Four Levels of Strategy

Functional-level strategy: a plan to strengthen an

organization’s functional and organizational resources, as
well as its coordination abilities, in order to create core
competences
Business-level strategy: a plan to combine functional core
competences to position the organization so that it has a
competitive advantage in its domain
Corporate-level strategy: a plan to use and develop core
competences so that the organization not only can protect
and enlarge its existing domain but can also expand into
new domains
Global expansion strategy: a plan that involves choosing
the best strategy to expand into overseas markets to obtain
scarce resources and develop core competences
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 Functional-Level Strategy
• The strategic goal of each function is to create a core
competence that gives the organization a competitive
advantage
• To gain a competitive advantage, an organization must be able
to do at least one of the following:
− Perform functional activities at a cost lower than that of its
rivals, or
− Perform functional activities in a way that clearly
differentiates its goods and services from those of its rivals
• Strategies to lower costs or differentiate products

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Low-Cost and Differentiation Advantages
Resulting From Functional-Level Strategy

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Structural Characteristics of Functions

What should be the structure of support

functions like HR & Finance? Same or Different?
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Organizational Structure & Business-Level Strategies

What about Multidivisional Structure?

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Corporate-Level Strategies for Entering New Domains

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 Corporate-Level Strategy and Structure
• For organizations operating in more than one domain, a
multidivisional structure is appropriate
• Conglomerate structure and unrelated diversification
− Conglomerate structure: a structure in which each business is
placed in a self-contained division and there is no contact between
divisions
− Exception for thumb rule related to design challenge II
• Most frequently used core competence for unrelated
diversification

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Ref: HBR Sept 2009; Read about Blue Ocean Strategy for more
 Class Activity 8A
• You are recent MBBS graduate • You own a pharmacy in
and in the process of setting Jamshedpur. Due to increased
the first hospital in the rural competition, the sales has gone
village you hail from. The down in pharmacy and you have
village is so remote that there decided to start a hospital in
is no other medical facility unused first floor. First floor can
including a pharmacy for next accommodate total of 20 people
50 KMs. You have just enough (including staff and patients-50%
resource to start a hospital each) and you expect the hospital
with 10 staff. to increase the sales of pharmacy.

Complete the structure based on “Star Model”

and explain how different components are aligned
 Organizational Culture
Set of shared values and norms that control
organizational members interaction with each
other and with people outside the
organization.

It controls the way

- the members make decisions
- they interpret the environment
- they process the information
- they behave

October 11, 2023 Organizational Structure, Design and Change 11

 Organizational Culture

•Physical Structures
Artifacts of •Language • Theory X & Y
Organizational • Two IT firms
•Rituals and Ceremonies from Bangalore
Culture
•Stories and Legends

Organizational
•Values/Norms
Culture
•Assumptions

October 11, 2023 Organizational Structure, Design and Change 12

Culture - Introductory Concepts
Extending to Airline Business

• Go through the clips from the movie and identify how

following aspects vary for three airline companies
− Assumptions
− Values
− Norms
− Artifacts
 Organizational Culture
Organizational Values
Organizational Values

Terminal Values Instrumental Values

Desired end states Desired modes of

or outcomes behavior

Specific norms, rules

and SOP’s
October 11, 2023 Organizational Structure, Design and Change 14
 FLEXIBILITY
Human Relations Model Open Systems Model
(E) Human Resource
Development (M) Flexibility, Readiness

(M) Cohesion (E) Growth,

Morale Resource acquisition

INTERNAL EXTERNAL
(M) (E) Productivity,
Communication Efficiency
Information (E) Stability
(M) Planning, Evaluation
Mgmt. Control Goal setting

Internal
October 11, 2023
Process Model STABILITY
Organizational Structure, Design and Change
Rational Goal Model
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 Organizational Culture
Source of Organizational Culture
Property rights
system

Organizational Organizational Organizational

ethics Culture structure

Characteristics
of the
people within

October 11, 2023 Organizational Structure, Design and Change 16

Culture - Introductory Concepts
Culture through competing values
 Netflix Culture:
Freedom & Responsibility

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 We Seek Excellence

Our culture focuses on helping us achieve

excellence

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 Seven Aspects of our Culture
• Values are what we Value
• High Performance
• Freedom & Responsibility
• Context, not Control
• Highly Aligned, Loosely Coupled
• Pay Top of Market
• Promotions & Development

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 You make wise decisions
(people, technical, business, and
creative) despite ambiguity

You identify root causes, and get

Judgment beyond treating symptoms

You think strategically, and can

articulate what you are, and are
not, trying to do

You smartly separate what must

be done well now, and what can
be improved later

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 You listen well, instead of
reacting fast, so you can better
understand

You are concise and articulate in

Communication speech and writing

You treat people with respect

independent of their status or
disagreement with you

You maintain calm poise in

stressful situations

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 You accomplish amazing
amounts of important work

You demonstrate consistently

strong performance so
Impact colleagues can rely upon you

You focus on great results rather

than on process

You exhibit bias-to-action, and

avoid analysis-paralysis

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 You learn rapidly and eagerly

You seek to understand our

strategy, market, customers, and
suppliers
Curiosity You are broadly knowledgeable
about business, technology and
entertainment

You contribute effectively

outside of your specialty

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 You re-conceptualize issues to
discover practical solutions to
hard problems

You challenge prevailing

Innovation assumptions when warranted,
and suggest better approaches

You create new ideas that prove

useful

You keep us nimble by

minimizing complexity and
finding time to simplify

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 You say what you think even if it
is controversial

You make tough decisions

without agonizing
Courage You take smart risks

You question actions

inconsistent with our values

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 You inspire others with your
thirst for excellence

You care intensely about

Netflix‘s success
Passion You celebrate wins

You are tenacious

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 You are known for candor and
directness

You are non-political when you

disagree with others
Honesty You only say things about fellow
employees you will say to their
face

You are quick to admit mistakes

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 You seek what is best for Netflix,
rather than best for yourself or
your group

You are ego-less when searching

Selflessness for the best ideas

You make time to help

colleagues

You share information openly

and proactively

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 Choose the Best and Worst and
Decision
• Demonetisation of 1000 and 500 denomination notes

• GST introduction in our country

• Decision by Congress High Command on Karnataka Chief Minister

• Russia attacking Ukraine

• Ukraine's entry to NATO

• China’s ex-president Hu Jintao was ‘led out’ of party congress

• Trifurcation of J&K

• Maruthi’s decision to allow Suzuki to invest in Gujarat Plant

• Maruthi’s decision to buy back Gujarat Plant

October 11, 2023 Organizational Structure, Design and Change 30
 Organizational Decision Making Models
The Rational model The Carnegie Model
• Availability of information • Limited Information
• Costless Decision Making • Information and managerial costs
• Value free Decisions • Impact of preferences
• Full range of possible alternatives • Limited range of alternatives (Bounded
Rationality)
• Unanimous choice
• Solution is based on
• Best solution for organization compromise/negotiation
• Satisfactory solution

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Organizational Decision Making Models
• The Incrementalist Model: managers select
alternative courses of action that are only slightly, or
incrementally, different from those used in the past
− Perceived to lessen the chances of making a mistake
− Called the science of “muddling through”
− They correct or avoid mistakes through a succession of incremental
changes
• The Unstructured Model: describes decision making
in environments of high uncertainty
− Decision making is not a linear, sequential process
Define the Identify Implement
problem alternatives best solution
− Tries to explain how organizations
32 make nonprogrammed
decisions
The Garbage Can Model
 Organizational Decision Making Models
• The Garbage Can Model: a view of decision making
that takes the unstructured process to the extreme
− Decision makers are as likely to start decision making
from the solution side as the problem side
− Create decision-making opportunities that they can solve
with ready-made solutions based on their competencies
and skills
− Different coalitions may champion different alternatives
− Decision making becomes a “garbage can” in which
problems, solutions, and people all mix and contend for
organizational action
− Selection of an alternative depends on which person’s or
group’s definition of the current situation holds sway
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(strongest coalition)
Types of Top-Management Teams

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 Devil’s Advocacy and Dialectical Inquiry
Alter the Rational Approach to Decision Making

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 The Nature of Organizational Learning
Organizational learning: the process through which
managers seek to improve organization members’ desire
and ability to understand and manage the organization
and its environment
− Creates an organizational capacity to respond effectively
to the changing business environment
− Two types:
• Exploration: organizational members search for and
experiment with new kinds or forms of organizational
activities and procedures
• Exploitation: organizational members learn ways to refine
and improve existing organizational
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activities and
procedures
Experiences during Simulation

• What have you done well?

• Where have you gone wrong
• What are the elements of VUCA world in the
simulation?
• Any cognitive bias that affected your decisions
during simulation?

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Distortion of Organizational Decision Making by Cognitive Biases

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