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CHAPTER 8 ORGANIZATIONAL DESIGN AND STRATEGY IN A CHANGING GLOBAL ENVIRONMENT

CHAPTER 8 ORGANIZATIONAL DESIGN AND STRATEGY IN A CHANGING GLOBAL ENVIRONMENT

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Published by Peter
1 To define organizational strategy and examine the sources of core competences. (8.1)
2. To discuss the four levels of strategy: functional, divisional, corporate, and global. (8.1)
3. To explain how each function creates value through lower cost or differentiated products. (8.2)
4. To illustrate that interorganizational strategies achieve core competences. (8.2)
5. To review the importance of structure and culture to functional-level strategy. (8.2)
6. To discuss the four strategies that enlarge the organizational domain. (8.3)
7. To explain that structure should match strategy. (8.3)
8. To demonstrate how corporate-level strategies use core competences in new domains. (8.4)
9. To analyze vertical integration, related and unrelated diversification, and the interorganizational strategies to achieve benefits without costs. (8.4)
10. To discuss how to implement strategy across countries. (8.5)
1 To define organizational strategy and examine the sources of core competences. (8.1)
2. To discuss the four levels of strategy: functional, divisional, corporate, and global. (8.1)
3. To explain how each function creates value through lower cost or differentiated products. (8.2)
4. To illustrate that interorganizational strategies achieve core competences. (8.2)
5. To review the importance of structure and culture to functional-level strategy. (8.2)
6. To discuss the four strategies that enlarge the organizational domain. (8.3)
7. To explain that structure should match strategy. (8.3)
8. To demonstrate how corporate-level strategies use core competences in new domains. (8.4)
9. To analyze vertical integration, related and unrelated diversification, and the interorganizational strategies to achieve benefits without costs. (8.4)
10. To discuss how to implement strategy across countries. (8.5)

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Categories:Business/Law
Published by: Peter on Mar 29, 2009
Copyright:Attribution Non-commercial

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   P   H   A   M    H   O   A   N   G    H   I   E   N ,   M   B   A ,   P   G .   (   C   S   U   )
CHAPTER 8 ORGANIZATIONAL DESIGN AND STRATEGY IN A CHANGINGGLOBAL ENVIRONMENTTEACHING OBJECTIVES1. To define organizational strategy and examine the sources of core competences.(8.1)2. To discuss the four levels of strategy: functional, divisional, corporate, and global.(8.1)3. To explain how each function creates value through lower cost or differentiatedproducts. (8.2)4. To illustrate that interorganizational strategies achieve core competences. (8.2)5. To review the importance of structure and culture to functional-level strategy.(8.2)6. To discuss the four strategies that enlarge the organizational domain. (8.3)7. To explain that structure should match strategy. (8.3)8. To demonstrate how corporate-level strategies use core competences in newdomains. (8.4)9. To analyze vertical integration, related and unrelated diversification, and theinterorganizational strategies to achieve benefits without costs. (8.4)10. To discuss how to implement strategy across countries. (8.5)CHAPTER SUMMARYStrategy is an action plan for developing core competences to reach long-term goalsand gain a competitive advantage. Core competences stem from specialized resourcespossessed by functional personnel, organizational resources, and coordination abilities.Strategies that create value and achieve competitive advantage are formulated at fourlevels: functional, business, corporate, and global.Achieving a competitive advantage at the functional level means gaining a low-cost or adifferentiation advantage. Interorganizational strategies, such as long-term contracts,develop functional resources and coordination abilities, which strengthen corecompetences. Contingency theory examines differences in structural design among theR&D, manufacturing, and sales functions. Culture also affects functional-level strategy.Business-level strategy combines functional level core competences to protect theorganizational domain. Two business-level strategies are differentiation and low cost.Four strategies enlarge the organizational domain: market penetration, productdevelopment, market development, and diversification. Focus strategy is reviewed.Organizational structure and culture must match business-level strategy. With only afew products, a low-cost organization uses a functional, mechanistic structure. Adifferentiator needs an organic structure. Other structures include: product, market,geographic, product team, and matrix. A low-cost organization needs cultural values ofeconomy, whereas a differentiator needs values of innovation and quality.
 
 
   P   H   A   M    H   O   A   N   G    H   I   E   N ,   M   B   A ,   P   G .   (   C   S   U   )
Corporate strategy uses core competences attained at the business level to expand intonew domains. Corporate-level strategies are considered with advantages anddisadvantages: vertical integration, global expansion, related diversification, andunrelated diversification. Structure and culture must match corporate-level strategies.Unrelated diversifiers use the conglomerate structure, whereas diversifiers use eitherthe multidivisional or the multidivisional matrix structure. Related diversifiers fostercooperative values, and unrelated diversifiers promote economical values.Interorganizational strategies, such as strategic alliances, increase value without thebureaucratic costs associated with vertical integration, related diversification, andunrelated diversification.There are four strategies for managing the international environment: multidomestic,international, global, and transnational. Company structure should match strategy,which is influenced by the control and coordination required. Vertical differentiation andthe need for integration are considered. A global geographic structure, relatively flat anddecentralized, is appropriate for a multidomestic strategy, because the need forintegration is low. The global product group structure, tall and centralized, is appropriatefor international or global strategies, which require a medium to high level of integration.A global matrix or “matrix in the mind” is appropriate for a transnational strategy, whichrequires a high level of integration. This structure is flat to ensure fast responsivenessand centralization and decentralization of decision-making,Matching strategy, structure, and culture is difficult. Managers overestimate the benefitsof a strategy and underestimate costs. Although the environment is uncertain,managers must forecast the value created from a strategy, control bureaucratic costs,and link strategies at all four levels.8.1 Strategy and the EnvironmentOrganizational strategy is a plan to use core competences to achieve competitiveadvantage and outperform competitors. Core competences are skills and abilities invalue creation activities that lead to superior efficiency, quality, innovation, or customerresponsiveness.Q. Name some core competences.A. Manufacturing, marketing, materials management, R&DQ. Why do organizations have strategies?A. Strategies use existing competences to develop new competences to outperformcompetitors and compete for resources. Resources permit reinvestment in newresources for core competences. The process is a cycle. (Fig. 8.1)Sources of Core Competences
 
 
   P   H   A   M    H   O   A   N   G    H   I   E   N ,   M   B   A ,   P   G .   (   C   S   U   )
A competitive advantage comes from functional and organizational resources.Functional resources stem from the skills of functional employees, such as R&Dscientists. Organizational resources stem form a company’s features, includingmanagement skills, reputation, equipment, land, and brand name. Both offer acompetitive advantage if they are unique and hard to copy. Coordinating resources is asource of core competences.Q. Name some coordination abilities.A. Coordination activities include using control systems, decentralizing or centralizingauthority, and promoting shared values. Structure and culture coordinate activities atfunctional and organizational levels. Functional coordination strengthens corecompetences, and coordinating activities leads to competitive advantage. Coordinationabilities are difficult to imitate.Global Expansion and Core CompetencesGlobal expansion creates value by transferring and enhancing core competences,establishing a network, and gaining resources and skills. (Fig. 8.2)Transferring Core Competences AbroadCreating value by transferring core competences to a foreign market facilitates low-costor differentiated products and a competitive advantage.Establishing a global network entails organizing task and reporting relationships amongmanagers, functions, and divisions that connect value creation activities.Q. How can a company lower costs?A. Production can occur in a country with low labor costs. The costs of labor, land,taxes, and raw materials are factor costs. A global network connects activities fromvarious countries and links distributors who sell and service products. Sales volumeincreases, creating economies of scale that enhance a low-cost advantage.Gaining access to global resources and skills gives an organization a competitiveadvantage. U.S. companies have Japanese divisions to benefit from total qualitymanagement and lean production.Using Global Learning to Enhance Core CompetencesNew skills learned abroad are transferred to the United States and improved; enhancedcompetences are sent back to foreign operations. After World War II, Japanesecompanies learned production methods from the United States, improved them, andused this competence to compete globally.Four Levels of Strategy

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