Name: Christine Joy A.
Edang expected results, and suggest corrective
actions to take when the difference is
Year & Section: BSIS 4-B unacceptable.
Two types:
Chapter 11: Organizational Structures and Strategic Controls
Control Financial Controls
NOTES
RECIPROCAL RELATIONSHIP - change in one
Strategy may be implemented via: typically causes a change in the other,
• Structure underscoring the interconnectedness
• Reward mechanisms between strategy formulation and strategy
• Organizational culture implementation.
• Leadership
This chapter focuses on structure. Strategy Structure Growth Pattern
The match or degree of fit between strategy
and structure influences the firm’s ability to
earn above-average return.
● Organizational structure and controls
provide the framework within which
strategies (business, corporate,
international and cooperative) are used
● No one structure is the best for all
organizations
● The choice of structure and controls
should support the strategic goals of the
firm
● Structure will change as the strategy of
the organization changes Firms use different forms of the functional
● Effective strategic leadership means organizational structure to support their
selecting the appropriate structure. strategy.
- Structure and Firm Performance
Research suggests that performance Business-level strategies are:
declines when the firm’s strategy is not • Cost leadership (broad or focused)
matched with the most appropriate • Differentiation (broad or focused)
structure and controls. • Integrated cost leadership/differentiation
Organizational structure Structural choices are:
- It is critical to match organizational • Simple
structure to the firm’s strategy • Functional
• Specifies the firm’s formal reporting • Multidivisional
relationships, procedures, controls, and
authority and decision-making processes MATCHES BETWEEN BUSINESS-LEVEL
• Specifies the work to be done and how to STRATEGIES AND THE FUNCTIONAL
do it, given the firm’s strategy or strategies STRUCTURE
• Is the pivotal component of effective The choice of structure is influenced by
strategy implementation structural characteristics needed to
compete:
Two considerations regarding alignment;
Specialization: the type and number of jobs
required to complete the work of the firm
Structural stability: capacity firm requires Centralization: the degree to which
to consistently and predictably manage its decision-making authority is retained at
daily work routines. higher managerial levels
Structural flexibility: opportunity to explore Formalization: the degree to which formal
competitive advantages firm will need to rules and procedures govern work
be successful in the future.
Controls guide the use of strategy, indicate
how to compare actual results with
USING THE FUNCTIONAL STRUCTURE TO decision-making authority to
IMPLEMENT THE DIFFERENTIATION coordinate/integrate decisions among
STRATEGY divisional units.
Transnational strategy: international
The choice of structure is influenced by strategy through which the firm seeks to
structural characteristics; achieve both global efficiency and local
responsiveness; usually implemented
Specialization: departments are designed through global matrix structure and hybrid
around areas of expertise—engineering to global design.
accounting
Flexible coordination: building a shared
Centralization: the key departments are vision and individual commitment through
coordinated through a highly centralized an integrated network.
office that reflects a focus on product
design and marketing; otherwise
Combination structure: organizational
DECENTRALIZED
structure in which characteristics and
mechanisms are drawn from both the
Formalization: reporting roles are clearly worldwide geographic area structure and
defined; simple lines of communication the worldwide product divisional structure
(used to implement transnational strategy.
Organization structure with three levels to
support the implementation diversification
Strategic Center Firm has four primary
strategy
tasks:
• Corporate headquarters
• Strategic business units (SBUs)
1. Strategic outsourcing
• Divisions under each SBU
2. Competencies
3. Technology
Three primary international strategies: 4. Race to learn
• Multidomestic Business-level complementary alliances;
• Global
• Transnational Vertical: partnering firms share their
resources and capabilities from different
Multidomestic Strategy: International stages of the value chain to create a
strategy in which strategic and operating competitive advantage.
decisions are decentralized to each country
to allow the units to tailor products to local Horizontal: partnering firms share
markets. resources and capabilities from the same
stage of the value chain to create a
Worldwide Geographic Area Structure: competitive advantage; commonly used for
Organizational structure emphasizing long-term product development and
national interests; facilitates efforts to distribution opportunities.
satisfy local or cultural differences.
Global Strategy: International strategy with
standardized products across country
markets, and the competitive strategy
dictated by the home office.
Worldwide Product Divisional Structure:
Organizational structure with centralized
Analysis :
Chapter 11, titled "Organizational Structures and Control," delves into the crucial role that
organizational structure plays in the successful implementation of strategic initiatives. Within
the realm of strategic management, the chapter places a strong emphasis on the intricate
relationship between strategy and organizational structure, emphasizing how their alignment
significantly influences a company's ability to attain returns that surpass industry averages. The
foundation for deploying various strategic initiatives, ranging from business strategies to
cooperative endeavors, lies in the careful design of organizational structures and controls.
Examining the international business landscape, the chapter outlines three primary strategies:
multidomestic, global, and transnational. These strategies provide firms with frameworks to
explore new markets, tap into diverse resources, build competencies, and leverage emerging
technologies. The multidomestic strategy, for instance, adopts a decentralized approach to
strategic and operational decision-making, tailoring efforts to meet the unique needs of local
markets, often supported by a Worldwide Geographic Area Structure. On the other hand, the
global strategy opts for standardized products and centralized decision-making. Meanwhile, the
transnational strategy strives for a delicate balance between global efficiency and local
responsiveness through flexible coordination mechanisms.
Within the sphere of business-level complementary alliances, the chapter underscores the
significance of vertical and horizontal alliances. Vertical alliances involve partnering firms sharing
resources and capabilities from different stages of the value chain, fostering a competitive
advantage. Conversely, horizontal alliances occur when collaborating entities pool resources and
capabilities from the same stage of the value chain, typically employed for long-term product
development and distribution opportunities. Both types of alliances play a pivotal role in
enhancing a firm's competitiveness.
In essence, this chapter comprehensively covers a spectrum of strategic approaches and
organizational structures in the global business context. The consistent labeling and
understanding of these approaches and strategies are highlighted as key factors that can
immensely benefit a firm, ultimately contributing to the achievement of returns surpassing
industry averages.
