Chapter 13: Matching Structure and Control to Strategy

1. 13-1 Chapter 13: Matching Structure and Control to Strategy Text by Charles W. L. Hill Gareth R. Jones Multimedia Slides by Milton M. Pressley Univ. of New Orleans

2. 13-2 Preview • Structure and Control at the Functional Level • Structure and Control at the Business Level • Designing a Global Structure • Structure and Control at the Corporate Level • Special Issues in Strategy-Structure Choice

3. 13-3 Structure and Control at the Functional Level • Manufacturing • Research and Development • Sales

4. 13-4 STRATEGY Cost Differentia- Focus Leadership tion Functional Appropriate Structure Center on Integrating Manufacturing Mechanisms Great Use (e.g., Output cost control Control Some Use (e.g., Bureaucratic budgets, Control standardization) Little Use (e.g., Organiza- quality control tional circles) Culture f Structure and Control at the Business Level Table 13.1: Generic Strategy, Structure, and Control

5. 13-5 STRATEGY Cost Differentia- Focus Leadership tion Functional Product-team Appropriate or Matrix Structure Center on Center on R&D Integrating Manufacturing or Marketing Mechanisms Great Use (e.g., Some Use Output cost control (e.g., quality Control goals) Some Use (e.g., Great Use Bureaucratic budgets, (e.g., rules, Control standardization) budgets) Little Use (e.g., Great Use Organiza- quality control (e.g., norms tional circles) and values) Culture f Structure and Control at the Business Level Table 13.1: Generic Strategy, Structure, and Control

6. 13-6 STRATEGY Cost Differentia- Focus Leadership tion Functional Product-team Functional Appropriate or Matrix Structure Center on Center on R&D Center on Integrating Manufacturing or Marketing Product or Mechanisms Customer Great Use (e.g., Some Use Some Use Output cost control (e.g., quality (e.g., cost and Control goals) quality) Some Use (e.g., Great Use Some Use Bureaucratic budgets, (e.g., rules, (e.g., budgets) Control standardization) budgets) Little Use (e.g., Great Use Great Use Organiza- quality control (e.g., norms (e.g., norms tional circles) and values) and values) Culture f Structure and Control at the Business Level Table 13.1: Generic Strategy, Structure, and Control

7. 13-7 Designing a Global Structure • Multidomestic Strategy • International Strategy • Global Strategy • Transnational Strategy Recall from Chapter 8:

8. 13-8 Multi- Trans- domestic International Global national Low High Need for Coordination Bureaucratic Costs Low High Centrali- Decentral- Core Com- Central- Simultan- zation of ized to petencies ized at eously Authority National Centralized. Optimal Central- Unit Others De- Global ized and centralized Location Decentral- to National ized Units Horizontal Global International Global Global Differentia- Area Division Pro-duct Matrix tion Structure Structure Group Structure Structure Need for Low Medium High Very High Complex Integrating Mechanisms Organiza- Not Quite Important Very tional Important Important Important Culture Designing a Global Structure(Continued) Table 13.2: Global Strategy-Structure Relationships

9. 13-9 Figure 13.1: Global Area Structure Corporate Headquarters North American Region South American Region Pacific Region European Region

10. 13-10 Multi- Trans- domestic International Global national Low High Need for Coordination Bureaucratic Costs Low High Centrali- Decentral- zation of ized to Authority National Unit Horizontal Differentia- Area tion Structure Need for Low Complex Integrating Mechanisms Organiza- Not tional Important Culture Designing a Global Structure(Continued) Table 13.2: Global Strategy-Structure Relationships Core Com- Central- Simultan- petencies ized at eously Centralized. Optimal Central- Others De- Global ized and centralized Location Decentral- to National ized Units Global International Global Global Division Pro-duct Matrix Structure Group Structure Structure Medium High Very High Quite Important Very Important Important

11. 13-11 Corporate Headquarters Product Group 2 Product Group 3 Product Group 1 United States United Kingdom Japan France Figure 13.2: International Division Structure

12. 13-12 Multi- Trans- domestic International Global national Low High Need for Coordination Bureaucratic Costs Low High Centrali- Decentral- Core Com- Central- Simultan- zation of ized to petencies ized at eously Authority National Centralized. Optimal Central- Unit Others De- Global ized and centralized Location Decentral- to National ized Units Horizontal Global International Global Global Differentia- Area Division Pro-duct Matrix tion Structure Structure Group Structure Structure Need for Low Medium High Very High Complex Integrating Mechanisms Organiza- Not Quite Important Very tional Important Important Important Culture Designing a Global Structure(Continued) Table 13.2: Global Strategy-Structure Relationships

13. 13-13 Corporate Headquarters Division 1 Division 2 Division 3 International Division United States United Kingdom Japan France Figure 13.3: Global Product Group Structure

14. 13-14 Multi- Trans- domestic International Global national Low High Need for Coordination Bureaucratic Costs Low High Centrali- Decentral- Core Com- Central- Simultan- zation of ized to petencies ized at eously Authority National Centralized. Optimal Central- Unit Others De- Global ized and centralized Location Decentral- to National ized Units Horizontal Global International Global Global Differentia- Area Division Product Matrix tion Structure Structure Group Structure Structure Need for Low Medium High Very High Complex Integrating Mechanisms Organiza- Not Quite Important Very tional Important Important Important Culture Designing a Global Structure(Continued) Table 13.2: Global Strategy-Structure Relationships

15. 13-15 Pacific SBU N. American SBU S. American SBU Product Group 1 Product Group 2 Product Group 3 Figure 13.4: Global Matrix Structure Individual Operating Companies

16. 13-16 Multi- Trans- domestic International Global national Low High Need for Coordination Bureaucratic Costs Low High Centrali- Decentral- Core Com- Central- Simultan- zation of ized to petencies ized at eously Authority National Centralized. Optimal Central- Unit Others De- Global ized and centralized Location Decentral- to National ized Units Horizontal Global International Global Global Differentia- Area Division Product Matrix tion Structure Structure Group Structure Structure Need for Low Medium High Very High Complex Integrating Mechanisms Organiza- Not Quite Important Very tional Important Important Important Culture Designing a Global Structure(Continued) Table 13.2: Global Strategy-Structure Relationships

17. 13-17 Type of Control Corporate Appropriate Need for Financial Behavior Organ- Strategy Structure Integration izational Culture Unrelated Multi- Low (No Great Use Some Little Diversifi- divisional Exchanges (e.g., ROI) Use (e.g., Use cation Between Budgets) Divisions) Vertical Multi- Medium Great Use Great Some Use Integra- divisional (Scheduling (e.g., ROI, Use (e.g., (e.g., tion Resource Transfer Standard- Shared Transfers) Pricing) ization, Norms and Budgets) Values Related Multi- High Little Use Great use Great use Diversifi- divisional (Achieve (e.g., (e.g., cation Synergies Rules, Norms, Between Budgets) Values, Divisions by Common Integrating Language) Roles) Structure and Control at the Corporate Level Table 13.3: Corporate Strategy and Structure and Control

18. 13-18 Type of Control Corporate Appropriate Need for Financial Behavior Organ- Strategy Structure Integration izational Culture Unrelated Multi- Low (No Great Use Some Little Diversifi- divisional Exchanges (e.g., ROI) Use (e.g., Use cation Between Budgets) Divisions) Vertical Multi- Medium Great Use Great Some Use Integra- divisional (Scheduling (e.g., ROI, Use (e.g., (e.g., tion Resource Transfer Standard- Shared Transfers) Pricing) ization, Norms and Budgets) Values) Related Multi- High Little Use Great use Great use Diversifi- divisional (Achieve (e.g., (e.g., cation Synergies Rules, Norms, Between Budgets) Values, Divisions by Common Integrating Language) Roles) Structure and Control at the Corporate Level Table 13.3: Corporate Strategy and Structure and Control

19. 13-19 Type of Control Corporate Appropriate Need for Financial Behavior Organ- Strategy Structure Integration izational Culture Unrelated Multi- Low (No Great Use Some Little Diversifi- divisional Exchanges (e.g., ROI) Use (e.g., Use cation Between Budgets) Divisions) Vertical Multi- Medium Great Use Great Some Use Integra- divisional (Scheduling (e.g., ROI, Use (e.g., (e.g., tion Resource Transfer Standard- Shared Transfers) Pricing) ization, Norms and Budgets) Values) Related Multi- High Little Use Great use Great use Diversifi- divisional (Achieve (e.g., (e.g., cation Synergies Rules, Norms, Between Budgets) Values, Divisions by Common Integrating Language) Roles) Structure and Control at the Corporate Level Table 13.3: Corporate Strategy and Structure and Control

20. 13-20 Special Issues in Strategy-Structure Choice • Mergers, Acquisitions, and Structure • Internal New Ventures and Structure • Network Structure and the Virtual Organization

21. STRUCTURE AND CONTROL AT THE FUNCTIONAL LEVEL STRUCTURE AND CONTROL AT THE BUSINESS LEVEL DESIGNING A GLOBAL STRUCTURE STRUCTURE AND CONTROL AT THE CORPORATE LEVEL SPECIAL ISSUES IN STRATEGY-STRUCTURE CHOICE 13-21 Chapter Summary