Chapters 1 and 2

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CHAPTER 9 Strategy Implementation Design and
Control
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Learning Objectives

• Understand the dimensions of organizational
  structure and how they are important
• Select an appropriate business-level structure
• Select an appropriate corporate-level structure
  for firms with more than one business unit
• Develop a comprehensive strategic control system
• Understand the characteristics of accident-prone
  organizations and how to avoid them

3
Dimensions of Organizational Structure

• Hierarchy of Authority
• Degree of Centralization
• Complexity
• Specialization
• Formalization
• Professionalism

4
Functional Structure
General Manager
Marketing
Finance
Operations
HR
RD/Eng
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Functional Structure

• Organizing Framework
• Inputs such as marketing and production
• Degree of Centralization
• High centralization
• Competitive Environment
• Stable, demands for internal efficiency or
  functional specialization
• Growth Strategy
• Market penetration

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Functional Structure

• Strengths
• Economies of scale
• Functional expertise and specialization
• Best if few products or services
• Weaknesses
• Slow response time
• Hierarchy overload
• Sometimes poor coordination across departments
• Can restrict view or broader organizational goals

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Product/Market Structure
General Manager
Administrative Departments
Product A
Product B
Marketing
Operations
Marketing
Operations
General Manager
Administrative Departments
Market A
Market B
Marketing
Operations
Marketing
Operations
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Product/Market Structure

• Organizing Framework
• Outputs such as product groups or markets
• Degree of Centralization
• Decentralized
• Competitive Environment
• Dynamic with pressure to satisfy particular
  market needs very well
• Growth Strategy
• Market and/or product development

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Product/Market Structure

• Strengths
• Suited to fast change in an unstable environment
• High levels of client satisfaction
• High coordination across functions
• Best in larger organizations with several
  products or markets
• Weaknesses
• Loss of economies of scale within functional
  areas
• Some redundancy of functions
• Loss of in-depth functional specialization
• May lead to poor coordination across product
  lines or markets

10
Project Matrix Structure
General Manager
Marketing Manager
RD Manager
Operations Manager
Support Functions
Project Manager A
Project Manager A
Project Manager A
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Project Matrix Structure

• Organizing Framework
• Inputs and outputs
• Degree of Centralization
• Decentralization with shared authority
• Competitive Environment
• Responds well to internal pressure for efficiency
  or specialization AND external market pressure to
  satisfy particular market needs or customers
• Growth Strategy
• Frequent changes to products and markets (allows
  flexible use of human resource)

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Project Matrix Structure

• Strengths
• Achieves coordination
• Flexible use of human resources
• Works well in medium-sized firms with multiple
  products
• Weaknesses
• Dual authority can cause frustration and
  confusion
• Excellent interpersonal skills needed
• Additional training can be expensive
• Time consuming, frequent meetings
• Great effort to maintain power balance

13
Network Structure
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Network Structure

• Organizing Framework
• Outputs
• Degree of Centralization
• Very decentralized
• Competitive Environment
• Conditions vary from region to region
• Growth Strategy
• Market penetration or market development

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Network Structure

• Strengths
• Units can focus on specific needs of markets
• High levels of client satisfaction
• Works well in larger organizations with highly
  differentiated markets
• Weaknesses
• Loss of economies of scale
• Duplication of resources
• Hard to coordinate units when coordination is
  necessary or desirable
• Can be confusing to customers with locations in
  multiple regions where the firm operates

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Corporate Structures -- Multidivisional
CEO
Corporate Staff
Division VP
Division VP
Division VP

• Few businesses compared to the other corporate
  structures
• Moderate/low relatedness across divisions
• Moderate/low need for coordination across
  divisions
• Financial synergy may be available across
  divisions and some operational synergy (although
  limited) only to the extent that the divisions
  are related to each other

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Corporate Structures -- Strategic Business Unit
CEO
Corporate Staff
SBU Manager
SBU Manager
SBU Manager
SBU Staff
SBU Staff
SBU Staff
Related Divisions
Related Divisions
Related Divisions

• Many businesses, some of which are related to
  each other
• Groups (SBUs) of related businesses
• Coordination needed within each SBU low need for
  coordination across SBUs
• Financial synergy across SBUs, potential exists
  for operational synergy within SBUs

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Corporate Structures -- Matrix
CEO and Staff
Division 2
Division 1
Marketing
Operations
RD

• Any number of businesses
• Highly related businesses so people can easily
  transfer
• Very high level of coordination is required
• Many opportunities exist for operational
  synergies (for innovation, to reduce costs, or
  serve multiple markets well)

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Corporate Structures -- Transnational
Product Group 1
Product Group 2
Product Group 3
U.S.A.
Marketing Operations RD
Asia
Europe

• Many businesses in different nations
• Highly related businesses (similar to corporate
  matrix)
• Very high level of coordination is required
• Many opportunities exist for operational
  synergies on a world wide scale (for innovation,
  to reduce costs, or serve multiple markets well)

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Steps in Developing a Feedback Control System

• Determine Broad Goals
• Establish Links Between Broad Goals and Resource
  Areas or Activities of the Organization
• Create Measurable Operating Goals for Each
  Resource Area or Activity
• Assign Responsibility for Goal Accomplishment
• Develop Specific Action Plans
• Allocate Resources
• Follow Up

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Customers
• Sales and volume
• New customers
• New customer contacts

• Customers
• Growth in sales
• Turnover of customer base
• Ability to control price

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Suppliers
• Cost of materials
• Delivery time
• Inventory
• Availability of materials

• Suppliers
• Growth rate of material cost, delivery time or
  inventory
• New ideas from suppliers

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Financial Community
• EPS
• Stock Price
• Number of buy lists
• ROE

• Financial Community
• Ability to convince Wall Street of strategy
• Growth in ROE, EPS, or stock price

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Employees
• Number of suggestions
• Productivity
• Number of grievances

• Employees
• Number of internal promotions
• Turnover

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Congress
• New legislation affecting firm
• Access to key members and staff

• Congress
• Number of new regulations that affect industry
• Ratio of cooperative vs. competitive
  encounters

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Consumer Advocates
• Number of meetings, hostile encounters,
  coalitions formed or legal actions

• Consumer Advocates
• Number of changes in policy due to CA
• Number of CA-initiated calls for help

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Key Result Areas and Possible Measures
Near-Term Measures
Long-term Measures

• Environmentalists
• Number of meetings, hostile encounters,
  coalitions formed, EPA complaints or legal actions

• Environmentalists
• Number of changes in policy due to
  environmentalists
• Number of environmentalist calls for help

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Feedback Controls
Organizational Outcomes
Compare Goals to Outcomes
Performance Feedback
T I M E
Feedback Control
Establish Strategic Direction
Formulate Basic Strategies
Goals and Objectives
Implementation Strategies and Controls
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Feedforward Controls
Analyze Operating Environment
Analyze Resources Strategies
Analyze Broad Environment
Business Intelligence
Feedforward Control
Establish Strategic Direction
Formulate Basic Strategies
Implementation Strategies Controls
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Behavioral, Process and Accounting Controls
Establish Strategic Direction
Implementation Strategies and Controls
Formulate Basic Strategies
Behavioral Controls Bureaucracy Socialization
processes (clan) Human resources systems
Process Controls Used to guide daily processes
and work activities often technology based
Accounting Controls Systems to ensure the
accurate collection and reporting of financial
information
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How Control Elements Fit Together
Analyze Broad Environment
Analyze Operating Environment
Analyze Resources and Strategies
Organizational Outcomes
Feedforward Control
Business Intelligence
Growth Stakeholder satisfaction Profitability Leve
l of innovation Other outcomes
Information used to guide firm strategies and
manage resources and stakeholder relationships
(includes performance feedback)
Compare Goals to Outcomes
Feedback Control
T I M E
Goals and Objectives
Establish Strategic Direction
Formulate Basic Strategies
Create Implementation Strategies and Controls
Specific targets set should be mission driven
Behavioral Controls
Process Controls
Accounting Controls
Behavioral, Process and Accounting Controls
Bureaucracy Socialization processes (clan) Human
resources systems
Used to guide daily processes and work
activities often technology based
Systems to ensure the accurate collection and
reporting of financial information
32
The Five Phases of Crisis Management

• Signal Detection
• Preparation / Prevention
• Containment / Damage Limitation
• Recovery
• Learning

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Preventing and Controlling Crises

• Strategic Actions
• Technical and Structural Actions
• Evaluation and Diagnostic Actions
• Communication Actions
• Psychological and Cultural Actions