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Chapter 13: Matching Structure and Control to Strategy

Text by Charles W. L. Hill Gareth R. Jones

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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

Structure and Control at the Functional Level

Manufacturing Research and Development Sales

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Structure and Control at the Business Level

Table 13.1: Generic Strategy, Structure, and Control
STRATEGY Cost Leadership Appropriate Structure Integrating Mechanisms Output Control Bureaucratic Control Organizational Culture
f

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Differentiation

Focus

Functional
Center on Manufacturing Great Use (e.g., cost control Some Use (e.g., budgets, standardization) Little Use (e.g., quality control circles)

Structure and Control at the Business Level

Table 13.1: Generic Strategy, Structure, and Control
Cost Leadership Appropriate Structure Integrating Mechanisms Output Control Bureaucratic Control
Functional Center on Manufacturing Great Use (e.g., cost control Some Use (e.g., budgets, standardization) Little Use (e.g., quality control circles)

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STRATEGY Differentiation
Product-team or Matrix Center on R&D or Marketing Some Use (e.g., quality goals) Great Use (e.g., rules, budgets) Great Use (e.g., norms and values)

Focus

Organizational Culture
f

Structure and Control at the Business Level

Table 13.1: Generic Strategy, Structure, and Control
STRATEGY
Cost Leadership Appropriate Structure Integrating Mechanisms Output Control Bureaucratic Control Organizational Culture
f

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Differentiation
Product-team or Matrix

Focus
Functional

Functional

Center on Manufacturing
Great Use (e.g., cost control Some Use (e.g., budgets, standardization) Little Use (e.g., quality control circles)

Center on R&D or Marketing

Some Use (e.g., quality goals) Great Use (e.g., rules, budgets) Great Use (e.g., norms and values)

Center on Product or Customer Some Use (e.g., cost and quality) Some Use (e.g., budgets)
Great Use (e.g., norms and values)

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Designing a Global Structure

Recall from Chapter 8:
Multidomestic Strategy International Strategy Global Strategy Transnational Strategy

Designing a Global Structure

Multidomestic Low Low Decentralized to National Unit International Global

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(Continued)
Transnational High High Simultaneously Centralized and Decentralized Global Matrix Structure Very High

Table 13.2: Global Strategy-Structure Relationships

Need for Coordination Bureaucratic Costs
Core Competencies Centralized. Others Decentralized to National Units International Division Structure Medium Centralized at Optimal Global Location Global Pro-duct Group Structure High

Centralization of Authority

Horizontal Differentiation Need for Complex Integrating Mechanisms

Global Area Structure Low

Organizational Culture

Not Important

Quite Important

Important

Very Important

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Figure 13.1: Global Area Structure

Corporate Headquarters

North American Region

South American Region

European Region

Pacific Region

Designing a Global Structure

Multidomestic Low Low Decentralized to National Unit International Global

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(Continued)
Transnational High High Simultaneously Centralized and Decentralized Global Matrix Structure Very High

Table 13.2: Global Strategy-Structure Relationships

Need for Coordination Bureaucratic Costs
Core Competencies Centralized. Others Decentralized to National Units International Division Structure Medium Centralized at Optimal Global Location Global Pro-duct Group Structure High

Centralization of Authority

Horizontal Differentiation Need for Complex Integrating Mechanisms

Global Area Structure Low

Organizational Culture

Not Important

Quite Important

Important

Very Important

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Figure 13.2: International Division Structure

Corporate Headquarters

Product Group 1

Product Group 2

Product Group 3

United States

United Kingdom

Japan

France

Designing a Global Structure

Multidomestic Low Low Decentralized to National Unit International Global

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(Continued)
Transnational High High Simultaneously Centralized and Decentralized Global Matrix Structure Very High

Table 13.2: Global Strategy-Structure Relationships

Need for Coordination Bureaucratic Costs
Core Competencies Centralized. Others Decentralized to National Units International Division Structure Medium Centralized at Optimal Global Location Global Pro-duct Group Structure High

Centralization of Authority

Horizontal Differentiation Need for Complex Integrating Mechanisms

Global Area Structure Low

Organizational Culture

Not Important

Quite Important

Important

Very Important

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Figure 13.3: Global Product Group Structure

Corporate Headquarters

Division 1

Division 2

Division 3

International Division

United States

United Kingdom

Japan

France

Designing a Global Structure

Multidomestic Low Low Decentralized to National Unit International Global

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(Continued)
Transnational High High Simultaneously Centralized and Decentralized Global Matrix Structure Very High

Table 13.2: Global Strategy-Structure Relationships

Need for Coordination Bureaucratic Costs
Core Competencies Centralized. Others Decentralized to National Units International Division Structure Medium Centralized at Optimal Global Location Global Product Group Structure High

Centralization of Authority

Horizontal Differentiation Need for Complex Integrating Mechanisms

Global Area Structure Low

Organizational Culture

Not Important

Quite Important

Important

Very Important

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Figure 13.4: Global Matrix Structure

N. American SBU
Product Group 1 Product Group 2 Product Group 3 Individual Operating Companies S. American SBU Pacific SBU

Designing a Global Structure

Multidomestic Low Low Decentralized to National Unit International Global

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(Continued)
Transnational High High Simultaneously Centralized and Decentralized Global Matrix Structure Very High

Table 13.2: Global Strategy-Structure Relationships

Need for Coordination Bureaucratic Costs
Core Competencies Centralized. Others Decentralized to National Units International Division Structure Medium Centralized at Optimal Global Location Global Product Group Structure High

Centralization of Authority

Horizontal Differentiation Need for Complex Integrating Mechanisms

Global Area Structure Low

Organizational Culture

Not Important

Quite Important

Important

Very Important

Structure and Control at the Corporate Level

Table 13.3: Corporate Strategy and Structure and Control
Type of Control Corporate Strategy Unrelated Diversification Vertical Integration Related Diversification Appropriate Structure Multidivisional Multidivisional Need for Integration Low (No Exchanges Between Divisions) Medium (Scheduling Resource Transfers) High (Achieve Synergies Between Divisions by Integrating Roles) Financial Great Use (e.g., ROI) Great Use (e.g., ROI, Transfer Pricing) Little Use Behavior Some Use (e.g., Budgets) Great Use (e.g., Standardization, Budgets) Great use (e.g., Rules, Budgets) Organizational Culture Little Use Some Use (e.g., Shared Norms and Values Great use (e.g., Norms, Values, Common Language)

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Multidivisional

Structure and Control at the Corporate Level

Table 13.3: Corporate Strategy and Structure and Control
Type of Control Corporate Strategy Unrelated Diversification Vertical Integration Related Diversification Appropriate Structure Multidivisional Multidivisional Need for Integration Low (No Exchanges Between Divisions) Medium (Scheduling Resource Transfers) High (Achieve Synergies Between Divisions by Integrating Roles) Financial Great Use (e.g., ROI) Great Use (e.g., ROI, Transfer Pricing) Little Use Behavior Some Use (e.g., Budgets) Great Use (e.g., Standardization, Budgets) Great use (e.g., Rules, Budgets) Organizational Culture Little Use Some Use (e.g., Shared Norms and Values) Great use (e.g., Norms, Values, Common Language)

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Multidivisional

Structure and Control at the Corporate Level

Table 13.3: Corporate Strategy and Structure and Control
Type of Control Corporate Strategy Unrelated Diversification Vertical Integration Related Diversification Appropriate Structure Multidivisional Multidivisional Need for Integration Low (No Exchanges Between Divisions) Medium (Scheduling Resource Transfers) High (Achieve Synergies Between Divisions by Integrating Roles) Financial Great Use (e.g., ROI) Great Use (e.g., ROI, Transfer Pricing) Little Use Behavior Some Use (e.g., Budgets) Great Use (e.g., Standardization, Budgets) Great use (e.g., Rules, Budgets) Organizational Culture Little Use Some Use (e.g., Shared Norms and Values) Great use (e.g., Norms, Values, Common Language)

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Multidivisional

Special Issues in Strategy-Structure Choice

Mergers, Acquisitions, and Structure Internal New Ventures and Structure Network Structure and the Virtual Organization

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