Prepared by

Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

IMPLEMENTING STRATEGY
Implementing Strategy Through Organizational Design
Organizational Design is the process of selecting the right combination of
organizational structure, control systems, and culture to pursue a business model
successfully. Organizational structure, control, and culture shape peoples behaviors,
values, and attitudes determine how they will implement an organizations business model
and strategies.
Organizational Structure
Assigns employees to specific value creation tasks and roles
To coordinate and integrate the efforts of all employees
Strategic Control Systems
A set of incentives to motivate employees
To provides feedback on performance so corrective action can be taken
Organizational Culture
The collection of values, norms, beliefs, and attitudes shared within an
organizations
To control interactions within and outside the organization
How Organizational Design Increases Profitability

1.1. Building Blocks of Organizational Structure

An organization structure assigns people to tasks and connects the activities
of different people and functions. Choice of structure is made on its ability to implement
companys business model and strategies successfully.
Grouping tasks, functions, and divisions
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

How best to group tasks into functions and functions into business units or divisions
to create distinctive competencies and pursue a particular strategy
Allocating authority and responsibility
How to allocate authority and responsibility to these functions and divisions
Integration and integrating mechanisms
How to increase the level of coordination or integration between functions and
divisions as a structure evolves and becomes more complex.
Group Tasks, Functions and Divisions
Companies group people and tasks into functions and then functions into divisions.
A function is a collection of people who work together and perform similar tasks
or hold similar positions.
A division is a way of grouping functions to allow an organization to better serve
its customers.
Handoffs are the work exchanges between people, functions, and subunits.
Bureaucratic costs result from the inefficiencies surrounding these
handoffs.
Allocating Authority and Responsibility
To economize on bureaucratic costs and effectively coordinate the activities,
company must develop a clear and unambiguous hierarchy of authority.
Organizational Structure variables
Span of control (number of subordinates)
Tall versus flat organizations
Flexibility Communication problems Response time Expense
Distortion of commands
Decision Making: Centralized versus Decentralized
Delegating and empowering employees
Requires fewer managers Reduces information overload
Increases motivation and accountability
Centralized decisions
Easier coordination of activities
Decisions fit broad organizational objectives
Principle of the Minimum Chain of Command:
Choose hierarchy with the fewest levels of authority necessary to use
organizational resources efficiently and effectively.
Tall and Flat Structures
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Integration and Integrating Mechanisms

They are used to increase communication and coordination among functions and
divisions .
Direct contact
Creates a context within which managers across functions or divisions can work
together
Liaison roles
Increases coordination
Gives one manager in each function or division the responsibility for oordinating
with the other
Teams
Use when multiple functions share mutual problems
The greater the complexity of an organizations structure, the greater the need for
formal coordination among people, functions, and divisions.

1.2. Strategic Control Systems

It refers to the formal target-setting, measurement, and feedback systems to
evaluate whether a company is implementing its strategy successfully
Characteristics of an effective control system:
Flexible to allow managers to respond as necessary to unexpected events
Accurate information giving a true picture of organizational performance
Timely presentation of information for timely decision making
Measures should be tied to the goals of developing distinctive competencies in
efficiency, quality, innovativeness, and responsiveness to customers.
Steps in Designing an Effective Control System
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Types of Strategic Control Systems

Personal Control
Shape and influence the behavior of a person in a face-to-face interaction in the pursuit
of a companys goals.
Managers question and probe to better understand subordinates.
The result is more possibilities for learning to occur and competencies to
develop.
Output Control
Forecast appropriate performance goals for each division, department, and employee
then measure actual performance relative to these goals .
The achievement of these goals is a sign that the companys strategy is working.
Behavior Control
Establish a system of rules and procedures to direct the actions or behavior of divisions,
functions, or individuals.
The result is standardization, predictability, and accuracy.
Levels of Organizational Control
Controls at each level should provide the basis on which managers at lower levels design
their controls systems.

Using Information Technology

Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Behavior control
IT standardizes behavior through the use of a consistent, cross-functional
software platform.
Output control
IT allows all employees or functions to use the same software platform to provide
information on their activities.
Integrating mechanism
IT provides people at all levels and across all functions with more information.
1.3. Organizational Culture
Organizational Culture is the specific collection of values and norms shared by
people in the organization.
Organizational socialization how people learn the culture so that they
become organization members.
Strategic leadership style established by the founder and transmitted to the
companys managers.
The culture becomes more distinct as the organizations members become more
similar.
Strong and adaptive cultures are innovative, encourage and reward
initiative, and have common values:
Bias for action autonomy, entrepreneurship, and risk-taking
Organizations mission sticks to its knitting and business model
How to operate the organization motivate employees to do their best
Functional Structure
Functional Structure advantages:
People doing similar functions can learn from one another.
People can monitor each other and improve work processes.
Managers have greater control over organizational activities.
Managing is easier with separately managed specialized groups.
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.

Functional Structure problems

Communications
problems
Stem from differences in goal
orientations and outlooks
Measurement problems
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Difficulties measuring
contribution as product range widens
Customer problems
Satisfying customer needs
and coordinating value-chain functions
Location problems
Functional structure not the
best way to handle regional diversity when selling or producing in multiple locations
Strategic problems
These problems mean a
company has outgrown its structure.
Consider a more complex
structure or outsourcing options.
Product Structure
Product structure is used to solve the control problems that result from producing may
different kinds of products for many different market segments. Implementing a Wide
Product Line requires a broad 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 who focus on the needs of one specific product group.
Measure the performance of
each product group separately from the others.
Closely link rewards to
performance of product group.
Nokias Product Structure

Market Structure
Market structure focuses on the ability to meet the needs of distinct and important sets of
customers or different customer groups. It helps in Increasing Responsiveness to
Customer Groups
Identify the needs of each customer group.
Group people and functions by customer or market segments.
Make different managers responsible for developing products for each group
of customers.
Establish market structure brings managers and employees closer to specific
groups of customers.
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Geographic Structure
Geographic regions may become the basis for grouping organizational activities when
companies expand nationally through internal expansion, horizontal integration, or
mergers. It helps in expanding nationally.
More responsive to needs of regional customers
Can achieve a lower cost structure and economies of scale
Provides more coordination and control than a functional structure through the
regional hierarchies

Matrix Structure and Product-Team Structures

In fast-changing, high-tech environments, competitive success depends on fast
mobilization of company skills and resources to ensure that product development and
implementation meet customer needs.
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
Product-team structure
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Tasks divided along product or project lines

Functional specialists are part of permanent cross-functional teams
Matrix Structure

Product-Team Structures

Focusing on a Narrow Product Line

A focused company concentrates on developing a narrow range of products aimed at one
or two market segments as defined by type of customer or location.
Focusers tend to have higher production costs
Output is lower
Reduced opportunity for economies of scale
Has to develop some form of distinctive competency
Structure and controls systems need to be:
Inexpensive to operate
Flexible enough to allow distinctive competency
Prepared by
Dr.S.C.SIVASUNDARAM ANUSHAN
Professor and Head, MBA Department , Arunai College of Engineering, TVM.

Focuser normally adopts a functional structure.

Restructuring and Reengineering
Restructuring
Streamlining hierarchy of and reducing number of levels
Downsizing the workforce to lower operating costs
Reasons to restructure and downsize
Change in the business environment
Excess capacity
Bureaucratic costs: organization grew too tall and inflexible
To improve competitive advantage and stay on top
Reengineering
Fundamental rethinking and radical redesign of business processes to achieve
dramatic improvements. Focuses on processes (which cut across functions), not on
functions