CAPTER 11: ORGANIZATIONAL DESIGN AND CONTROL CASE: Alibaba.com
ORGANIZATIONAL STRUCTURE ( DESIGN )
The firm’s formal reporting relationships, procedures, controls, and authority and decision making processes. Specifies the work to be done and how to do it in line with the firms strategies • Structural Stability: Provides the capacity the firm requires to consistently & predictably manage it’s daily work routines.
Abdul Aziz Bin Abdul Samad Maniyarasan Al Munusamy Zahairinizal Bin Zakria Kanesan Al Velusamy Sheerad Bin Sahid
• Structural Flexibility:
Provides the opportunity to explore competitive possibilities & allocate resources to activities that will shape the competitive advantages of the firm that it will need to be successful in the future.
Guide the use of strategy, indicate how to compare actual results with expected results, and suggest corrective actions to take when the difference is unacceptable. Strategic Controls Organizational Controls Financial Controls
RELATIONSHIPS BETWEEN STRATEGY AND STRUCTURE
• Strategy has much more important influence on the structure than the reverse. • When changing strategies the firm should simultaneously change the structure that support the strategies in order to have competitive advantage.
• Concerned with examining the fit between what the firm might do and what it can do.
• Largely financial objective criteria
used to measure the firm’s performance against previously established quantitative standards.
EVOLUTIONARY PATTERNS OF STRATEGY AND ORGANIZATIONAL STRUCTURE • Firms grow in predictable patterns:
• Evaluate the degree to which
the firm focuses on the requirements to implement it’s strategies.
• Accounting-based measures
include: Return on investment (ROI) & Return on assets (ROA)
– First by volume – Then by geography – Then integration (vertical, horizontal) – And finally through product/business diversification • A firm’s growth patterns determine its structural form
• Market-based measures include:
Economic Value Added (EVA)
TYPE OF ORGANIZATIONAL STRUCTURE
Three basic structure types:
Owner/Managers: makes all major decisions directly and monitors all activities
CHARACTERISTICS OF DIVERSIFICATION STRATEGIES
Overall Structural Form
Structural Characteristics Cooperative M-Form (Related Contrained Strategy) Centralized at corporate office Extensive Emphasize subjective (strategic) criteria Linked to overall corporate performance SBU M-Form (Related Linked Strategy) Competitive M-Form (Unrelated Diversification Strategy) Decentralized to divisions
CEO and limited corporate staff, with functional line manager in dominant organizational areas such as production, marketing ,A/C, HR, R&D.
Centralization of operations Use of integration mechanisms Divisional performance appraisals Divisional incentive compensation
Partially centralized (in SBUs)
Moderate Use a mixture of subjective (strategic) and objective (financial) criteria Mixed linkage to corporate, SBU, and divisional performance
Nonexistent Emphasize objective (financial) criteria Linked to divisional performance
Corporate office and operating divisions, each operating division representing a separate business or profit center in which the top officer delegates responsibilities for day-to-day operation and business-unit strategy to division manager.
WORLDWIDE GEOGRAPHIC AREA STRUCTURE: MULTIDOMESTIC STRATEGY
• Product characteristics tailored to local preferences • Isolation from global competition Establish protected market position, compete in industry
A STRATEGIC NETWORK
A Strategic Network is a grouping of organizations that has been formed to create value via participation in a set of cooperative arrangements (such as a strategic alliance). A Strategic Centre Firm often manages the network. The Strategic Centre Firm identifies actions that increase the opportunity...