Implementing Strategy in

Companies That Compete in a

Single Industry

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Overview

 Strategy implementation
 How a company should create, use, and
combine organizational structure, control
systems, and culture to pursue strategies
that lead to a competitive advantage and
superior performance

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Implementing Strategy Through
Organizational Structure, Control, and
Culture

 Organizational structure
 Assigns employees to specific value creation
tasks and roles and specifies how those are
linked to increase efficiency, quality,
innovation, and responsiveness to customers
 To coordinate and integrate the efforts of all
employees

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Implementing Strategy Through
Organizational Structure, Control, and
Culture (cont’d)
 Control system
 A set of incentives to motivate employees to
increase efficiency, quality, innovation, and
responsiveness to customers
 Provides feedback on performance so corrective
action can be taken
 Organizational culture
 The collection of values, norms, beliefs, and
attitudes shared within an organizations and that
control interactions within and outside the
organization
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Implementing Strategy

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Building Blocks of Organizational
Structure

 Grouping tasks, functions, and divisions

 Organizational structure follows the range
and variety of tasks that an organization
pursues
 Companies group people and tasks into
functions and then functions into divisions
 Bureaucratic costs

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Building Blocks of Organizational
Structure (cont’d)

 Allocating authority and responsibility

 Hierarchy of authority (chain of command)
 Span of control (number of subordinates)

 Tall and flat organizations

 Drawbacks of taller organizations

 Less flexibility and slower response time
 Communication problems

 Distortion of commands

 Expense

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Tall and Flat Structures

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Allocating Authority and
Responsibility (cont’d)
 The minimum chain of command
 To combat an organization that is too tall
 Hand responsibility up and empower those below

 Centralization or decentralization?
 Delegating responsibility reduces information overload and
enables managers to focus on strategy
 Empowering lower-level managers increases motivation and

accountability
 Empowering employees requires fewer managers

 Centralized decisions allow easier coordination of activities

 Centralization means that decisions fit broad organizational

objectives

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Building Blocks of Organizational
Structure (cont’d)

 Integration and integrating mechanisms

 Direct contact among managers across
functions or divisions
 Liaison roles
 Givesone manager in each function or division the
responsibility for coordinating with the other
 Teams

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Strategic Control Systems

 Four basic building blocks

 Control and efficiency
 Control and quality

 Control and innovation

 Control and responsiveness to customers

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Steps in Designing an Effective
Control System

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Levels of Organizational Control

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Types of Strategic Control System
 Personal control
 Face-to-face interaction
 Output control
 Performance goals for each division, department, and
employee
 Behavior control
 Rules and procedures to direction actions or
behaviors of divisions, functions, and individuals
 Operating budget
 Standardization

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 Using Information Technology
 Behavior control
 ITstandardizes behavior through the use of a
consistent, cross-functional software platform
 Output control
 ITallows all employees or functions to use the
same software platform to provide information
on their activities
 Integrating mechanism
 IT provides people at all levels and across all
functions with more information
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Strategic Reward Systems

 Based on strategy managers must decide

which behaviors to reward
 A control system measures those
behaviors and links the reward structure to
them

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Organizational Culture

 Culture and strategic leadership

 Traits of strong and adaptive corporate
cultures
 Bias for action
 Nature of the organization’s mission (sticking
with what the organization does best)
 How to operate the organization (motivating
employees to do their best)

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Building Distinctive Competencies at the
Functional Level
 Grouping by function: functional structure
 Grouping people on the basis of their
expertise or because they use the same
resources
 Advantages
 People can learn from one another
 People can monitor each other

 Managers have greater control

 With different functional hierarchies, the company

can avoid becoming too tall

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Functional Structure

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 The Functional Level
 The role of strategic control
 Managers and employees can monitor and improve
operating procedures
 Easier to apply output control

 Developing culture
 Managers must implement functional strategy and
develop incentive systems to allow each function to
succeed
 Manufacturing: TQM

 R&D: innovation to bring products quickly to market

 Sales: output and behavior controls

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Functional Structure and Bureaucratic
Costs

 Communications problems
 Measurement problems
 Customer problems
 Location problems
 Strategic problems
 The outsourcing option

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 Implementing Strategy in a Single
Industry
 Implementation begins at the functional
level, however, managers must coordinate
and integrate across functions and
business units
 Effective strategy implementation at the
business level
 Increasesdifferentiation, adds value for
customers, allows for a premium price
 Reduces bureaucratic costs

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How Organizational Design Increases
Profitability

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Implementing Strategy in a Single Industry
(cont’d)

 Implementing a cost-leadership approach

 Reducing costs across all functions
 Continuously monitoring for effective operation

 Implementing a differentiation approach

 Design structure around the source of distinctive
competency, differentiated product, and customer
groups

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Implementing Strategy in a Single Industry
(cont’d)

 Implementing a broad product line—

product structure
 Group the overall product line into product
groups
 Centralize support value chain functions to
lower costs
 Divide support functions into product-oriented
teams of functional specialists who focus on
the needs of one specific product group

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Kodak’s Product Structure

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Implementing Strategy in a Single Industry
(cont’d)

 Increasing
responsiveness to customer
groups—market structure
 Group people and functions by customer or
market segments
 Different managers are responsible for
developing products for each group of
customers

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Market Structure

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Implementing Strategy in a Single
Industry (cont’d)

 Expanding nationally—geographic
structure
 To be responsive to needs of regional
customers
 To reduce transportation costs

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Geographic Structure

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Implementing Strategy in a Single
Industry (cont’d)
 Competing in fast-changing, high-tech
environments—product-team and matrix
structures
 Matrix structure
 Value chain activities are grouped by function and
by product or project
 Flat and decentralized

 Promotes innovation and speed

 Norms and values based on innovation and

product excellence

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Matrix Structure

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Implementing Strategy in a Single Industry
(cont’d)

Competing in fast-changing, high-

tech environments—product-team
and matrix structures (cont’d)
Product-team structure
Tasks divided along product or project lines
Functional specialists are part of

permanent cross-functional teams

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Product-Team Structure

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Implementing Strategy in a Single
Industry (cont’d)

 Focusing on a narrow product line

 Tends to have higher production costs
because output is lower, reducing opportunity
for scale economies
 Has to develop some form of distinctive
competency
 Functional structure is appropriate

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 Restructuring and Reengineering

 Restructuring involves
 Streamlining hierarchy of authority and reducing
number of levels
 Downsizing the workforce to reduce costs

 Reasons
 Change in the business environment
 Excess capacity

 Organization grew too tall and inflexible; bureaucratic

costs
 To improve competitive advantage and stay on top

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Restructuring and Reengineering
(cont’d)

 Reengineering
 Fundamental rethinking and radical redesign
of business processes to achieve dramatic
improvements
 Focuses not on functions, but on processes
(which cut across functions)

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