CH 11 Im
CH 11 Im
CH 11 Im
Chapter 11
Organizational Structure and Controls
KNOWLEDGE OBJECTIVES
1.
2.
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6.
Define organizational structure and controls and discuss the difference between strategic and financial
controls.
Describe the relationship between strategy and structure.
Discuss the functional structures used to implement business-level strategies.
Explain the use of three versions of the multidivisional (M-form) structure to implement different
diversification strategies.
Discuss the organizational structures used to implement three international strategies.
Define strategic networks and discuss how strategic center firms implement such networks at the
business, corporate and international levels.
CHAPTER OUTLINE
Opening Case Are Strategy and Structural Changes in the Cards for GE?
ORGANIZATIONAL STRUCTURE AND CONTROLS
Organizational Structure
Strategic Focus Increased Job Autonomy: A Structural Approach to Increased Performance and Job
Satisfaction?
Organizational Controls
RELATIONSHIPS BETWEEN STRATEGY AND STRUCTURE
EVOLUTIONARY PATTERNS OF STRATEGY AND ORGANIZATIONAL STRUCTURE
Simple Structure
Functional Structure
Multidivisional Structure
Matches between Business-Level Strategies and the Functional Structure
Matches between Corporate-Level Strategies and the Multidivisional Structure
Matches between International Strategies and Worldwide Structures
Strategic Focus Using the Worldwide Geographic Area Structure at Xerox Corporation
Matches between Cooperative Strategies and Network Structures
IMPLEMENTING BUSINESS-LEVEL COOPERATIVE STRATEGIES
IMPLEMENTING CORPORATE-LEVEL COOPERATIVE STRATEGIES
IMPLEMENTING INTERNATIONAL COOPERATIVE STRATEGIES
SUMMARY
REVIEW QUESTIONS
EXPERIENTIAL EXERCISES
NOTES
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STRATEGIC FOCUS
Increased Job Autonomy: A Structural Approach to Increased Performance and Job Satisfaction?
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Organizational Controls
Organizational controls guide the use of strategy, indicate how to compare actual results with expected results,
and suggest corrective actions to take when the difference between actual and expected results is unacceptable.
Properly designed organizational controlsstrategic and financialprovide insights into behaviors that
enhance firm performance.
Strategic controls are largely subjective criteria intended to verify that the firm is using strategies that are
appropriate given the conditions in the external environment and the companys competitive advantages. Thus,
strategic controls are concerned with examining the fit between what the firm might do (external environment)
and what it can do (its competitive advantages).
Effective strategic controls help the firm understand what it takes to be successful. Strategic controls demand
rich communication between managers using them and those implementing the firms strategy. These frequent
exchanges are both formal and informal in nature.
Strategic controls help evaluate how well a firm is focusing on what it takes to implement its strategies.
For a business-level strategy, the concern is to study primary and support activities (see Tables 3.6 and 3.7)
to verify that those that are critical to successful execution of the chosen strategy are being properly
emphasized and executed.
With related corporate-level strategies, strategic controls are used to verify that intended levels of sharing of
relevant strategic factorssuch as knowledge, markets, technologies, and so forthare taking place. When
evaluating related diversification strategies, executives must have a deep understanding of each units
business-level strategy. Extensive diversification often requires that financial controls be emphasized.
Teaching Note: The use of strategic controls, which are behavioral in nature, requires high
levels of cognitive diversity among the firms top-level managers. Cognitive diversity is a term
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structure was largely centralized, dictated by rules and procedures. To support an advice driven strategy,
Schwabs structure needed to be decentralized, with decision responsibility given to individual brokers.
Schwab attempted to match structure with the new strategy. If that match is found to be valuable, rare,
imperfectly imitable and nonsubstitutable, the firm will have a competitive advantage based on its
integration between strategy and structure.
FIGURE 11.1
Strategy and Structure Growth Pattern
As indicated by Figure 11.1, firm structure evolves from simple to functional to multidivisional.
This evolution is caused by sales growth and/or coordination and control problems that prevent the firm from
efficiently implementing its formulated strategy.
Thus, as implementation efforts falter due to growth or other problems, the firm may need to change its
organizational structure to achieve an appropriate fit between strategy and structure.
Simple Structure
A simple structure is an organizational form in which the owner-manager makes all major decisions directly
and monitors all activities, and the firms staff is merely an extension of the managers supervision authority.
The simple structure is characterized by:
little specialization of tasks
few rules
little formalization
unsophisticated information systems
direct involvement of owner-manager in all phases of day-to-day operations
frequent and informal communications between the owner-manager and employees
Teaching Note: In the U.K., some analysts believe that the simple organizational structure
may result in competitive advantages for some small firms relative to their larger
counterparts. These competitive advantages include a broad openness to innovation, greater
structural flexibility, and an ability to respond more rapidly to environmental changes.
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If they are successful, small firms grow larger; and as a result, the firm outgrows the simple structure.
There is a significant increase in the amount of competitively relevant information that requires analysis.
More extensive and complicated information-processing requirements place significant pressures on ownermanagers (often due to a lack of organizational skills or experience). At this evolutionary point, firms tend to
move from the simple structure to a functional organizational structure.
Functional Structure
The functional structure consists of a chief executive officer and limited corporate staff with functional line
managers in dominant functionse.g., production, accounting, marketing, R&D, engineering, human resources.
This structure allows for functional specialization, facilitating active knowledge sharing within each functional
area. Knowledge sharing usually supports career paths and professional development of functional specialists.
However, compared to the simple structure, there also are some potential problems. For example, differences in
functional specialization and orientation may impede communication and coordination.
Teaching Note: Functional specialists often may develop a myopic or narrow perspective,
losing sight of the firms strategic vision and mission. When this happens, the problem can
be overcome by implementing the multidivisional structure.
The functional structure supports implementation of business-level strategies and corporate-level strategies with
low levels of diversification (e.g., dominant business).
Multidivisional Structure
Because of limits to an individual chief executive officers ability to process complex strategic information,
problems related to isolation of functional area managers, and increasing diversification, the structure of the
firm must change again. In these instances, the multidivisional or M-form structure is most appropriate.
The multidivisional (M-form) structure is composed of operating divisions where each division represents a
separate business to which the top corporate officer delegates responsibility for day-to-day operations and
business unit strategy to division managers.
As initially designed, the M-form was thought to have three major benefits.
1. It allows corporate officers to accurately monitor business unit performance, simplifying control problems.
2. It facilitated comparisons between divisions, which improved the resource allocation process.
3. It stimulated managers of poorly performing divisions to look for ways of improving performance.
Teaching Note: An expanded discussion of M-form may be helpful at this point. Some facts
related to use of the multidivisional structure at DuPont and GM follow.
The multidivisional or M-form structure was developed in the 1920s, in response to
coordination and control problems in large firms such as DuPont and GM.
Functional departments often had difficulty dealing with distinct product lines and markets,
especially in coordinating conflicting priorities among the products.
Costs were not allocated to individual products, so it was not possible to assess an
individual products profit contribution.
Loss of control meant optimal allocation of firm resources between products was difficult.
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Teaching Note: Southwest Airlines has successfully implemented the cost leadership
strategy by encouraging the emergence of a low-cost culture (1) by using specialized work
tasks and (2) by striving continuously to reduce costs below those of competitors.
Using the Functional Structure to Implement the Differentiation Strategy
Firms offering products that are considered unique by customers usually are following a differentiation strategy.
A differentiation strategy requires
the firm to sell nonstandardized products to customers with unique needs
relatively complex and flexible reporting relationships
frequent use of cross-functional product development teams
a strong focus on marketing and product R&D rather than manufacturing and process R&D
continuous product innovation, requiring people be able to interpret and take action based on ambiguous,
incomplete, and uncertain information
a strong focus on the external environment to identify new opportunities
rapid responses to collected information suggesting a need for decentralization
creativity and the continuous pursuit of new sources of differentiation and new products requiring a lack of
specialization (i.e., workers have a relatively large number of tasks in their job descriptions)
low formalization, decentralization, and low specialization of work tasks allowing people to interact
frequently to further differentiate products while developing ideas for new products
Figure Note: Figure 11.3 summarizes the discussion of the relationships between the
differentiation strategy and the functional structure.
FIGURE 11.3
Functional Structure for Implementing a Differentiation Strategy
A first glance, Figure 11.3 appears to be very similar to Figure 11.2 (Functional Structure for Implementation of
a Cost Leadership Strategy). However, there are several subtle but important differences.
The centralized corporate staff (between the president and the individual functions) has been replaced by the
central staffs of R&D and marketing, which work closely together.
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Using the Functional Structure to Implement the Integrated Cost Leadership/Differentiation Strategy
As discussed in Chapter 4, some firms may attempt to implement simultaneously both the cost leadership and
differentiation strategies by providing value through
low cost relative to a differentiated firms products
differentiated features relative to features offered by cost leadership firms products
The integrated cost leadership/differentiation strategy is used frequently in the global economy, though it is
difficult to implement. This difficulty is due largely to the fact that different primary and support activities (see
Chapter 3) must be emphasized.
Low-cost strategies emphasize production and manufacturing process engineering and few product changes.
Differentiation strategies require an emphasis on marketing and new product R&D.
Teaching Note: Toyota Motor Corporation has become a world leader in the auto industry
primarily through its ability to implement cost leadership and differentiation at the same time.
The key to Toyotas success has been the differentiated design and manufacturing process
that the company has implemented through its integrated product design process.
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FIGURE 11.4
Three Variations of the Multidivisional Structure
The three variations of the multidivisional structure that will be discussed from the perspective of how each is
best suited to specific diversification strategies are the:
Cooperative form
Strategic Business Unit (SBU) form
Competitive form
Teaching Note: It is important to reiterate that the functional structure is not as well suited to
managing and controlling multiple businesses as is the multidivisional structure or M-form.
Using the Cooperative Form of the Multidivisional Structure to Implement the Related Constrained Strategy
The cooperative form structure uses horizontal integration to bring about interdivisional cooperation. The
divisions in the firm using the related-constrained diversification strategy commonly are formed around
products, markets, or both.
Figure Note: Figure 11.5 summarizes the structural characteristics of the Cooperative Mform that create and encourage cooperation.
FIGURE 11.5
Cooperative Form of the Multidivisional Structure for Implementing a Related-Constrained Strategy
The first variant of the M-form structurethe Cooperative M-formis characterized by an increased emphasis
on integration devices and horizontal human resource practices.
The large box at the top of Figure 11.5 illustrates what is referred to as the central, corporate, or headquarters
office. It includes the firms top-level executives and all staff specialty functions.
All divisions are controlled by the central office and integrated by one of the integrating mechanisms (such as
division managers meeting face-to-face, integrating teams, or task forces).
Integrating mechanisms are indicated by the dotted line connecting the divisions which create:
tight linkages between divisions
corporate office emphasizing centralized planning, human resources, and marketing to facilitate cooperation
centralized R&D to coordinate new product introductions and/or process engineering improvements
a subjective reward system emphasizing corporate and division performance
a cooperative, sharing culture
All of the related-constrained firms divisions share one or more corporate strengths. Production competencies,
marketing competencies, or channel dominance are examples of strengths that the firms divisions might share.
Production expertise is one of the strengths of Sonys divisions, but they have had difficulties in
coordinating across divisions to create joint products in online music.
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Figure Note: Figure 11.6 summarizes structural characteristics of the SBU multidivisional
structure and leads to a discussion of this structural forms potential pitfalls or disadvantages.
FIGURE 11.6
SBU Form of the Multidivisional Structure for Implementing a Related Linked Strategy
While the SBU M-form appears similar to the Cooperative M-form (that was presented as Figure 11.5), there
are several differences.
The SBU M-form includes an addition layer the strategic business unit or SBU between the corporate
headquarters and product divisions.
There may be integration and coordination between divisions in a specific SBU.
There is independence among and between SBUs.
Headquarters manages approval of strategic planning of SBUs for the president.
Individual SBUs may have budgets and staffs for within-SBU integrating mechanisms.
Corporate headquarters staff serve as consultants to SBUs and divisions on product strategy (rather than
having direct input).
Using the Competitive Form of the Multidivisional Structure to Implement the Unrelated Diversification
Strategy
Recalling the discussion in Chapter 6, firms following an unrelated diversification strategy can create value by:
efficient internal capital allocations
restructuring, buying, and selling businesses
Unrelated diversified firms should adopt the third variant of the multidivisional structure, the competitive form
of the multidivisional structure, where controls emphasize competition between separate (usually unrelated)
divisions for corporate capital allocations.
Figure Note: Figure 11.7 summarizes structural characteristics of the Competitive M-form.
FIGURE 11.7
Competitive Form of the Multidivisional Structure for Implementation of an Unrelated Strategy
The Competitive M-form differs from both the Cooperative and SBU M-forms (see Figures 11.5 and 11.6) by:
establishing a smaller headquarters office, generally containing three functions:
1. legal affairs, which increases in importance when a firm acquires or divests units
2. auditing, which monitors divisional performance to ensure performance data are accurately reported
3. finance, which manages the firms cash flow and allocates capital
allowing independent divisions so financial performance can be monitored separately for each
setting up divisions that retain strategic control, but give up cash flow control
allowing competition between divisions for capital allocations
The efficient internal capital market that is the foundation for use of the unrelated diversification strategy
requires organizational arrangements that emphasize divisional competition rather than cooperation, and three
benefits are expected from this internal competition:
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Figure Note: Characteristics of the worldwide product divisional structure are presented in
Figure 11.9. They illustrate the centralized nature of the structure.
FIGURE 11.9
Worldwide Product Divisional Structure for Implementing a Global Strategy
The worldwide product divisional structure is characterized by:
an emphasis on inter-division coordination devices to facilitate global economies of scale and scope
information flows that are coordinated by the shaded global headquarters office
corporate headquarters allocates financial resources in a cooperative way
organization represents a centralized federation
Multiple integrating mechanismswhich result in effective coordination through mutual adjustment via
personal interactioninclude,
encouraging direct, face-to-face contact between managers
assigning liaison roles between departments
forming temporary task forces or teams
Using the Combination Structure to Implement the Transnational Strategy
The last international strategy (the transnational strategy) combines multidomestic and global strategies by
seeking national or country-specific advantages by emphasizing adaptation to local differences
attempting simultaneously to achieve global economies of scale and scope
The combination structure is an organizational form with characteristics and structural mechanisms that result
in an emphasis on both geographic and product structures.
The transnational strategy is often implemented through two possible combination structures: a global matrix
structure or a hybrid global design.
The global matrix design brings together both local market and product expertise into teams who develop
and respond to the global marketplace worldwide.
In the hybrid structure some divisions are oriented towards products while others are oriented toward market
areas.
FIGURE 11.10
Using the Hybrid Form of the Combination Structure for Implementing a Transnational Strategy
In this design, some divisions are oriented toward products while others are oriented toward market areas.
Thus, in some products, where the geographic area is more important, the division managers are area-oriented.
In other divisions, where worldwide product coordination and efficiencies are more important, the division
manager is more product-oriented.
As alluded to previously, specific attributes of the transnational structure are difficult to identify because of the
conflicting requirements that firms organize to provide the firm simultaneously with the
flexibility required for adapting to local market preferences
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STRATEGIC FOCUS
Using the Worldwide Geographic Area Structure at Xerox Corporation
As an organization, Xerox Corporation, emphasizes product innovation to best serve customers needs and
process innovations to simultaneously improve quality and reduce its production costs. Allocating more
than 6 percent of total revenues to research and development (R&D), Xeroxs Innovation Group
collaborates with personnel across the firms business units to facilitate development of product and
process innovations.
Xerox has concentrated its efforts in three primary markets: (1) high-end production and commercial print
environment, (2) networked offices from small to large and (3) value-added services. Xerox is applying a
multidomestic strategy in all three markets in order to leverage off its service capabilities in selling
solutions to customers in different geographic regions. Even though the need for documentation is generic
worldwide, specific needs vary due to business culture and the sophistication of the local business
environment. Because of these idiosyncrasies, Xerox uses the worldwide geographic area structure to
support its multidomestic strategy. Supporting these units efforts to serve the unique needs of customers in
different regions are groups such as Innovation, Corporate Strategy/Alliances, and Human
Resources/Ethics. Xerox relies on the match between its international strategy and structure as a key driver
of profitable growth.
Xeroxs strategic approach to its global effort can best be described as hybrid. It is regionally
customized based on business cultures and sophistication levels and yet allows the economies
generated through support sameness.
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Figure Note: Figure 11.11 illustrates the structure of the strategic network.
FIGURE 11.11
A Strategic Network
The strategic center firm sits in the middle of the strategic network so that it can coordinate the activities of
network members firms.
Note: Four critical aspects of functions performed by the strategic center firmstrategic outsourcing,
capability development, technology management, and managing learning processesare discussed next.
As coordinator or manager of activities carried out by partners in the strategic network, the strategic center firm
and other network partnersshould note four critical aspects of the strategic center firms functions:
1. Strategic Outsourcing
2. Development of Competencies
3. Technology Management
4. Race to Learn (or Managing Learning Processes)
Strategic Outsourcing is one of the strategic center firms key functions. In addition to outsourcing more than
other members of the strategic network, the center firm also encourages member firms to go beyond contracting
to solve problems and to initiate competitive actions that the network can pursue.
The Competence-related role of the center firm is to build or develop the core competencies of other network
member firms and encourage them to share these with other network partners.
Technology aspects of the center firms role include managing the development and sharing of technology-based
ideas among network partners.
Emphasizing the Race to Learn implies that the strategic center firm must encourage positive rivalry among
partner firms that will strengthen each partners (as well as the networks) value chain. The effectiveness of the
center firm is related to how well it learns to manage learning processes among network partners.
IMPLEMENTING BUSINESS-LEVEL COOPERATIVE STRATEGIES
Recall from Chapter 9 that complementary assets at the business level can be vertical or horizontal. Vertical
complementary strategic alliances are more common than are horizontal alliances and generally are focused on
buyer-supplier relationships.
With Toyotas strategic network of vertical alliances in Japan, Toyota, as the strategic center firm:
encourages subcontractors to modernize their facilities
supplies them with any necessary technical and financial assistance
reduces transactions costs by entering into long-term contracts which allow supplying partners to increase
long-term productivity (as opposed to entering into a series of short-term contracts based on unit pricing)
provides engineers in upstream companies (suppliers) with better communication with contractees
allows suppliers and center firms to become more interdependent and less independent
is able to achieve a competitive advantage because of the imperfect imitability of the structure and the
proprietary actions that it uses to manage its strategic network
Horizontal complementary strategic alliances are much more difficult to manage than are vertical
complementary strategic alliances because, in a horizontal alliance, it is difficult to select a strategic center firm
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Organizational structure specifies the firms formal reporting relationships, procedures, controls, and authority
and decision-making processes. Influencing managerial work, structure essentially details the work to be done
and how that work is to be accomplished. Organizational controls guide the use of strategy, indicate how to
compare actual and expected results, and suggest actions to take to improve performance when it falls below
expectations. When properly matched with the strategy for which they were intended, structure and controls can
be a competitive advantage.
Strategic controls (largely subjective criteria) and financial controls (largely objective criteria) are the two types
of organizational controls used to successfully implement a firms chosen strategy. Both types of controls are
critical, although their degree of emphasis varies based on individual matches between strategy and structure.
Strategic controls are concerned with examining the fit between what the firm might do (as suggested by
opportunities in its external environment) and what it can do (as indicated by its competitive advantages).
Effective strategic controls help the firm understand what it takes to be successful. Strategic controls demand
rich communication between managers responsible for using them to judge the firms performance and those
with primary responsibility for implementing the firms strategies. These frequent exchanges are both formal
and informal in nature.
Strategic controls are also used to evaluate the degree to which the firm focuses on the requirements to
implement its strategies. For a business-level strategy, for example, the strategic controls are used to study
primary and support activities to verify that those critical to successful execution of the business-level strategy
are being properly emphasized and executed. With related corporate-level strategies, strategic controls are used
to verify the sharing of appropriate strategic factors such as knowledge, markets, and technologies across
businesses. To effectively use strategic controls when evaluating related diversification strategies, executives
must have a deep understanding of the involved businesses.
Partly because strategic controls are difficult to use with extensive diversification, financial controls are
emphasized to evaluate the performance of the firm following the unrelated diversification strategy. The
unrelated diversification strategys focus on financial outcomes requires the use of standardized financial
controls to compare performances between units and managers. When using financial controls, firms evaluate
their current performance against previous outcomes as well as their performance compared to competitors and
industry averages.
2.
What does it mean to say that strategy and structure have a reciprocal relationship? (pp. 311.312)
Strategic competitiveness can be attained only when the firms selected structure is congruent with its
formulated strategy. As such, a strategys potential to create value is reached only when the firm configures
itself in ways that allow the strategy to be implemented effectively. Thus, as firms evolve and change their
strategies, new structural arrangements are required. Additionally, existing structures influence the future
selection of strategies. Therefore, the two key strategic actions of strategy formulation and strategy
implementation continuously interact to influence managerial choices about strategy and structure.
Regardless of the strength of the reciprocal relationships between strategy and structure, those choosing the
firms strategy and structure should be committed to matching each strategy with a structure that provides the
stability needed to use current competitive advantages as well as the flexibility required to develop future
advantages. This means, for example, that when changing strategies, the firm should simultaneously consider
the structure that will be needed to support use of the new strategy.
Research suggests that most firms experience a certain pattern of relationships between strategy and structure.
Chandler found that firms tended to grow in somewhat predictable patternsi.e., in the following order: (1)
volume, (2) geography, (3) integration [vertical, horizontal], and (4) product diversification (see Figure 11.1).
Chandler interpreted his findings to indicate that the firms growth patterns determine its structural form.
As shown in Figure 11.1, sales growth creates coordination and control problems that the existing
organizational structure cant efficiently handle. Organizational growth creates the opportunity for the firm to
change its strategy to try to become even more successful. However, the existing structures formal reporting
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A strategic network is a group of firms that has been formed to create value by participating in multiple
cooperative arrangements, such as strategic alliances. An effective strategic network facilitates the discovery of
opportunities beyond those identified by individual network participants. A strategic network can be a source of
competitive advantage for its members when its operations create value that is difficult for competitors to
duplicate and that network members cant create by themselves. Strategic networks are used to implement
business-level, corporate-level, and international cooperative strategies.
Commonly, a strategic network is a loose federation of partners who participate in the networks operations on a
flexible basis. At the core or center of the strategic network, the strategic center firm is the one around which
the networks cooperative relationships revolve.
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EXPERIENTIAL EXERCISES
Exercise 1: The Merits of ROWE (Results-Only Work Environment)
For this exercise, you and your classmates will debate the merits of Best Buys ROWE initiative. To
complete this exercise, your instructor will divide the class into five groups of roughly equal size. The
groups will have these responsibilities:
Team 1 will present arguments why ROWE is desirable and should be implemented in other organizations.
Team 2 will present a counterargument why ROWE is undesirable, and hence should not be implemented
in other organizations.
Team 3 will cross-examine Team 1.
Team 4 will cross-examine Team 2.
Team 5 will decide which of the two arguments is most convincing.
Exercise 2: Burger Buddy and Ma Maison
Assume that it is a few months before your college graduation. You and some classmates have decided to
become entrepreneurs. The group has agreed on the restaurant industry, but your discussions thus far have
gone back and forth between two different dining concepts: Burger Buddy and Ma Maison. Details about
these two concepts follow.
Burger Buddy would operate near campus in order to serve the student market. Burger Buddy will be a
1950s-themed hamburger joint, emphasizing large portions and affordable prices.
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1.
2.
How would the organizational structure of the two restaurant concepts differ?
3.
How would the nature of work vary between the two restaurants?
4.
If the business concept is successful, how might you expect the organizational structure and nature
of work at each restaurant to change in the next five to seven years?
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How well did the debate tap the notion that a given structure should be matched to a given
strategy?
2.
Since strategy and structure are linked, what do you think of Best Buys initiative to sell the
ROWE model to other firms?
3.
What types of firms (and industries) might ROWE be the most appropriate for? The least?
4.
Who in class believes they would personally be more effective in a ROWE setting? Less
effective? Why?
5.
Additionally, the instructor may wish to visit the ROWE website, at: http://www.culturerx.com/.
Exercise 2: Burger Buddy and Ma Maison
The purpose of this exercise is to use a familiar industry restaurants to illustrate how organizational
structure and job design differ for firms which are pursuing different strategies. Student teams are asked to
consider two different restaurant concepts.
Burger Buddy is the first concept. The idea for this restaurant is to operate near campus, serving the
student market. Burger Buddy will be a 1950s-themed hamburger joint, emphasizing large portions and
affordable prices.
Ma Maison is the alternate concept. One of your partners has attended cooking school, and has proposed
the idea of a small, upscale French restaurant. The menu would have no set items, but would vary on a
daily basis instead. Ma Maison will position itself as a boutique restaurant providing superb customer
service and unique offerings.
Working in small groups, students are asked to answer the following questions:
5.
6.
How would the organizational structure of the two restaurant concepts differ?
7.
How would the nature of work vary between the two restaurants?
8.
If the business concept is successful, how might you expect items 2 and 3 to change in the next 5
to 7 years?
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Why do firms experience evolutionary cycles in which there is a fit between strategy and structure,
punctuated with periods in which strategy and structure are reshaped? Have the students provide examples
of global firms that have experienced this pattern.
Ask the students to select an organization (for example, an employer, a social club, or a nonprofit agency)
of which they currently are members. What is this organizations structure? Is the organization using the
structure that is appropriate, given its strategy? If not, what structure should it use?
Have the students use the Internet to find a firm that uses the multidivisional structure. Which form of the
multidivisional structure is the firm using? What is there about the firm that makes it appropriate for it to
use the M-form?
Through reading of the business press, students should identify a firm implementing the global strategy and
one implementing the multidomestic strategy. What organizational structure is being used in each firm? Are
these structures allowing each firms strategy to be implemented successfully? Why or why not?
Students should define strategic and financial controls for a businessperson in the local community. Ask the
businessperson to describe the use of each type of control in his or her business. In which type of control
does the businessperson have the greatest confidence? Why?
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When a firm changes from the functional structure to the multidivisional structure, what responsibilities
does it have to current employees?
Are there ethical issues associated with the use of strategic controls? With the use of financial controls? If
so, what are they?
Are there ethical issues involved in implementing the cooperative and competitive M-form structures? If
so, what are they? As a top-level manager, how would you deal with them?
Global and multidomestic strategies call for different competitive approaches. What ethical concerns might
surface when firms attempt to market standardized products globally? When they develop different
products or approaches for each local market?
What ethical issues are associated with the view that the redesign of organizations throughout a society
indeed, globallyentails losses as well as gains?
Internet Exercise
Many retail industries, such as music sales, are ideal for Web-based organizational and selling structures. Visit
the sites of some of the most popular venues: CD Universe (http://www.cduniverse.com), CD Quest
(http://www.cdquest.com), and Amazon.com (http://www.amazon.com). Can you define the type of
organizational structure each company uses? What attempts are being made by each to diversify and expand
into other businesses?
*e-project: Suppose you want to launch your own CD sales company on the Internet that will have an immense
global reach to the large Spanish-speaking market around the world. Suppose further that you have hired a
Web design firm to construct a site for you. Based on your research of top sites, how will you describe your
Web design and business-level strategy for this project? What organizational structure is appropriate to
implement the business-level strategy selected?
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