(3, 1) - Strategy and Structure Flashcards
What is a ‘functional’ organisational structure? What are the advantages and disadvantages of this structure?
It groups the organisations resources into capabilities into the same areas of management e.g. operations, finance, HR, marketing, legal.
+ Clear chain of command and division of responsibilities for key management disciplines
+ Allows for specialisation of functional skills
+ Enables simple communication within the function
+ Facilitates consistency and compliance with functional policies and procedures
+ Economies of scale within each functional group
- Can create silos or culture of independence
- Can create conflict between functional goals and overall organisational objectives
- Can create unhelpful competitive tensions between functions
- Does not facilitate cross-functional working
- Does not promote alignment to customer needs
What is a ‘divisional’ organisational structure? What are the advantages and disadvantages of this structure?
It groups the organisations resources around products and / or geographical location e.g. structured around business units for different customer groupings, regional areas or different products and services.
+ Accountability for performance is developed to divisional levels (such as profit centres)
+ Encourages individual responsibility and ownership, also encourages entrepreneurship and risk taking.
+ Local customer focus and product knowledge
+ Encourages joint-working for local goals
- Loss of central control
- Can create independence and competition between divisional units for resources
- Diversity of operations can create issues of consistency (such as branding, quality, service and culture)
- Support functions become devolved and lose economies of scale
What is a ‘matrix’ organisational structure? What are the advantages and disadvantages of this structure?
The matrix structure attempts to organise itself functionally and divisionally. The divisions organise around products and/or customer segments, whilst functional reporting gives a clear line of accountability into the board.
+ Accountability for performance is devolved to divisional levels (such as profit centres)
+ Encourages individual responsibility and ownership, also encourages entrepreneurship and risk taking
+ Local customer focus and product knowledge
+ Encourages joint-working for local goals
- Loss of central control
- Can create independence and competition between divisional units for resources
- Diversity of operations can create issues of consistency (such as branding, quality, service and culture)
- Support functions become devolved and lose economies of scale
The way supply chain fits into an organisation is influenced by 4 elements, what are they?
- The nature of procurement in the organisation e.g. transactional, commercial or strategic
- Coverage of procurement and therefore the range of specialisation which may be needed
- Alignment of procurement accountabilities (for example by purchase category or customer group)
- Strategic objective for example centralisation is appropriate if the objectives are largely cost focussed but decentralisation if objectives are customer focussed.
What are the advantages of centralising the procurement function?
- Specialisation - staff can focus on particular areas and develop market knowledge
- Consolidation of requirements to obtain economies of scale
- Greater co-ordination of procurement activities making it easier to impose standard procurement policies and practices
- Easier monitoring and control of procurement
- Easier resolution of conflict of priorities between divisions
What is decentralising the procurement function and what are the advantages of this?
Supply chain responsibilities sit with the divisions or customer groups, usually at a lower level in the organisation but closer to where goods are procured. The advantages are:
- Customer focus - a better understanding of user needs and problems
- Closer relationship between procurement and operating departments, leading to easier access to user expertise and reduced maverick buying
- Quicker response to operational needs by local buyers
- Knowledge of, and relationship with, locally based suppliers
- Freeing central procurement units to focus on higher level, higher value adding tasks
What are CLAN and SCAN structures for procurement?
These are hybrid structures for the procurement function.
Centre Led Action Network - uses locally based procurement staff who report primarily to their local management, but with secondary responsibility to a small procurement centre. The role of the procurement centre is to lead and co-ordinate the network of local buyers formulating policy, setting standards and encouraging best practice.
Strategically Controlled Action Network - similar to CLAN except the local procurement teams report primarily to central procurement with secondary responsibility to their local management.
As well as structuring the supply chain function you also need to structure the supply chain itself, one method is a tiered supply structure, what is this?
The organisation only deals with top tier suppliers who in turn, only deal with second tier suppliers and so on. The selection of first tier suppliers becomes a key strategic activity for the organisation.
What is the main advantage and disadvantage of a small supply base, which can be achieved through a tiered supply structure?
+ Extra time per supplier to focus on collaborative relationship management, this makes it easier to drive synergistic improvement and seek innovative developments which benefit both parties
- There is no back up if the supplier fails and the growing risk of complacency among preferred suppliers, often leading to erosion of the value in the deal. The organisation could miss out on new or more competitive suppliers in the wider market.
What strategic resources are needed to successfully implement corporate strategy?
People (objective setting, performance appraisal, incentives and training etc)
Information
Technology
Finance
What 2 headings can information as a resource be considered as?
Information systems - software and hardware that support data intensive applications
knowledge management - systematic process which supports continuous development of individual, group and organisational learning, involving the creation, acquisition, gathering, transformation, transfer and application of knowledge to achieve organisational objectives.
What are key information systems?
MRP - Materials Requirements Planning
MRP II - Manufacturing Resource Planning
ERP - Enterprise Resource Planning
Purchase 2 Pay - automate requisitioning through to order receipts and payment
Electronic Data Interchange - a standard format for transferring data between different computer systems.
Name 2 examples of where technology can help with strategy implementation. What are the disadvantages of technology?
Automation or computer aided design (CAD)
Improved logistics through radio frequency identification (RFID) and barcode scanning
- Costly to implement and constant change makes it difficult to keep up to date
- Reliability can be an issue in early stages of development
What 3 elements need to be considered about finance as a resource?
- Profit - the extent to which the organisation is operating profitably
- Assets - the extent to which an organisations assets are being ‘worked’
- Debt vs Equity - the balance between debt and equity in the business
When deciding if to fund a strategy, what 3 questions should you ask?
- How much cash will be needed?
- When will it be needed? Cash flow forecasts are useful
- How much cash might be generated by successful implementation
