Training Session 10 (Chapter 10)

Ambidexterity

A firm's ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation with exploration.

Groupthink

A situation in which opinions coalesce around a leader without individuals critically evaluating and challenging that leader's opinion and assumptions

formalization

An organizational element that captures the extent to which employee behavior is steered by explicit and codified rules and procedures. Standard Operating Procedures

Exploitation

Applying current knowledge to enhance firm performance in the short term.

Source of resources competitive advantage comes from:

Intangible (Organizational Design)

Strategic Control and Reward Systems

Internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees).

4 Types of Corporate Diversification

Single Business Dominant Business Related Diversification Unrelated Diversification

final part of the AFI framework: strategy implementation

Strategy implementation concerns the organization, coordination, and integration of how work gets done.

Organizational Culture

The collectively shared values and norms of an organization's members; a key building block of organizational design.

Ambidextrous Organization

The goal for managers who want to pursue a blue ocean strategy An organization able to balance and harness different activities in trade-off situations

span of control

The number of employees who directly report to a manager.

organizational design

The process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization.

Input Controls

BEFORE EMPLOYEE MAKES DECISIONS Mechanisms in a strategic control-and- reward system that seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures that are considered prior to the value-creating activities.

Implementation stage is known as

Graveyard stage

mechanistic organization

Characterized by a high degree of specialization and formalization and by a tall hierarchy that relies on centralized decision making.

organic organization

Characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making.

How does organizational culture change?

Core competencies becomes a core rigidity Culture no longer has good fit with the enviornement Cultural Change is Needed Cultural Change: Brings new leadership Mergers and Acquisitons

The relationship between strategy and structure that directly impacts a firm's performance is

Dynamic

Intertia

Firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure

Which of the following features help match a cost leadership strategy to a functional structure?

Focus on economies of scale

Walmart is an example of _________ organization?

Mechanistic

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

Organic

Multidivisional Structure (M-Form)

Organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility.

Organizational structure should ALWAYS follow strategy

True

The pattern for successful firms often follows a particular path:

1. Mastery of, and fit with, the current environment. 2. Success, usually measured by financial measurements. 3. Structures, measures, and systems to accommodate and manage size. 4. A resulting organizational inertia that tends to minimize opportunities and challenges created by shifts in the internal and external environment.

centralization

An organizational element that refers to the degree to which decision making is concentrated at the top of the organization. Slow response time and reduced customer satisfaction BP's Gulf Spill

Holacracy

An organizational structure in which decision- making authority is distributed through loose collections or circles of self-organizing teams.

Functional Structure

As sales increase firms generally adopt a functional structure Groups of employees with distinct functional areas The areas of expertise correspond to distinct stages in the company value chain activities Recommended with narrow products/services Matches well with business level strategies EX) College of Business DRAWBACKS: Lacks effective communication channels across departments Lack of linkage between functions Often solved the problems by having cross-functional teams

Goal of Cost Leadership Strategy

Create competitive advantage by reducing the firm's cost below the of competitiors while offering acceptable value No Frills, Standardized Product, Mechanistic Structure, Centralized

What element of organizational structure deals with positioned-based reporting lines?

Hierarchy

Organizational Structure

A key to determining how the work efforts of individuals and teams are orchestrated and how resources are distributed.

Founder Imprinting

A process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure.

Specialization

An organizational element that describes the degree to which a task is divided into separate jobs (i.e., the division of labor). Military

hierarchy

An organizational element that determines the formal, position- based reporting lines and thus stipulates who reports to whom. Tall Structure vs. Flat Structure

Matrix Structure

Combo of M-Form and Functional Structure Dual Lines of Authority Receives support both horizontally and vertically Very Versatile Firms tend to use a global matrix structure to pursue a transnational strategy, in which the firm combines the benefits of a multidomestic strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable) DISADVANTAGES: Difficult to implement Increases administrative costs Reporting structures are not clear Accountability can be undermined Can slow decision making

Multidivisional Structure

Consists of several distinct SBUs Each SBU is independent and led by a CEO Each CEO of SBUs report to the corporate office EX) Zappos is an SBU under Amazon Skype is an SBU under Microsoft Paypal is an SBU under eBay RELATED DIVERSIFICATION: Co-Opetition among SBUs Transfer core competences across SBUs Centralized decision making UNRELATED DIVERSIFICATION: Decentralized decision making Competing for resources

Goal of Differentiation Strategy

Create competitive advantage by offering products and services at a higher perceived value, while controlling costs. Non-Standardized Product or service to specific market segments and customers are willing to pay a higher price To implement differentiation strategy, managers rely on organic organization functional structure should be set up to allow the firm to reap economies of scope from its core competencies, such as by leveraging its brand name across different products or its technology across different devices.

Output Controls

RESULT ORIENTED (INTRINSIC VS. EXTRINSIC) Mechanisms in a strategic control-and- reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups or SBUs. According to a recent synthesis of the strategic human resources literature, intrinsic motivation in a task is highest when an employee has: Autonomy (about what to do). Mastery (how to do it). Purpose (why to do it).

Exploration

Searching for new knowledge that may enhance a firm's future performance

Simple Structure

Smalls firms with low complexity Top Management makes all important strategic decisions Low Degree of formalization and specialization A basic organizational structure EX) Small Mom and Pops stores, Small Consulting, Account and Law Firms

Key Building Blocks of an Organization Structure are:

Specialization Formalization Centralization Hierarchy

Organizational Design

The process of implementing, monitoring and modifying The structure, processes and procedures of an organization Key Components: Structure Culture Control

three key levers that managers have at their disposal when designing their organizations for competitive advantage:

structure, culture, and control.