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Implementing Strategy in Companies That Compete in a Single Industry

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Overview

Strategy implementationHow 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

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Implementing Strategy Through Organizational Structure, Control, and Culture

Organizational structureAssigns 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

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Implementing Strategy Through Organizational Structure, Control, and Culture (cont’d)

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

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Building Blocks of Organizational Structure

Grouping tasks, functions, and divisionsOrganizational 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

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Building Blocks of Organizational Structure (cont’d)

Allocating authority and responsibilityHierarchy of authority (chain of command)Span of control (number of subordinates)Tall and flat organizationsDrawbacks of taller organizations

Less flexibility and slower response timeCommunication problemsDistortion of commandsExpense

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Tall and Flat Structures

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Allocating Authority and Responsibility (cont’d)

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 (cont’d)

Integration and integrating mechanismsDirect contact among managers across

functions or divisionsLiaison 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 blocksControl and efficiencyControl and qualityControl and innovationControl 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

Output control Performance goals for each division, department, and

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 platformOutput 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

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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 leadershipTraits of strong and adaptive corporate

culturesBias for actionNature of the organization’s 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 structureGrouping people on the basis of their

expertise or because they use the same resources

AdvantagesPeople can learn from one anotherPeople can monitor each otherManagers have greater controlWith 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 problemsMeasurement problemsCustomer problemsLocation problemsStrategic problemsThe 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 priceReduces bureaucratic costs

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How Organizational Design Increases Profitability

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Implementing Strategy in a Single Industry (cont’d)

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 (cont’d)

Implementing a broad product line—product structureGroup the overall product line into product

groupsCentralize support value chain functions to

lower costsDivide support functions into product-oriented

teams of functional specialists who focus on the needs of one specific product group

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Kodak’s Product Structure

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Implementing Strategy in a Single Industry (cont’d)

Increasing responsiveness to customer groups—market structureGroup people and functions by customer or

market segmentsDifferent 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 (cont’d)

Expanding nationally—geographic structureTo be responsive to needs of regional

customersTo reduce transportation costs

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Geographic Structure

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Implementing Strategy in a Single Industry (cont’d)

Competing in fast-changing, high-tech environments—product-team and matrix structuresMatrix structure

Value chain activities are grouped by function and by product or project

Flat and decentralizedPromotes innovation and speedNorms and values based on innovation and

product excellence

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Matrix Structure

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Implementing Strategy in a Single Industry (cont’d)

Competing in fast-changing, high-tech environments—product-team and matrix structures (cont’d)Product-team structure

Tasks divided along product or project linesFunctional 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 (cont’d)

Focusing on a narrow product lineTends 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 (cont’d)

ReengineeringFundamental rethinking and radical redesign

of business processes to achieve dramatic improvements

Focuses not on functions, but on processes (which cut across functions)