Lecture 7: Organization Flashcards
What are the four key elements of organizational architecture?
• Organizational structure- structure & coordination of roles,
responsibilities & relationships
• Organizational control systems and incentive mechanisms
• Organizational culture
• Processes
def. organizational structure
The formal arrangement of roles, responsibilities, and relationships in the firm
describe the relationship between strategy and structure
• Strategy and structure have a reciprocal
relationship:
– Structure flows from or follows the selection of
the firm’s strategy – structure aids strategy
implementation
but …
– Once in place, structure can influence current strategic actions as well as choices about future strategies
describe org. structure in int’l business
– allows specialization (division of labour)
– requires integration (coordination) across specialized knowledge
what do international business firms seek?
– to standardize and integrate activities to maximize global
efficiency, and
– to adapt activities to achieve local effectiveness
to achieve their strategic goals, what must international business firms do and why?
the firm must establish the appropriate structure
– organizational structure helps implement strategy by integrating types of knowledge: functional, product, geographical.
What are two categories of organization structures?
- vertical differentiation
- horizontal differentiation (classical org structures)
what are the two vertical differentiation structures?
centralization
decentralization
what are the four kinds of horizontal differentiation structures
– Functional – Divisional – Global Matrix – Mixed Structure (structure differs by region and/or product)
describe centralization
• degree to which high-level managers make strategic
decisions and delegate them to lower levels for
implementation
– Gives top-level managers the means to bring about
organizational change
– Seeks to avoid duplication of activities
describe decentralization
• degree to which lower-level managers make and
implement strategic decisions
– Motivates mid- and lower- level managers
– Allows greater flexibility & responsiveness
– May be more challenging to coordinate
describe horizontal differentiation
– Specifies the set of tasks to accomplish
– Divides the tasks among SBUs, divisions, departments,
committees, teams, jobs, and individuals
– Stipulates superior and subordinate relationships
what are the 3 types of knowledge that org structure helps implement?
• Functional knowledge: Access to coworkers with expertise
in basic business functions such as production, marketing,
finance, accounting, HR management, IT
• Product knowledge: Understanding technological trends,
customer needs, competitive forces affecting the goods the
firm produces & sells
• Geographical (area) knowledge: Understanding cultural,
commercial, social, economic conditions in each host
country
what do org structures do with regards to the different kinds of information?
• Each form allows firms to integrate one type of knowledge,
• but also makes it difficult to integrate the other types of
knowledge
First choice: function vs. product
describe this
If focus on inputs, then structure by function –functional structure
If focus on outputs, then structure by product divisions–divisional structure
What structure has an upstream centre of gravity (raw materials focus/ “core business”)
functional structure
what structure has a downstream centre of gravity (retailer focus)
divisional structure
describe functional structure
- Structure by inputs
- Standardized products
- Operational efficiency
- Cost leadership
describe divisional structure
- Structure by outputs
- Different products
- Flexibility
- Differentiation strategy
what is divisional structure and what are its subtypes and disadvantage?
• Groups employees based on product, customer segment, or geographic location • Subtypes – International division structure – World wide geographic (area) structure – World wide product division structure • Disadvantage – Involves duplication of functions and resources across divisions
describe product division
• Diverse product portfolio • Differences between products • Similarities between regions
describe geographic division
• No dominant product market
• Similarities between
products
• Differences between regions
what structure would the global strategy follow?
worldwide product division structure
- reasonable agree of diversification
- Facilitates location and experience curve economies, transfer of core competencies
what structure would the transnational strategy follow?
global matrix structure or worldwide product divisional structure
Global Matrix:
• Overlays functional and/or divisional forms via dual reporting structure
• Challenge – reporting to two superiors, violates unity of command
principle ‐
what structure would the international strategy follow?
international division
what structure should the localization strategy follow?
worldwide geographic (area) structure
because it has a low degree of diversification
-functional structure within each geographic area/division
describe global matrix structure
• Overlays functional and/or divisional forms via dual reporting
structure
• Challenge – reporting to two superiors, violates unity of command
principle ‐
describe neoclassical structures
– emphasize coordination and cultivation rather than
command and control
describe network structure
– arranges differentiated elements in patterned flows of
activity that allocate people and resources to problems
and projects in a decentralized manner
describe virtual organization structure
– “work across space and time”
– dynamic arrangement among partners that efficiently adapts to market change
what is a heterarchy?
a structure in which any pair of items is likely to be related in two or more differing ways (generally nonhierarchical)
describe Philips in terms of their strategies
• Philips – IB strategy • Strategy: Localization since 1930s & WW II – Goal: transnational strategy • Organization structure – World-wide geographic area structure (key: National Organizations:N.O.s) – New matrix structure but highly decentralized weak product dimension & strong geographic (N.O.) dimension • Central R&D but weak in bringing product to market • Low global integration across countries. Lower efficiency
describe Matsushita and their strategies
– Strategy: Global since 1930s – Goal: transnational strategy • Organization structure – World-wide product division structure since 1930s • Highly centralized – Management, R&D, manufacturing in Japan – Japan accounts for 90% of manufacturing value (1982) • International subsidiaries only implement strategy set by HQ – Weak market responsiveness
what are the key points to consider about organizational architecture?
• Architectural elements must be internally
consistent
• Architecture must fit the strategy of the firm
– Strategy is implemented through architecture
• Strategy and architecture must be consistent with
prevailing competitive conditions
def. org culture
The shared meaning and beliefs that shape how employees interpret information, make decisions and implement actions
What are the elements of org culture?
– Leadership style and philosophy – Values and principles of management – Work climate and atmosphere – “How we do things around here” – Ethical standards
can org culture be a source of competitive advantage?
yes, it can be a key source of competitive
advantage
what is a coordination system?
ways of linking people and processes in activities across organization
what is coordination by standardization?
formal rules and procedures
what is coordination by plan?
goals, guidelines, sequences, schedules, milestones
what is coordination by mutual adjustment
social networking, shared understandings,
collaboration
what is a control system?
ways of guiding,
monitoring, correcting performance
what are three different control systems?
– Bureaucratic (Administrative) Control
– Market Controls
– Clan Control
what are control mechanisms?
– formal (plans, diagnostic reports, incentives), informal (beliefs, shared objective, agendas, boundaries, face-to-face)
– Outcome control vs
– Behaviour control
What are the main levers of corporate control and coordination (Collis)?
-Organization Structure
-Human Resource
Management
-Culture & Style
-Planning & Control
describe outcome control
Organization structure: autonomous SBUs or divisions
Corporate office: tiny, main function to look at financials
Rewards & incentives: bonus large part of compensation & linked to quantifiable targets
Personnel: few lateral transfers across divisions, hiring from within each industry
Resource allocation: tight capital expenditure controls
Information systems: geared to aggregate financial reporting
describe behaviour control
Organization structure: less autonomous business units
Corporate office: knows the business, acts as coach
Rewards & incentives: longterm career progression, multiple qualitative measures, operating processes evaluated
Personnel: internal career paths & lateral transfers
Culture: common corporate culture to ease cross division transfer
Information systems: many common systems & prescribed procedures
What are Simons’ levers of control?
***MORE IMPORTANT THAN COLLIS
- Belief Systems (org.culture)
- Interactive Control Systems
- Boundary Systems
- Diagnostic Control Systems
describe belief systems
– Core values – Shared beliefs • Basic values • Purpose • Direction
describe interactive control systems
– Focusing attention on strategic uncertainties
– Modes of managerial involvement in decision activities of subordinates
• Recurring agendas
• Face-to-face meetings
• Debate on data, assumptions & action plans
describe boundary systems
– Risks to be avoided – Allow creativity within defined limits • Clear rules, limits • Codes of conduct • Strategic planning systems • Capital budgeting systems
describe diagnostic control systems
– Critical performance variables – Provide motivation, resources & information • Profit plans & budgets • Project monitoring systems • Brand revenue monitoring systems
What are the 3 levels of International control and describe them?
-strategic control: • Foreign market entry • Business Expansion, JV, Alliances • Financial Control • Managing foreign exchange
-organizational control:
• Design of the organization, how the firm
can redesign in response to changes
• Evaluate each product, geographic,
functional SBU – responsibility center
• Use a generic control system for all units
• Evaluate the planning process
-Operations control: • Evaluates operating processes • Components of performance that need to be analyzed daily or hourly • Daily sales, productivity
describe processes
• Manner in which decisions are made and work is performed
– Cut across national boundaries as well as
organizational boundaries
– Can be developed anywhere within the firm’s global
operations network
In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: global strategy
geocentric
In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: transnational strategy
geocentric
In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: international strategy
ethnocentric
In terms of ethnocentric, geocentric, polycentric, what approach does this strategy use: localization strategy
polycentric
