Strategic Management: Chapter 11

How does organizational culture change?

Corporate BODs bring in new leadership at top, which is charged to make changes in strategy/ structure

Organizational Culture can be a basis of competitive advantage if the firms unique culture helps in increasing its ...

economic value creation

Exploitation-

enhance firm performance in the short term

Ambidexterity encourages managers to balance... (2 E's)

exploitation with exploration

Extrinsic motivation is driven by...

external factors such as awards and higher compensation, or punishments (the carrot- and-stick approach)

Flat Structure-

few or no levels of middle management between staff and executives (wide span of control) (top down and bottom up communication)

Best to develop strong/ strategically relevant culture in the first...

few years

Ambidexterity-

firm's ability to address trade-offs (over time)

Simple structure-

founders tend to make all the important strategic decisions as well as run the day-to-day operations

The network structure allows firms to connect centers of excellence to their...

global location

Functional structure -

groups employees into distinct functional areas based on domain expertise

Need for structural reorganization is especially intense in industries where rate of change is ______ and potential disruption is _________

high; frequent

Artifacts-

includes elements such as the design and layout of physical space (cubicles/ private offices etc.); symbols (uniform); vocabulary; what stores are told; events celebrated; how they're celebrated.

the use of budget is key to...

input controls

Strategic control and reward systems-

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

A high degree of specialization can increase productivity but decrease...

job satisfaction (due to repetition of tasks)

Mechanic organizations are often used with... (McDonald's and Walmart)

low cost strategy

Tall structure-

many managers, and each manager has a narrow span of control (many levels of hierarchy)

Groupthink is a __________ side effect of recruiting, retaining, and promoting employees with the same values.

negative

Due to computer-mediated collaboration tools firms have moved from rigid matrix structure to...

network structure

Span of control-

number of employees who directly report to manager

Groupthink-

opinions coalesce around a leader w/o individuals critically evaluating and challenging that leader's opinions and assumptions

Organizational structure is key to determining how the work efforts of individuals and teams are ____________ and how resources are ___________.

orchestrated; distributed

What type of organization has fluid and flexible information flow among employees (both vertical and horizontal); faster decision making; and higher employee motivation, retention, satisfaction, and creativity?

organic organization

Key decisions managers make when designing effective organizations pertain to...

organizational structure

Results-only-work-environments (ROWEs)-

output controls that attempt to tap intrinsic employee motivation, which is driven by the employee's interest in and the meaning of the work itself. (work requiring creativity and innovation)

Founder imprinting-

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

Socialization -

process of employees internalizing an organization's values and norms through day-to-day operations (how employees learn the org culture)

The goal of organizational design is to design an organization that allows managers to translate their chosen strategy into a....

realized one

Centralization-

refers to the degree to which decision making is concentrated at the top of the organization

Output controls ties employee compensations to...

rewards to predetermined goals

Exploration-

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

Input controls-

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

Output controls-

seek to guide employee behavior by defining expected results, but leave the means to those results open to individual employees, groups, or SBUs

Input controls define ways and means to reach...

strategic goals and ensure predictable outcomes

Organizational structure must follow...

strategy

structure must accommodate...

strategy

Specialization-

the degree to which a task is divided into separate jobs (division of labor)

Organizational inertia-

the failure of established firms

Organizational design-

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

Firms tend to use a global matrix structure to pursue a...

transnational strategy

Related Diversification:

-Centralized decision making -High level of integration at corporate headquarters -Co-opetition among SBUs

Matrix Structure and Global Strategy: (4)

1. international 2. multidomestic 3. global standardization 4. transnational

Key Building Blocks of Organization Structure:

1. specialization 2. formalization 3. centralization 4. hierarchy

Blue ocean strategy: (combo of differentiation and cost leadership)

-Ambidextrous organization -Balancing centralization with decentralization -Multiple core competencies along the value chain required: R&D, manufacturing, logistics, marketing, etc. -Process and product innovations -Focus on economies of scale and scope

Intrinsic motivation in a task is highest when an employee has: (AMP)

-Autonomy (about what to do) -Mastery (how to do it) -Purpose (why to do it)

Disadvantages of matrix structure:

-Difficult to implement -Reporting structures often not clear (employees can have trouble when having two or more supervisors) -Adding layer can slow decision making/ increase bureaucratic costs

International:

-Functional structure -Leverages home based core competency by moving it to foreign markets

Transnational:

-Global matrix structure -Balance of centralized and decentralized decision making -Additional layer of hierarchy to coordinate both: Geographic areas and Product divisions

Pattern for successful firms:

-Master of the current environment -Success is usually measured by financial measurements -Structures, measures, and systems to accommodate and manage size -A resulting organizational inertia that tends to minimize opportunities and challenges created by shifts in the internal and external environment

Cost-leadership strategy:

-Mechanistic organization -Centralized -manufacturing and logistics (core comps) -Process innovation (drive down cost) -economies of scale

Matrix structure combines the benefits of the ____ ______ and the _________ ____________

-Multi-Divisional Form (M-Form) -Functional structure

Global Standardizaton

-Multidivisional structure -Product divisions -Centralized decision making -Cost leadership strategy used where capabilities reside at lowest cost -Reap economies of scale

Multi Domestic:

-Mutlidivisional structure -Geographic areas to maximize local responsiveness -Decentralized decision making

Differentiation strategy:

-Organic organization -Decentralized -R&D, innovation, and marketing (core comps) -economies of scope (leveraging brand name across diff products)

Simple structure characteristics:

-Small firms -Flat structure -decentralized -Low formalization/specialization -no professional managers

Internal shifts:

-accelerated growth -change in business model -entry in new markets -change in top management team -mergers and acquisitions

Disadvantages of multidivisional structure:

-adding another layer of corporate hierarchy (problems of increasing bureaucracy, red tape, and sometimes duplication of efforts) -slows decision making -SBUs compete with each because they are standalone profit-and-loss -Co-opetition (competition and cooperation at the same time) is necessary

Functional structure characteristics:

-adopted when sales increase -Department heads report to CEO -Higher specialization/deeper domain expertise -Greater division of labor (higher productivity) -Top down and bottom up communication chain b/w CEO and functional departments (flat structure)

In multidivisional structure, the president reports to the ______ __ _________, who represents the interests of the _________________.

-board of directors -shareholders

Unrelated Diversification:

-competitive multidivisional structure -decentralized decision making -low level of integration at corporate headquarters -competition among SBUs for resources

High degree of formalization can slow ______ _________, reduce ________/__________, and hinder ________ _________.

-decision making -creativity/innovation -customer service

Benefits of the Multi-Divisional Form:

-domain expertise -economies of scale -efficient processing of info

Where do organizational cultures come from?

-founder imprinting -groupthink

Global Matrix structure wants... (2)

-high local responsiveness -low cost

Control Systems:

-input controls -output controls

Organic organizations: (Zappos)

-low specialization and formalization -a flat structure -decentralized

Functional structure and business strategy is recommended when a firm has a... (2)

-narrow focus of product/service -small geographic footprint

Benefits of Functional Structure:

-responsiveness -decentralized focus

Different Stages in Firm's Growth: (4)

-simple structure -functional structure -multi divisional structure -matrix structure

What 2 multidivisional structures are functional with 70% revenue from primary activity?

-single business -dominant business

Multidivisional Structure (M-Form):

-single business -dominant business -related diversification -unrelated diversification

Output controls are best applied to... (2)

-single line of business -unrelated diversification

Mechanic organizations deal with... (2)

-standardization -economies of scale

Organizational design key components: (SCC)

-structure -culture -control

Types of hierarchy's:

-tall structure -flat structure

Matrix Structure:

-the company structure where reporting relationships are set up as a grid, or matrix -employees have multiple managers to report to (functional manager and a product manager)

Formalization-

Detailed written rules/ policies for what to do in specific situations

External shifts-

PESTEL factors

Inertia-

a firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure (not willing to change)

Mechanic organizations- (McDonald's and Walmart)

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

Norms-

appropriate employee attitudes and behaviors

communities of practice are formed by people who engage in a process of...

collective learning in a shared domain (a tribe learning to survive, a band of artists seeking new forms of expression, a group of engineers working on similar problems)

Functional Structure lacks effective _________ ________ across departments,

communication channels

It can be difficult to imitate cultures of successful firms for two reasons:

causal ambiguity and social complexity

Top-down strategic management takes place in highly...

centralized organizations

Multidivisional structure- (Siloed Departments)

consists of several distinct strategic business units (departments are siloed off), are operated independently from one another and each led by a CEO who is responsible for business strategy/ day-to-day operations.

Cross-Functional Teams overcome the lack of....

cross-departmental collaboration in a functional structure

Internal & external shifts can break apart the ______ ________ which can lead to ____ _____

current system; firm failure

planned emergencies are found in more...

decentralized organizations

Hierarchy-

determines the formal, position-based reporting lines and thus stipulates who reports to whom

Organic organizations use what type of strategy?

differentiation strategy

Organizational culture must be:

valuable, rare, difficult to imitate, and organized

Culture flows from...

values

Organizational culture-

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

Most important & least visible to least important and most observable:

values, norms, artifacts

Values-

what is important

Strong cultures emerge when company's core values are...

widely shared among firm's employees and norms have been internalized