ADM650

CHAPTER 6 Strategy
Implementation
-Organisational
Structure & Operation
Management

Presented By :
Hjh May Sapura Binti
Mohd Shazilli
 STRATEGY IMPLEMENTATION

BERNARD REIMANN HENRYMINTZBERG

◼ “The greatest strategy is doomed if ◼ “Most of the time, strategists should not
it’s implemented badly.” be formulating strategy at all; they
should be getting on with implementing
strategies they already have”.
SuhaimiAS 4
LEARNING OBJECTIVES

6.1) ORGANIZATIONAL
STRUCTURE
• Organizational structure and controls
• Relationship between strategy and structure
• Evolutionary patterns of strategy and
organizational structure

6.2) OPERATIONS MANAGEMENT

• Definition of Operation Management

• The essence of operations strategy

• Operations strategy as a source of competitive
advantage
6.1) ORGANIZATIONAL
STRUCTURE
 ORGANIZATIONAL STRUCTURE AND
CONTROLS
ORGANIZATIONALSTRUCTURE
◼ specifies the firm’s formal reporting
relationships, procedures, controls, and
authority and decision-making processes.
ORGANIZATIONALCONTROLS
◼ guide the use of strategy, indicate how to
compare actual results with expected
results, and suggest corrective actions to
take when the difference between actual
and expected results is unacceptable.
MATCHING STRUCTURE WITH STRATEGY

1. Functional

Types of
4. Matrix 2. Divisional
Structure

3. SBU
1. Functional Structure

• Organizational structure based on functions; finance and accounting, production, personnel etc.
• Opportunity to learn from other.
• Specialized (centralized) and productive.
• Skilled employees are given opportunity to train others.
• Develop norm and values to become effective.
• Merit/positive: efficient, specialization of labor, excellent in stable environment.
• Demerit/negative: communication barrier, measurement obstacles, highly formalized, lack of
flexibility and responsiveness in volatile environment.
Functional structure

Good about the features:

1) a well‐defined channels of communication and authority/responsibility relationships.
2) Not only can this structure improve productivity by minimizing duplication of personnel and equipment,
but it also makes employees comfortable and simplifies training as well.
3) specialisation - departments focus on one area of work. Productivity - specialism means that staff are
skilled in the tasks they do.
4) Accountability - there are clear lines of management. Employees understand their own and others' roles.

Downsides:

But the functional structure has many downsides that may make it inappropriate for some organizations.
Here are a few examples:
• The functional structure can result in narrowed perspectives because of the separateness of different
department work groups. Managers may have a hard time relating to marketing, for example, which is
often in an entirely different grouping. As a result, anticipating or reacting to changing consumer needs
may be difficult. In addition, reduced cooperation and communication may occur.
• Decisions and communication are slow to take place because of the many layers of hierarchy. Authority is
more centralized to the respective department. This can cause poor communication and "silos" that are
too independent from one another. If employees and management are only loyal to their teams, there
will be a lack of teamwork and coordination.
• The functional structure gives managers experience in only one field—their own. Managers do not have
the opportunity to see how all the firm's departments work together and understand their
interrelationships and interdependence. In the long run, this specialization results in executives with
narrow backgrounds and little training handling top management duties.
 2. Divisional Structure

Definition:
Divisional organisation structure in which various departments are created on the basis of
products, territory or region, is called a divisional structure. Each unit has a divisional
manager, who is responsible for performance and has authority over their division.

• Because managers in large companies may have difficulty keeping track of all their
company's products and activities, a specialized departments may develop. These
departments are divided according to their organizational outputs.
• Examples include departments created to distinguish among product, geographical,
market, customer, process.
• Organizational structure based on division is in order to relax the rigid formalities of the
functional structure.

Merit: specific, more focus.

These departments allow managers to better focus their resources and results. Divisional structure also
makes performance easier to monitor. As a result, this structure is flexible and responsive to change.

• Demerit: inefficient, resource duplication, diluted of technical excellence development.

Because managers are so specialized, they may waste time duplicating each other's activities and resources.
In addition, competition among divisions may develop due to limited resources.
3. Strategic Business Unit (SBU) Structure
Definition:

• as a fully-functional unit of a business(dept) that has its own vision and direction or business
term used to present an independently managed entity or unit of a large company.
• to manage specific products, services, customers or a geographical area
• with objective of increasing profit
• The SBU structure delegates authority and
responsibility for each unit to a senior executive
who reports directly to the chief executive officer.
• This structure can facilitate strategy
implementation by improving coordination
between similar divisions and channeling
accountability to distinct business units.
• Advantages: improved coordination and
accountability, makes the tasks of planning and
control by the corporate office more manageable.
• Disadvantages: requires an additional layer of
management, which increases salary expenses;
role of the group vice president is often
ambiguous/not clear.

Example 1)
Proctor and Gamble, LG etc. These
companies have different product categories
under one roof. For example, LG as a
company makes consumer durables. It
makes refrigerators, washing machines, air-
conditioners as well as televisions.

2) STRATEGIC BUSINESS UNIT (SBU) in uitm:

FACULTY OF SPORT SCIENCE AND
RECREATION.
 DIFFERENCES BETWEEN SBU and A DIVISION

Putting it all together, you can identify three key areas of difference between a strategic
business unit and a division:

Strategy: SBUs set their own strategy, which gives them a chance to make better business
decisions. Divisions accept strategy from corporate HQ. These objectives may not be realistic
for the division and are unlikely to give the division any control over its future.

Management: The SBU structure requires a different style of management. Because the SBU is
decentralized, managers have considerable flexibility in control and decision-making. Divisions,
by contrast, often operate within a traditional hierarchical structure, with the CEO and senior
leadership team perched at the top of the tree and the division managers sitting below.

Resources and results: Divisions aren't responsible for their own results, so they're not looking
at which activities create the most value. This means that resources may be allocated in the
wrong place and activities that really should be abandoned are not. SBUs are their own profit
centers, so they're incentivized to use resources more efficiently. This allows them to focus
their investment where it's needed the most.

vs
 4. The Matrix Structure
• The matrix structure combines functional
specialization with the focus of divisional structure.
• This structure uses permanent cross‐functional
teams to integrate functional expertise with a
divisional focus.
• Employees in a matrix structure belong to at least
two formal groups at the same time—a functional
group and a product, program, or project team.
They also report to two bosses—one within the
functional group and the other within the team.
• The most complex of all designs because it depends
on both vertical and horizontal flows of authority
and communication.
• Widely used in many industries, including
construction, health care, research and defense.

Advantages:
• •The projects objectives are clear , workers can see the visible results of their works and better
performance accountability. Shutting down a project can be accomplished relatively easily. This
improved strategic management.
• Increases employee motivation and allows technical and general management training across
functional areas as well.
• There are many channels of communication. This provides better cooperation and problem solving,
increased flexibility and better customer service .
Disadvantages:
• The two‐boss system is susceptible to power struggles, as functional supervisors and team
leaders vie with one another to exercise authority.
• Members of the matrix may suffer task confusion when taking orders from more than one boss.
• Teams may develop strong team loyalties that cause a loss of focus on larger organization goals.
• Adding the team leaders/management positions, a crucial component, to a matrix structure can
result in increased costs.
 Relationship between strategy and structure

•
The general nature of the strategy/structure
relationship means that changes to the firm’s
strategy create the need to change how the
organization completes its work.
• Research shows, however, that “strategy has a much
more important influence on structure than the
reverse.”

• when changing strategies, the firm should

simultaneously consider the structure that will be
needed to support use of the new strategy

“ STRUCTURE FOLLOWS STRATEGY”

Evolutionary patterns of
strategy and organizational
structure
The simple structure is a
structure in which the
ownermanager makes all
major decisions and monitors
all activities while the staff
serves as an extension of the
manager’s supervisory
authority.

The functional structure

consists of a chief
executive officer and a
limited corporate
staff, with functional line
managers in dominant
organizational areas, such as
production, accounting,
marketing, R&D, engineering,
and human resources.

The multidivisional
(M-form) structure consists of operating
divisions, each representing a separate
business or profit center in which the top
corporate officer delegates responsibilities
for day-to-day operations and business-
unit strategy to division managers.
6.2) OPERATIONS
MANAGEMENT
PURPOSE OF OPERATIONS MANAGEMENT
is an area of management concerned with designing and
controlling the process of production and redesigning business
operations in the production of goods or services

OPERATIONS MANAGEMENT
is primarily concerned with planning, organizing and supervising in
the contexts of production, manufacturing or the provision of
services

It involves the responsib ility of ensuring that b usiness operations are efficient in terms of
using as few resources as needed and effective in terms of meeting customer
requirements.
The essence /
importance of
operations strategy

• Production processes typically

constitute more than 70% of firm’s
total assets.

• Major part of SI process takes place at

production site.

• Implementation of JIT significantly

reduces the costs implementing
strategies whereby parts and
materials are delivered to a production
site just as they are needed.
Issues
• Plant size – is it enough?
• Inventory/Inventory control – are raw
materials recorded properly?
• Quality control is the quality is taken care of?
• Cost control does the variable cost is
controllable?
• Technological innovation – does R&D support
innovation?
• Equipment and resource utilization are the
equipment's under good maintenance?
• Employee training – can the employees cope
with current demand?

Came out in final exam Feb2023 Part BQ3(a)

Operations Management A Source Of Competitive Advantage

Operations Specific Strategy Used Competitive

Decisions Examples Advantage

Quality
FLEXIBILITY
Product Sony’s constant innovation of new products Design
HP’s ability to follow the laptop market Volume
Process
Southwest Airlines No-frills service LOW COST
Location
DELIVERY
Layout Pizza Hut’s five-minute guarantee at lunchtime Speed
Federal Express’s “absolutely, positively on time” Dependability Differentiation
Human Resource (Better)

Supply Chain QUALITY Response

Motorola’s automotive products ignition systems Conformance Cost leadership (Faster)
Inventory Spice Nepal’s network Performance (Cheaper)

Scheduling
IBM’s after-sale service on mainframe computers AFTER-SALE SERVICE
Maintenance
Fidelity Security’s broad line of mutual funds BROAD PRODUCT LINE

Came out in final exam

Feb2023 Part BQ3(b)

4 competitive priorities for operation strategy contributes to and sustaining the firm’s competitive advantage
End of chapter 6

THANK YOU