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Key Points: Structure

Key Points: Structure. Understand key decisions in structuring an organization Understand basic types of structure Strategy and structure should match Generic business-level strategies Corporate-level strategies. Organizational Structure.

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Key Points: Structure

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  1. Key Points: Structure • Understand key decisions in structuring an organization • Understand basic types of structure • Strategy and structure should match • Generic business-level strategies • Corporate-level strategies

  2. Organizational Structure • Definition:a firm’s formal role configuration, procedures, governance and control mechanisms, and authority and decision making processes • Key Decisions • Which, if any, decision-making should be centralized and which, if any, should be decentralized? • How should tasks be divided? • How should the various parts of a company be integrated? • What form(s) of controls should be used to evaluate a firm’s performance? • Financial: use of objective criteria • Strategic: use of long-term and strategically relevant subjective criteria

  3. Types of Structure • Simple structure: owner-manager makes all major decisions and monitors all activities • Functional structure: CEO and small corporate staff with functional line managers in main areas such as production, accounting, marketing, engineering, and human resources • Project/Product group structure: cross-functional teams are responsible for individual projects or product lines • Multidivisional structure: separate operating divisions for each business act as profit centers and are delegated responsibility for day-to-day operations

  4. Structure and Business-Level Strategy • Cost Leadership • Centralized • Formalized (rules & procedures) • Emphasis on cost control • Emphasis on process innovation • Differentiation • Decentralized • Flexible • Job roles less structured • Emphasis on product innovation How would you structure an organization implementing an integrated low-cost/differentiation strategy?

  5. Structure and Corporate-Level Strategy • Related-Constrained • Tight links between business units • Some activities likely to be centralized (e.g., marketing, distribution, R&D) • Strategic controls that emphasize overall firm performance • Culture emphasizes cooperative sharing HQ BU BU BU BU

  6. Structure and Corporate-Level Strategy • Related-Linked • Several groups that include closely related businesses • Tight links between businesses in the same group • Each group is a profit center • Strategic controls that emphasize overall group performance • Financial controls imposed by HQ on each group HQ Group A Group B BU BU BU BU BU BU

  7. Structure and Corporate-Level Strategy • Unrelated • Small HQ staff • Each business operates independently • Financial controls--set financial goals for each business • Divisions compete for corporate resources HQ BU BU BU BU

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