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Aaron Villamar

on 11 February 2014

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Learning Objectives
After reading this chapter, you should have a good understanding of:
- The importance of organizational structure and the concept of the “boundaryless” organization in implementing strategies.
- The growth patterns of major corporations and the relationship between a firm’s strategy and its structure.
- Each of the traditional types of organizational structure: simple, functional, divisional, and matrix
- The relative advantages and disadvantages of traditional organizational structure
- The implications of a firm’s international operations for organizational structure

Traditional Forms of Organizational Structure
Organizational structure refers to formalized patterns of interactions that link a firm’s
- Tasks
- Technologies
- People
Structure provides a means of balancing two conflicting forces
- Need for the division of tasks into meaningful groupings
- Need to integrate the groupings for efficiency and effectiveness

Dominant Growth
Patterns of
Large Corporations
Learning Objectives
- Why there is no “one best way” to design strategic reward and evaluation systems, and the important contingent roles of business- and corporate-level strategies.
- The different types of boundaryless organizations—barrier-free, modular, and virtual—and their relative advantages and disadvantages
- The need for creating ambidextrous organizational designs that enable firms to explore new opportunities and effectively integrate existing operations

Chapter 10

Simple Organizational Structure
- organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serves as an extension of the top executive

- the most common and oldest organizational form
- highly informal, coordination of tasks is accomplished by direct supervision
- highly centralized
- little segregation of tasks
- few rules and regulatioons

-employees may not clearly understand their responsibilities which leads to conflict and confusion
-employees may take advantage of lack of regulation & act in their own self-interest
-limit opportunities for upward mobility
Functional Structure
-organizational form in which the major functions of the firm,such as production, marketing, & accounting are grouped internally
- enhanced coordination and control
Centralized decision making
- enhanced organizational-level perspective
More efficient use of managerial and technical talent
- facilitated career paths and development in specialized areas

- impeded communication and coordination due to differences in values and orientations
- may lead to short-term thinking (functions vs. organization as a whole)
- difficult to establish uniform performance standards

Divisional Structure
- organized around products, projects, or markets

-Each division includes its own functional specialists typically organized into departments

- divisions are relatively autonomous and consist of products and services that are different from those of other divisions

- division executives help determine product-market and financial objectives

-Strategic business unit (SBU) structure
-Separation of strategic and operating control
-Quick response to important changes in external environment
-Minimal problems of sharing resources across functional departments
-Development of general management talent is enhanced

- Can be very expensive
- Can be dysfunctional competition among divisions
- Can be a sense of a “zero-sum” game that discourages sharing ideas and resources among divisions
- Differences in image and quality may occur across divisions
- Can focus on short-term performance

- an organizational form in which products, projects, or product market divisions are grouped into homogeneous units.

-task of planning and control by the corporate office more manageable
-individual businesses can react more quickly to important changes

-may become difficult to achieve synergies
-additional level of management increases overhead expenses
Strategic business unit (SBU) structure

An organizational form in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters

-cost savings associated with lower overhead
-autonomy increases the motivational level of divisional executives

-inherent lack of control and dependence
-limited staff support
Holding company structure
Matrix Structure
-A combination of the functional and divisional structures
Individuals who work in a matrix organization become responsible to two managers
- the project manager
- the functional area manager

Facilitates the use of specialized personnel, equipment and facilities
Provides professionals with a broader range of responsibility and experience

Can cause uncertainty and lead to intense power struggles
Working relationships become more complicated
Decisions may take longer

International Operations: Implications for Organizational Structure
Three major contingencies influence structure adopted by firms with international operations:
1. Type of strategy driving the firm’s foreign operations
2. Product diversity
3. Extent to which the firm is dependent on foreign sales

Structures used to manage international operations
International division - consistent with multidomestic strategies
-local managers are provided with a high level of autonomy to manage their operations within the constraints and demands of their geographic market

Geographic-area division - if foreign sales increase as a percentage to total sales

Worldwide matrix - if a firm's product and/or market diversity becomes large

Worldwide functional - consistent with efficiency perspective
-division managers view the marketplace as homogenous and devote relatively little attention to local market, political, and economic factors
-with significant prouct-market diversity

Worldwide product division - firms with relatively low levels of product diversity
Global start-up
- a business organization that, from inception, seeks to derive significant advantage from the use of resources and the sale of outputs in multiple countries
example: Logitech

5 global startup cities to watch:
Can startups help the City of Light solve its financial woes in 2014? Perhaps if French billionaire Xavier Niel has something to say about it. The telecom mogul this year announced plans to begin construction on the largest startup incubator in the world, all while creating a tuition-free computer science school for the nation and investing in startups himself. Paris has competition from Berlin and London, which have already been successful in attracting European startups, but a billionaire leading the charge is getting the government's attention. And friendlier taxes and business laws could be to come.

This South American nation could be the first to know the true potential of marijuana. Earlier this month, it became the first nation in the world to legalize (with its own oversight) the growth, sale and use of the substance, and that opens an entire marketplace of opportunity for startups. Beyond that, Uruguay also has a thriving video game development scene, loose immigration laws and strong computer science education programs, at least according to a New York Times profile earlier this year. Seems like a place worth our attention in 2014.

The post-Communist environment in this southeast Asia nation has given it entrepreneurial muscle. 500 Startups created a $10 million micro-fund this year for southeast Asia startups, and has already made investments in Vietnamese startups. In Ho Chi Minh City this year, the new Saigon Hub coworking space opened. And the Asian site Tech in Asia recently highlighted 10 reasons Vietnam's startup scene is the most aggressive in Southeast Asia.

Nairobi, Kenya
There's been enough momentum in this African city that it's earned Kenya the title 'Silicon Savannah.' The residents are tech-savvy—more than 93 percent of Kenyans use mobile phones and most use the nation's M-PESA system to make payments or transfer money through devices. Construction is soon to begin on the new Konza Tech City, a $10 billion investment by the Kenyan government in a new technological city to be complete by 2030. Accelerators operate here, and there's even an Etsy-like marketplace, which we profiled earlier in 2013. Richard Branson is active in the region too, opening a high-dollar safari camp in Nairobi.

Chile has been aggressively targeting startups inside and outside of its borders since it launched Startup Chile in 2010, and in 2013 was South America's most innovative country on the Global Innovation Index. More than 600 entrepreneurs from around the world have been through the six-month accelerator, about 40 percent staying in the nation, and they've raised more than $20 million. But that's peanuts compared to Silicon Valley, and according to a May 2013 Huffington Post story, some have argued not enough for the government to continue running it. In the mix in 2014 too, is a reinstated president (Michelle Bachelet, who served 2006-2010), who hasn't yet weighed in on the program. In either case, leaders say innovation, R&D, and entrepreneurship are important for a country torn by poverty and economic inequality as well as the after-effects of a massive 2010 earthquake and conservative policies that benefitted the rich most. We're anxious to see the next generation of Chilean innovation in 2014.
How an Organization's Structure Can Influence Strategy Formulation
-the strategy that a firm chooses dictates the structural elements such as division of tasks, the need for integration activities, and authority relationships within the organization

- However, an existing structure can influence strategy formulation. Thus, strategy cannot be formulated without considering structural elements.
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