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Implementing Strategy in Companies That Compete in a Single Industry

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Overview

Strategy implementation
How

a company should create, use, and combine organizational structure, control systems, and culture to pursue strategies that lead to a competitive advantage and superior performance

Implementing Strategy Through Organizational Structure, Control, and Culture

Organizational structure
Assigns

employees to specific value creation tasks and roles and specifies how those are linked to increase efficiency, quality, innovation, and responsiveness to customers To coordinate and integrate the efforts of all employees

Implementing Strategy Through Organizational Structure, Control, and Culture (contd)

Control system
A

set of incentives to motivate employees to increase efficiency, quality, innovation, and responsiveness to customers Provides feedback on performance so corrective action can be taken

Organizational culture
The

collection of values, norms, beliefs, and attitudes shared within an organizations and that control interactions within and outside the organization
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Implementing Strategy

Building Blocks of Organizational Structure

Grouping tasks, functions, and divisions

Organizational

structure follows the range and variety of tasks that an organization pursues Companies group people and tasks into functions and then functions into divisions Bureaucratic costs

Building Blocks of Organizational Structure (contd)

Allocating authority and responsibility

Hierarchy

of authority (chain of command) Span of control (number of subordinates) Tall and flat organizations Drawbacks of taller organizations
Less flexibility and slower response time Communication problems Distortion of commands Expense

Tall and Flat Structures

Allocating Authority and Responsibility (contd)

The

minimum chain of command

To combat an organization that is too tall Hand responsibility up and empower those below

Centralization

or decentralization?

Delegating responsibility reduces information overload and enables managers to focus on strategy Empowering lower-level managers increases motivation and accountability Empowering employees requires fewer managers Centralized decisions allow easier coordination of activities Centralization means that decisions fit broad organizational objectives
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Building Blocks of Organizational Structure (contd)

Integration and integrating mechanisms

Direct

contact among managers across functions or divisions Liaison roles

Gives one manager in each function or division the responsibility for coordinating with the other

Teams

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Strategic Control Systems

Four basic building blocks

Control

and efficiency Control and quality Control and innovation Control and responsiveness to customers

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Steps in Designing an Effective Control System

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Levels of Organizational Control

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Types of Strategic Control System

Personal control
Face-to-face

interaction goals for each division, department, and

Output control
Performance

employee

Behavior control
Rules

and procedures to direction actions or behaviors of divisions, functions, and individuals

Operating budget Standardization
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Using Information Technology

Behavior control
IT

standardizes behavior through the use of a consistent, cross-functional software platform allows all employees or functions to use the same software platform to provide information on their activities provides people at all levels and across all functions with more information

Output control
IT

Integrating mechanism
IT
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Strategic Reward Systems

Based on strategy managers must decide which behaviors to reward A control system measures those behaviors and links the reward structure to them

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Organizational Culture
Culture and strategic leadership Traits of strong and adaptive corporate cultures

Bias

for action Nature of the organizations mission (sticking with what the organization does best) How to operate the organization (motivating employees to do their best)
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Building Distinctive Competencies at the Functional Level

Grouping by function: functional structure

Grouping

people on the basis of their expertise or because they use the same resources Advantages
People can learn from one another People can monitor each other Managers have greater control With different functional hierarchies, the company can avoid becoming too tall

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Functional Structure

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The Functional Level

The role of strategic control

Managers

and employees can monitor and improve operating procedures Easier to apply output control

Developing culture
Managers

must implement functional strategy and develop incentive systems to allow each function to succeed Manufacturing: TQM R&D: innovation to bring products quickly to market Sales: output and behavior controls

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Functional Structure and Bureaucratic Costs

Communications problems Measurement problems Customer problems Location problems Strategic problems The outsourcing option

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Implementing Strategy in a Single Industry

Implementation begins at the functional level, however, managers must coordinate and integrate across functions and business units Effective strategy implementation at the business level

Increases

differentiation, adds value for customers, allows for a premium price Reduces bureaucratic costs

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How Organizational Design Increases Profitability

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Implementing Strategy in a Single Industry (contd)

Implementing a cost-leadership approach

Reducing

costs across all functions Continuously monitoring for effective operation

Implementing a differentiation approach

Design

structure around the source of distinctive competency, differentiated product, and customer groups
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Implementing Strategy in a Single Industry (contd)

Implementing a broad product line product structure

Group

the overall product line into product groups Centralize support value chain functions to lower costs Divide support functions into product-oriented teams of functional specialists who focus on the needs of one specific product group
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Kodaks Product Structure

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Implementing Strategy in a Single Industry (contd)

Increasing responsiveness to customer groupsmarket structure

Group

people and functions by customer or market segments Different managers are responsible for developing products for each group of customers

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Market Structure

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Implementing Strategy in a Single Industry (contd)

Expanding nationallygeographic structure

To

be responsive to needs of regional customers To reduce transportation costs

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Geographic Structure

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Implementing Strategy in a Single Industry (contd)

Competing in fast-changing, high-tech environmentsproduct-team and matrix structures

Matrix

structure

Value chain activities are grouped by function and by product or project Flat and decentralized Promotes innovation and speed Norms and values based on innovation and product excellence

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Matrix Structure

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Implementing Strategy in a Single Industry (contd)

Competing

in fast-changing, high-tech environmentsproduct-team and matrix structures (contd)

Product-team
Tasks

structure

divided along product or project lines Functional specialists are part of permanent cross-functional teams
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Product-Team Structure

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Implementing Strategy in a Single Industry (contd)

Focusing on a narrow product line

Tends

to have higher production costs because output is lower, reducing opportunity for scale economies Has to develop some form of distinctive competency Functional structure is appropriate

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Restructuring and Reengineering

Restructuring involves
Streamlining

hierarchy of authority and reducing number of levels Downsizing the workforce to reduce costs

Reasons
Change

in the business environment Excess capacity Organization grew too tall and inflexible; bureaucratic costs To improve competitive advantage and stay on top
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Restructuring and Reengineering (contd)

Reengineering
Fundamental

rethinking and radical redesign of business processes to achieve dramatic improvements Focuses not on functions, but on processes (which cut across functions)

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