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Strategic Mgt

Strategic Mgt

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Strategic Management

Presentation on

Structural Implementation
Under the guidance of Dr. Vikas Madhukar

Submitted by Satyam Roll no 2946

Structural Implementation
We usually conceive of an organisation structure as a chart consisting of boxes in which the names of position or designations of personnel are in a hierarchical order. To as strategist, an organisation structure is not only a chart but much more.

‡ The diagrammatical representation of structure could be an organisation chart, but a chart shows only the skeleton. The flesh and blood that makes an organisation alive is the several administrative mechanisms, such as controls, that support the structure.

An organisation structure specifies three key components that are enumerated below: ‡ 1. It identifies the formal reporting relationship, including the number of levels in the hierarchy and the span of control of managers.

‡ 2. It specifies the grouping of individuals into departments and of departments into the total organisation . ‡ 3. It consist of design of systems to ensure effective communication, coordination and integration of efforts across departments.

. which is the vertical structure created through the process of differenciation. Third component refers to pattern of interactions among members of the organisation and is the horizontal structure.‡ The first two components constitute the structural framework. created through the process of integration that involves cross-functional information systems and team work.

the vertical structure will have these characteristics: ‡ Specialised tasks ‡ Hierarchy of authority ‡ Rules and regulations. ‡ Vertical communication and formal reporting systems ‡ Centralised decision making ‡ Emphasis of efficiency .Typically.

The horizontal structure will have these characteristics: ‡ Shared tasks ‡ Flexible authority ‡ Few rules and regulations ‡ Horizontal communication and sharing of information ‡ Decentralised decision making ‡ Emphasis on learning .

thick boundaries between layers preventing smooth communication. .Vertical structures ‡ Vertical structures lead to many layers of management. On the positive side. centralized decisionmaking and too many specific ways of doing things stifling creativity. these structures are well-suited for efficient and tightly-con-trolled operations. rigidity. tight controls.

Large manufacturing companies government bureaucracies . through mass production systems with established technologies e.Vertical structures ‡ These types of structures are best suited for organizations making standarised products and services in large volumes.g.

Vertical structure .

Such structures are also called flat structures. a liberal exchange of information between different layers and across departments. much delegation of authority leading to decentralized decision-making and having an organization climate conducive to innovation. On the negative side. flexible systems. .Horizontal structures ‡ Horizontal structures are lean and mean organizations with few layers of management. such structures often result in loss of control and high costs of coordination and require highly qualified employees with multiple skills.

Horizontal structures ‡ These types of structures are suited to organizations that make differentiated products and service through batch production system.g. serving niche markets with customers seeking premium items for consumption e. Small-sized service organizations. with advanced technologies. .

Horizontal structure .

are mutually contradictory.‡ The challenging aspect of creating an organization structure is that requirements for vertical and horizontal structures coexist at the same time. In the same bank. cheque processing is a fairly standardized activity requiring a low level of skills and repetitive operations with high centralization of authority. the investment division or marketing department may perform specialized activities requiring unique skills. resulting in an inherent tension. Characteristics of these two structures co-exist in organizations. ‡ In a bank for instance. .

Nutshell ‡ Structure in the context of strategic management is they way in which tasks and sub-tasks required to implement a strategy are arranged. The relationship of structure and strategy creates its own special requirements that should be satisfied by the structure .

Nutshell ‡ Organisation structure is distinguished into vertical and horizontal structures. The horizontal structure is designed for coordination and collaboration of work among peers in the organisation. The challenging aspect of creating an organisation structure is that requirements for vertical and horizontal structures coexist at the same time. The veridical structure is designed primarily for exercising control by superiors over subordinates work in the organisation. .

it is an illustration of the forward linkage. Once in place. the structure flows from strategy.Relation among environment. structure & strategy ‡ When structure follows strategy. That is how structural considerations also affect strategy. the structure tends to influence how present strategies are implemented and also how future strategies would be formulated. which is a case of backward linkage. .

. It does this by providing the necessary infrastructure and administrative mechanisms that enable implementation of the chosen strategy. The structure conversely impact the strategy. but to a lesser extent. ‡ The two way relationship between strategy and structure helps us to understand what is structural implementation.Two-way relationship of structure and strategy ‡ Strategy determines the structure in a major way.


chief financial officer. leading to delays and customers dissatisfaction. At the operational level. There was a CEO assisted by deputy chief operating officer. the top management at Bajaj Allianz realized that its multilayered pyramidal structure with centralized authority may not work in the emerging scenario.An example ‡ Sometime in 2003. the underwriting authority of the branch head was restricted and proposals were sent up to the head office for decisions. . president of R&D and heads of sales and marketing.

There was some heartburn among the existing top managers. The net result of the structural implementation is that the company is able to perform effectively and regularly posts good financial result. .‡ Post-2004. the company went into high gear and started implementing a rapid expansion strategy. The company had to poach managers from rivals to make up for the shortfall. Authority was decentralized. with branch offices given autonomy to accept or reject proposals. The product portfolio was strengthened and the distribution network was expanded. some left the company.

strategy and structure. Structure and strategy have a two-way.Nutshell ‡ There is a relationship between the environment. We have taken a position that strategy and structure affect each other though the forward impact is more visible. reciprocal relationship. The relationship between strategy and structure is spanned by environment in one direction and effectiveness in the other . Changing environment impacts which in turns determines the type of structure to have.

In other words.Nutshell ‡ Structural implementation is more concerned with the match that should exist between strategy and structure. a particular strategy creates special requirements that should be fulfilled by the structure. .

The organizational or process orientation. ‡ . These organizations are characterized by simplicity of objectives.organizations are small-scale enterprises usually managed by a single person who is the entrepreneur-owner-manager.organizations are bigger than stage I organizations in terms of size and have a wider scope of operations. The organizational form is simple functional. ‡ Stage II .Stages of Development of organizations ‡ Stage I . They are characterized by functional specialisation or process orientation.

multiproduct organizations that result from the adoption of related and unrelated diversification strategies. Each division is semiautonomous and linked to the headquarters but functionally independent. units or plants at different places. . They are generally large.‡ Stage III organizations are large and widely scattered organizations. generally having. The organizational form is divisional. ‡ Stage IV organizations are the most complex. multi-plant.

Business Today makes an interesting analysis of chronological evolution of organization structure within Indian firms ‡ ‡ ‡ ‡ ‡ ‡ ‡ One-man organisation (Pre-1940) The classic triangle (1940-50) The managing agency (1950-60) The functional structure (1960-70) The cross-holding structure (1970-80) The conglomerate (1980-90) The streamlined group (post-1990) .

Nutshell ‡ Stages of development help to explain how an organisation matures from simplicity to complexity in terms of structure. . The life cycle of organizations could be divided into four stages that are not distinct and may overlap. The stages of development theories present a convenient way to understand the way in which the structure may evolve as the organisation moves from one stage to the next.

Types of organizational structures Entrepreneurial structure ‡ Most elementary form of structure and is appropriate for an organisation that is owned and managed by one person. A small-scale industrial unit. ‡ . a small proprietary concern or a mini-service outlet may exhibit the characteristics of organizations which are based on an entrepreneurial structure.

manager employees .Entrepreneurial structure Owner .

A typical functional structure is shown .Functional Structure ‡ As the volume of business expands. The need arises for specialized skills and delegation of authority to m managers who can look after the different functional areas. the entrepreneurial structure may outlive its usefulness.

Functional Structure CEO PR FINANCE MKT ING HR .

Divisional Structure ‡ There comes a time in the life of organizations when growth and increasing complexity in term of geographic expansion. . Some form of divisional structure is necessary to deal with such situations. market segmentation and diversification make the functional structure inadequate.

it becomes difficult for the top management to exercise strategic control.SBU Structure ‡ A strategic business unit (SBU) any part of business organisation which is treated separately for strategic management purposes. size and number of divisions. ‡ . The concept of SBU is helpful in creating an SBU organizational structure. When organizations face difficulty in managing divisional operations due to increasing diversity.


The result is the requirement of a matrix type of organisation structure. each of which is strategically significant. there is often a need to work on major products or projects.Matrix Structure ‡ In large organizations. Such a type of structure is created by assigning functional specialists to work on a special project or a new product or service. .

.Network Structure The increasing volatility of environment. coupled with the emergence of knowledge-based industries. has led to the creation of a network structure. Also known as the Spider s web structure of the virtual organisation the network structure is composed of a series of project groups or collaborations linked by constantly changing non-hierarchical. cobweb-like networks .

‡ The structures to support interorganisational are horizontal structures.‡ An emerging strand of organizational structure is that of establishing horizontal relationship . . extending externally to partner organizations.

logistics providers and a host of other organizations. ‡ . in a massive joint effort at serving their clientele better and thereby enhancing their effectiveness. car rental. other airline companies. ‡ An example of interorganisational relationship is of airline companies partnering with hotel chains. cruise liner and catering companies. such a network of organizations is interconnected with the purpose of achieving common strategic purpose.‡ Called strategic businesses nets.

divisions. to which the group of activities could be assigned and establishing the interrelationship between the different departments for the purpose of coordination and communication. ‡ Five steps required for organisational design are: identifying key activities. choice of structure that could accommodate the different groups of activities. etc. .Organizational design ‡ Organisational design is based on the key activities derived out of the mission and objectives. grouping of similar activities that need a common set of skills to be performed. creation of departments.

‡ The purpose of organisation design is to create the right structure that fits the requirements of the strategy to be implemented. . It is an extremely difficult propositioning to decide which type of structure would satisfy the requirements of a particular strategy.

Organisational design has two dimension: ‡ structural dimensions describe the internal characteristics of an organisation and ‡ contextual dimensions describe the organizational setting that influences and shapes the structural dimensions. .

Structural dimension ‡ ‡ ‡ ‡ ‡ ‡ Formalisation Specialization Centralisation Professionalism Hierarchy Personnel ratios .

Contextual dimensions ‡ ‡ ‡ ‡ ‡ Environment Goals and strategy Culture Technology Size .

with several systemic changes. in 2000. . it adopted a global matrix structure in line with the requirements of its internationalization strategies that have taken it to more than 30 countries. it adopted an independent business unit structure with a corporate centre. Yet again. after five years.‡ NIIT a global IT learning and knowledge solutions company that has undergone several structural changes over a period of time. In 1995. In 1989. it had a divisional structure that served its purpose of rapid growth for the next five years.

.Organizational change ‡ Organizational change takes place along two board dimension: the structural changes and the accompanying behavioral changes. All organizations make changes in their strategies. structure and administrative procedures from time to time.

delayering.‡ Significant changes in thinking related to organisation structural design have been taking place worldwide and is impacting Indian companies too. Some of the major ideas in this context are of restricting. . reengineering. etc. flatter structures. reorganization.

Flatter structures result due to delayering. . of levels in hierarchy to facilitate better communication within the organization. service and speed. ‡ Delayering is reducing no.‡ Reengineering (or business process reengineering) is the fundamental rethinking and radical redesign of business processes to achieve dramatic gains in areas such as cost. quality.

Structures for business strategies Structures for Diversification strategies ‡ Depending on whether the diversification is related or unrelated. ‡ Related diversification ‡ Unrelated diversification . structures would also reflect the differences.

Structures for internationalization strategies There are four types of internationalization strategies: ‡ international ‡ multidomestic ‡ global ‡ transnational .

global graphic structure .global matrix structure INTERNATIONAL STRATEGY international division structure MULTIDOMESTIC STRATEGY .GLOBAL STRATEGY global product structure TRANSNATIONAL STRATEGY .

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