CHAPTER 10 STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin 10-1.
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Transcript of CHAPTER 10 STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin 10-1.
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-1
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McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Creating Effective Organizational
Designs
Chapter 10
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-3 After studying this chapter, you should have a good understanding of:
• The importance of organizational structure and the concept of the boundaryless 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 boundaryless organizations—barrier-free, modular, and virtual—and their advantages and disadvantages
Learning Objectives
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-4Exhibit 10.1 Growth Patterns of Large Corporations
Phase 1Strategy: Low revenue base; simple product-market scopeStructure: Simple
Phase 2Strategy: Increase in revenues; engage in vertical integrationStructure: Functional
Phase 3Strategy: Expand into new, related product-markets and/or geographical
areasStructure: Divisional
Phase 4Strategy: Expand into international marketsStructure: International Division, Geographic Area, Worldwide Product
Division, Worldwide Functional, or Worldwide Matrix
Phase 1Strategy: Low revenue base; simple product-market scopeStructure: Simple
Phase 2Strategy: Increase in revenues; engage in vertical integrationStructure: Functional
Phase 3Strategy: Expand into new, related product-markets and/or geographical
areasStructure: Divisional
Phase 4Strategy: Expand into international marketsStructure: International Division, Geographic Area, Worldwide Product
Division, Worldwide Functional, or Worldwide Matrix
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-5 Functional Structure
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
Exhibit 10.2
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-6 Functional Structure
Advantages Disadvantages• Pooling of specialists
enhances coordination and control
• Centralized decision making enhances an organizational perspective across functions
• Efficient use of talent• Career paths and
professional development in specialized areas are facilitated
• Differences in functional orientations impede communication and coordination
• Tendency for specialists to develop a short-term perspective and a narrow functional orientation
• Functional area conflicts may overburden top level decision makers
• Difficult to establish uniform performance standards
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-7Divisional Structure
Chief Executive Officer or President
Corporate Staff
Division A
General Manager
Division B
General Manager
Division C
General Manager
Manager Production
Manager Engineering
Manager Marketing
Manager R&D
Manager Personnel
Manager Accounting
Organized similarly to Division 1
Organized similarly to Division 1
Lower-level managers, specialists, and operating personnel
Exhibit 10.3
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-8 Divisional Structure Advantages Disadvantages
• Increases strategic and operational control, permits executives to address strategic issues
• Quick response to environmental changes
• Increased focus on products and markets
• Minimizes problems associated with sharing resources across functions
• Facilitates development of general managers
• Increased costs incurred through duplication of personnel, operations, and investment
• Dysfunctional competition among divisions may detract from corporate performance
• Difficulty in maintaining uniform corporate image
• Overemphasis on short-term performance
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-9Matrix Structure
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
Exhibit 10.4
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-10 Matrix Structure Advantages Disadvantages
• Increases market responsiveness through collaboration and synergies
• Allows more efficient utilization of resources
• Improves flexibility, coordination, and communication
• Increases professional development through broader responsibilities
• 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 resources duplicated
• Excessive reliance on teamwork may impede timely decision making
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-11
A structure based on geographic lines usually implies a multi-domestic international strategy
The Multi-Divisional StructureThe Multi-Divisional Structure
North America
AustraliaEurope AsiaLatin
AmericaAfrica
Product A Product B Product C Product D
Chief Executive OfficerChief Executive OfficerChief Executive OfficerChief Executive Officer
Corporate Office (Staff)Corporate Office (Staff)Corporate Office (Staff)Corporate Office (Staff)
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-12
Product A Product B Product C Product D
A structure based on product lines usually implies a global international strategy
The Multi-Divisional StructureThe Multi-Divisional Structure
Chief Executive OfficerChief Executive OfficerChief Executive OfficerChief Executive Officer
Corporate Office (Staff)Corporate Office (Staff)Corporate Office (Staff)Corporate Office (Staff)
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-13
A Transnational International Strategyis likely to utilize a structure that results in
emphasis on both geographic and product structures
The Multi-Divisional StructureThe Multi-Divisional Structure
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-14 Boundaryless Organizational Designs
Barrier-Free -Under-defined -Fluid -Team-based
Modular -Value-Chain, not Hierarchy
-Specialization and Outsourcing
Virtual -The Organization as a Dynamic Network
-Strategic Alliances
-Networking
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-15 Pros and Cons of the Barrier-Free Organization
Pros Cons• Leverages the talents of all
employees• Enhances cooperation,
coordination, and information-sharing with internal and external constituencies
• Enables a quicker response to market changes
• Difficult to overcome political and authority boundaries both inside and outside the organization
• A lack of leadership and vision can lead to coordination problems.
• Time-consuming and difficult-to-manage democratic processes
• A lack of high levels of trust can impede performance
Exhibit 10.6
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-16 Pros and Cons Of the Modular Organization
Pros Cons• Directs a firm to its critical
activities• Maintains full strategic control
over most the critical activities—core competencies
• Achieves “best in class” performance throughout 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 competences are outsourced
• Increases the difficulty of bringing activities back into the firm
• May lead to an erosion of cross-functional skills
• Decreases operational control and potential loss of control over a supplier
Exhibit 10.7
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CHAPTER 10STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
10-17 Pros and Cons of the Virtual Organization
Pros Cons• Enables the sharing of costs,
skills, risks• Enhances access to global
markets• Increases market responsiveness• Creates a “best of everything”
organization since each partner brings their core competencies
• 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
• 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
Exhibit 10.8