Chapter 8 - Organisational design and strategy in a changing global environment Flashcards
Strategy
The specific pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors.
Core competences
The skills and abilities in value-creation activities that allow a company to achieve superior efficiency, quality, innovation or customer responsiveness.
There are two types of resources to provide an organisation with core competences to turn into a competitive advantage
Functional resources
Organisational resources
Functional resources
The skills possessed by an organization’s
functional personnel.
Organizational resources
The attributes that give an organization a
competitive advantage such as the skills of the top-management
team or possession of valuable and scarce resources.
Coordination abilities
An organisation’s ability to coordinate its functional and organisational resources to create maximal value.
Effective coordination of resources leads to a
competitive advantage.
There are four ways in which global expansion allows an organisation to create value for its stakeholders.
Transfer of core competences abroad
Establishment of a global network
Gaining access to global skills and resources
Use of global learning to enhance core competences
Four levels of strategy
Functional- level strategy
Functional-level strategy and structure
Functional-level strategy and culture
Business-level strategy
To gain an advantage, an organisation must be able to perform functional activities
At a lower cost compared to its rivals, to charge lower prices
In a way that allows it to differentiate its products from those of its rivals so they can charge higher prices
The reason is that the coordination abilities that stem from an organization’s
culture emerge gradually and are a product of many factors:
An organisation’s property rights system
Its structure
Its ethics
The characteristics of its top management team
To develop functional abilities and produce a core competence, it is necessary to choose:
Property rights
Functional structure
Functional managers
Business-level strategy
A plan to combine functional core competences in order to position the organization so that it has a competitive advantage in its domain.
The challenge of a business-level strategy
is for an organization to take the core competences created by its functions and combine them to take advantage of opportunities in the environment to create value.
The organization needs a business-level strategy that does both of the following
Selects the domain the organisation will compete in
Positions the organisation so it can use its resources and abilities to manage its specific and general environments in order to protect and enlarge that domain.
Two basis ways in which an organization can create value
By reducing costs of its value-creation activities
By performing those activities in a way that gives its products a differentiated appeal.
Once an organisation has chosen its domain it has two bases on which it can position itself to compete with its rivals.
It can use its skills in low-cost value creation to produce for a customer group that wants low-prices goods and services
It can use skills at differentiation to produce for a customer group that wants and can afford differentiated products that command a high or premium price
Low-cost business-level strategy:
A plan whereby an organisation produces low-priced goods and services for all customer groups.
Differentiation business-level strategy
A plan whereby an organisation produces high-priced, quality products aimed at particular market segments.
Another business-level strategy is the focus strategy
Specialising in one segment of a market and focusing all of the organisation’s resources on that segment
Three factors affect an organization’s choice of a structure to create competitive advantage for itself:
- As an organization produces a wider range of products, it will need greater control over the development, marketing, and production of these products.
- As an organization seeks to find new customer groups for its products, it will need a structure that allows it serve the needs of its customers.
- As the pace of new product development in an industry increases, an organization will need a structure that increases coordination among its functions.
Related diversification
The entry into a new domain that is related in some way to an organization’s domain.
Unrelated diversification
The entry into a new domain that is not relates in any way to an organization’s core domain.
Corporate-level strategy and structure
Conglomerate structure and unrelated diversification
Structures for related diversification
Conglomerate structure and unrelated diversification
Conglomerate structure, a structure in which each business is placed in a selfcontained division and there is no contract between divisions.
Structures for related diversification
An organisation pursuing a strategy of related diversification tries to obtain value by sharing resources or by transferring functional skills from one division to
another – processes that require a great amount of coordination and integration.
Global-level strategy
A plan that involves choosing the best strategy to expand into overseas markets to obtain scarce resources and develop core competences as discussed above
Companies can use four principal principles as they begin to market their products and establish production facilities abroad:
- Multi-domestic strategy
- International strategy
- Global strategy
- Transnational strategy
The choice of structure and control systems for managing a global business is a function of three factors:
- The decision how to distribute and allocate responsibility and authority between managers at home and abroad so that effective control over a company’s global operations is maintained.
- The selection of the organisational structure that groups divisions both at home and abroad in a way that allows the vest use of resources and serves the needs of foreign customers most effectively.
- The selection of the right kinds of integration and control mechanisms and organisational culture to make the overall global structure function effectively.
