm creates incentives that reduce the probability of any single firm taking advantage of its network partners

20. A Strategic Network StrategicCenterFirmStrategicCenterFirm Network Firms

21. StrategicCenterFirmStrategicCenterFirm Strategic Center Firm’s Critical Functions Strategic Outsourcing Capability Development Technology Sharing Building Linkages to Facilitate Learning

22. StrategicCenterFirmStrategicCenterFirm Strategic Outsourcing Center firm coordinates outsourcing among partners, initiates actions and coordinates problem solving

23. StrategicCenterFirmStrategicCenterFirm Strategic Center Firm’s Critical Functions Strategic Outsourcing Capability Development Technology Sharing Building Linkages to Facilitate Learning

24. Strategic center firm manages the development and sharing technology-based ideas among network partners Capability and Technology StrategicCenterFirmStrategicCenterFirm Center firm attempts to develop each partner’s core competencies and provides incentives for network firms to share their capabilities and competencies with partners

25. StrategicCenterFirmStrategicCenterFirm Strategic Center Firm’s Critical Functions Strategic Outsourcing Capability Development Technology Sharing Building Linkages to Facilitate Learning

26. StrategicCenterFirmStrategicCenterFirm Strategic center firm emphasizes to partners the need to build linkages between value chains and networks of value chains. The strategic network seeks to develop a competitive advantage in primary or support activities

27. IDEOLOGÍA Partes Básicas de una Organización Ápice Estratégico Tecnoestructura Núcleo de Operaciones Personal de Apoyo Linea Intermedia Fuente: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.

28. Formas de Organización La Organización Empresarial La Organización Máquina La Organización Profesional La Organización Diversificada La Organización Innovadora La Organización Misionaria La Organización Política

29. Impulsos por tipos de configuración CONFIGURACIÓNPRINC MECANISMO DE COORDINACIÓN PARTE CLAVE DE LA ORGANZACIÓN IMPULSOS Empresarial, nuevos negocios Supervisión directaÁpice EstratégicoLiderazgo, Dirección Máquina, banco, manufacturas Procesos StandardTecnoestructutraRacionalización, Eficiencia Profesional, consultoras Habilidades Standard OperacionesProfesionalización; Destreza Diversificada, múltip. Negocios Producción Standard Linea IntermediaFragmentación, Concentración Innovadora, Inv & Desarrollo Adaptación mutuaApoyoColaboración, Aprendizaje Misionaria, ONG’s, Educación Normas StandardIdeologíaDescentralización, Cooperación Política, partidos políticos Ninguna La desunión, Competencia