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Business Strategy

Adip Roy
Lesson 6
Organization Structure
• Simple Organization Structure – Owner with few
employees, tasks are accomplished through direct
• Functional Organization Structure – the tasks are divided
by “functional” groups
• Divisional Structure – autonomous unit, governed by
corporate office
• Strategic Business Unit – divisional structure but they are
grouped together based on some common strategic
elements (product/market)
• Holding company structure – unrelated business and
“holding” (little managerial involvement)
• Matrix Organization Structure – dual channel of authority,
evaluation and control. (mix of staff & line functions)
Organizational Structure
Vertical Horizontal
• SpecializedTasks • Shared tasks
• Hierarchy of authority • Flexible authority
• Rules and regulations • Few rules and regulations
• Vertical communications • Horizontal
and formal reporting communications and
systems sharing information
• Centralized decision • Decentralized decision
making making
• Emphasis on efficiency • Emphasis on learning &



Views of Organization
Characteristic 20th Century 21st Century
Organization Pyramid Web or Network
Style Structured Flexible
Focus Internal External
Source of Strength Stability Flexible
Offerings Mass production Mass customization
Operation Vertical integration Virtual integration
Financials Quarterly Real time
Leadership Dogmatic Inspirational
Inventories Months Hours
Thinking on Leadership and Organization
Elements of Strategic Leadership
Managing Change
Strategic Vision
Governance & Management

Communication Network


Managing Change
Pragmatism is a philosophical tradition that began in the United States
around 1870. Its origins are often attributed to the philosophers William
James, John Dewey, and Charles Sanders Peirce. Peirce later described it in
his pragmatic maxim: "Consider the practical effects of the objects of your
conception. Then, your conception of those effects is the whole of your
conception of the object.“

Pragmatism considers thought an instrument or tool for prediction,

problem solving and action, and rejects the idea that the function of
thought is to describe, represent, or mirror reality. Pragmatists contend that
most philosophical topics—such as the nature of knowledge, language,
concepts, meaning, belief, and science—are all best viewed in terms of
their practical uses and successes. The philosophy of pragmatism
"emphasizes the practical application of ideas by acting on them to actually
test them in human experiences". Pragmatism focuses on a "changing
universe rather than an unchanging one as the Idealists, Realists and
Thomists had claimed".

In a nutshell, it’s taking the most

practical route when making a decision or
action. It leaves all the sometimes
unnecessary fluff that comes with clinging
to certain deeply held beliefs.
Organizational Change
Functions Traditional Orgn. Learning Orgn.
• Determination of • Vision is provided by Top • Vision is shared by many
overall direction Management not only by the top
• Formulation and • Top management decides • Formulation and
implementation of Ideas and rest of the organizations implementation of idea
acts takes place at all levels
• Nature of • Each person fulfills his/her • People understands their
Organizational thinking role and focus on developing role but also
individual competencies interdependence
• Conflict resolution • Conflicts are resolved by • Conflicts are resolved
the power of higher using collaboration
management • Role of the Leader is to
• Leadership and • Leader provides the vision build shared vision,
Motivation and controls, rewards, empower, inspire by
punishes as needed charismatic Leadership
Level 5 Executive Builds enduring greatness with a blend
of humility and professional will
Level 4 Effective Commitment with clear vision and
Leader stimulating higher performances

Level 3 Competent Organizes people and resources toward

Manager the pre-determined objectives

Level 2 Contributing Contributes individual capabilities to the

Team achievement of group objectives and
works effectively with others in a group
Member setting
Level 1 Highly Makes productive contributions using
Capable talents, knowledge, skills and good
working habits
Cycle of Mediocrity
Customers trade
horror stories
Other suppliers (if any)
seen as equally poor

Employees spend
working life
in environment
Employee of mediocrity
(but can’t easily quit) Emphasis
Narrow design on rules
of jobs vs. pleasing
No incentive for Complaints met by
cooperative relationship Training emphasizes
indifference or Success =
to obtain better service hostility learning rules
not making
Service not focused
Jobs are boring and on customers’ needs
repetitive; employees
unresponsive Good wages/benefits
high job security
Resentment at inflexibility and
lack of employee initiative; Promotion
and pay
complaints to employees increases based Initiative is
on longevity,
lack of mistakes
Source: Schlesinger and Heskett; see Services Marketin
Customer dissatisfaction textbook, page 312, for full source information.
Solving someone’s
Listening to


Asking Questions to raise

Making suggestions
Giving Feedback
Offering Guidance
Giving Advice

DIRECTIVE Helping someone
to solve problems
Coaching, Leading and Mentoring
Advantages of Outsourcing
• It can reduce the cost
• It can reduce the need for capital investment
• Manager’s can focus on mission-critical
• Better control
• Careful selection of partner and improve the
Disadvantages of Outsourcing
• Might result in loss of control and reliance on “outsider”
• Can create future competitors
• Skills important for the outsourced activity is ‘lost’
• May draw negative reaction in market/investors
• Crafting a fool-proof agreement might be difficult
• Organization may get into a longer contract and become
• May get into a ‘underbidding supplier’
• Outsourcing may lead to use of lowly paid staff with no
Summary: Implementation Steps
1. Select the most appropriate strategy
2. Create the ‘right’ organization structure
3. Define the roles and responsibilities
4. Create the ‘right’ processes
5. Frame the appropriate measurement techniques
6. Create the effective feedback/monitoring
7. Make changes as might be needed to achieve
the Mission/Vision/Objectives