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TRANSCRIPT
Organization Dilemmas
Table of Contents
1.0 INTRODUCTION.................................................................................................................................2
2.0 STRATEGY AND ORGANIZATION STRUCTURE........................................................................................3
3.0 STRUCTURE FOLLOWS STRATEGY...............................................................................................4
3.1 Alfred Chandler.................................................................................................................................4
3.2 Peter F. Drucker.................................................................................................................................5
3.3 Henry Mintzberg...............................................................................................................................6
3.4 Igor Ansoff............................................................................................................................................7
3.5 Examples of company which followed the views of authors discussed above are:............................7
4.0 Strategy follows Structure.....................................................................................................................8
5.0 Types of Strategies and Structures.........................................................................................................9
1. Functional Level:.............................................................................................................................9
2. Business Level.................................................................................................................................9
3. Corporate Level Strategy.................................................................................................................9
4. Global Strategy..............................................................................................................................10
6.0 Conclusion...........................................................................................................................................13
7.0 References...........................................................................................................................................14
8.0 APPENDIX.........................................................................................................................................15
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1.0 INTRODUCTION
Organization is a group of people working together for achieving a common objective which is
already defined by the organization. To run organizations properly without any haphazardness
and wastage of resources a proper structure and hierarchy is to be properly defined in an
organization. Organizational structure is the way in which the different groups of people,
working in the organization, are constructed the objective of creating these groups are created to
ensure proper coordination, less wastage of resources and quick achievement of objectives.
These structures than take different forms like bureaucratic, functional structure, matrix
structure, and divisional structures etc each structure has its own advantages. The shape adopted
by a structure depends upon factors like the size of the organization, variety of operations being
performed by the organization, number of branches and their location, education level of
manpower, available resources. While working in an organization one of the most imperative
things is the role of the leader. To strengthen the role of the leader hierarchies are made.
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2.0 STRATEGY AND ORGANIZATION STRUCTUREStructure follows Strategy simply means due to certain motives an organization is born, it has its
own missions and visions, to full fill objectives of the organization an strategy needs to be
developed, to support strategy a structure needs to be defined which will suit the strategy being
implied. Every strategy requires an organization to implement it. This is one of those hard
essential facts of business life from which there is no escape. A strategy on its own is no more
than a statement or plan of action. How successful that action is and what the outcome will be
depends on whether the organization has the structure, skills and capabilities to implement the
plan. The best, most carefully researched and meticulously planned strategy the world has ever
seen, will undoubtedly fail if the organization charged with carrying out is not competent to do
so. For the Companies to have a solid structure to support strategy is imperative.
Blue ocean strategy is a great example, where structure is shaped by strategy; here the strategy is
focused on creating value innovation. It serves to mass market and breaks the barrier of value-
cost trade by providing high value product at low cost. Companies which fall under such strategy
are Apple with i-pod, Ford with its Model-T, Nintendo and Southwest Airlines each offer
something unique off great value to its customer. (Deepak Agarwal, 2010)
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3.0 STRUCTURE FOLLOWS STRATEGY
3.1 Alfred Chandler
http://www.nndb.com/people/747/000031654/
According to Chandler:
Strategy is “the determination of the long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for carrying out these
goals.”
The historian, Alfred Chandler, substantiated his 'Structure follows Strategy' thesis based on four
case studies of American conglomerates that dominated their industry from the 1920's onward.
Chandler described how the chemical companies Du Pont, the automobile manufacturer General
Motors, the energy company Standard Oil of New Jersey and the retailer Sears Roebuck
developed over time by identifying four sequential stages: (Proven Models, 2010)
1. acquisition of resources such as employees and raw materials and the buildup of marketing and
distribution channels;
2. establishment of functional structures to increase efficiency;
3. adoption of growth and diversification strategy: diversification into new markets and products to
overcome limits of home market;
4. The creation of the then revolutionary diversionalised form to manage large conglomerates.
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3.2 Peter F. Drucker
http://800ceoread.com/book/blog/9780060833459-The_Effective_Executive
According to Peter Drucker, the procedure of setting objectives and monitoring your progress
towards them should permeate the entire organization, top to bottom. His famous idea is MBO or
“Management-By-Objectives”. After the organization developed its objectives, it then develops
the strategies for each of those objectives.
Drucker’s idea is “opposite or against” the idea of Alfred Chandler, specifically in terms of
implementing the strategies. Drucker said that work (implementing the strategies) would be
carried out in teams with the person most knowledgeable in the task at hand being the temporary
leader. Drucker’s idea is different from Chandler in a sense that in Chandler’s view, work must
follow the strictly defined structure of the organization (e.g. this department does this set of
activities and nothing else), whereas Drucker’s idea is about forming “work teams” with
qualified people or knowledge worker pricked out from any department doing every activity as a
team towards achieving the objectives. The leader of each work team is not necessarily the head
of department, as we would normally believe.
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3.3 Henry Mintzberg
http://ctr.concordia.ca/2000-01/May_10/08-Hon_Docs/index.shtml
According to renowned management theorist Henry Mintzberg, an organization's structure
emerges from the interplay of the organization's strategy, the environmental forces it
experiences, and the organizational structure itself. When these fit together well, they combine to
create organizations that can perform well. When they don't fit, then the organization is likely to
experience severe problems. Different structures arise from the different characteristics of these
organizations, and from the different forces that shape them (which Mintzberg calls the "basic
pulls" on an organization). By understanding the organizational types that Mintzberg defines,
you can think about whether your company's structure is well suited to its conditions. If it isn't,
you can start to think about what you need to do to change things.
Mintzberg's Organizational Types
The main successful organizational structures that he identifies are as follows:
The entrepreneurial organization.
The machine organization (bureaucracy).
The professional organization.
The divisional (diversified) organization.
The innovative organization ("adhocracy").
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3.4 Igor Ansoff
http://www.easy-strategy.com/igor-ansoff.html
Igor Ansoff extended the work of Chandler and developed a strategy grid that compared market
penetration strategies, product development strategies, market development strategies and
horizontal and vertical integration and diversification strategies. He felt that management could
use these strategies to systematically prepare for future opportunities and challenges. He
developed the “ gap analysis” still used today in which manager must understand the gap
between where the organization is currently and where they would like it to be, then develop
what Ansoff called “ gap reducing actions”.
3.5 Examples of company which followed the views of authors discussed above are:Coca-cola is an example of an organization which practices “Structure follows Strategy” since
they follow strategic planning in year 2009 they had great success with such belief. Coca Cola
believes consumer demand derives everything; strategy to achieve the goal is on what Coca Cola
emphasize most on.
Worldwide volume increased by 4 percent with strong international growth of 5percent.
• Earnings per share grew by 82 percent.
• Return on common equity grew from 23 percent to 38 percent this year.
• Return on capital increased from 16 percent in 2000 to 27 percent 2009.
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• The company has generated free cash flow of $3.1 billion, up from $2.8 billion. (Knowledge
Inn, 2010)
4.0 Strategy follows Structure
Until now we were discussing on structure follows strategy but each organization also has to
practice that strategy follows structure, there are many reasons supporting Strategy follows
structure starting off with the Organization Life cycle.
Once the organization has been constructed, it grows whereby at every stage a strategy
reinforcement is required for example when organization reaches its maturity and most probably
is about to fall into decline stage Manager can come up with extension strategies to prevent
organizations falling into decline stage.
Another reason is that the management and workforce is satisfied with the current organization
structure and are unwilling to change the structure, defining everything again is a great effort and
they are not willing to go for it.
Nature of the organization, for example in typical governmental organizations such as Military,
the robust organization structure can’t be changed in order to cope up with an strategy rather the
strategy is modified to suit the structure, the structure which is centralized remains centralized.
Businesses which only think of Structure follows strategy are mistaken that later on structure
requires Strategy to be modified in order for the existing structure to successfully run, due to
uncertainty in the external environment, it is cheap to modify strategy rather than changing the
whole structure, people are often unwillingly to accept the change in the organization structure it
often confuses them. In the end it’s a great risk for the businesses to change the structure for the
strategy and if later on Strategy fails the whole organization can be shutdown since lots of cost is
involved in changing the whole structure, whereas just changing the strategy often gives
organizations a change to stand up again on its feet, since not a lot of damage is incurred.
A great example of a company which follows Structure shapes strategy is Etisalat, which is a
UAE-based telecommunications services provider, currently operating in 18 countries across
Asia, the Middle East and Africa.
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Etisalat follows management by objectives, due its structure complexity and rigidness it is
impossible to modify structure therefore they come up with implementing management by
objectives, whereby they have a strict atmosphere in the organization where by every action is a
demand of objective fulfillment. So there was no need of having to change the entire structure
rather altering strategies to cope up with structure.
5.0 Types of Strategies and StructuresStrategy is the specific patterns of decisions and actions that managers take to sue core
competency to achieve a competitive advantages. Among many other things that influence
design of the structure, strategy is one of them.
There are 4 types of strategies determining the structure of the organization.
1. Functional Level: plan of action to strengthen an organization’s functional and
resources, as well as its coordination abilities in order to create core competences.
The organization which will have more emphasis on manufacturing is bound to have a
tall hierarchy, centralized, mechanistic structure, whereas if the focus is diverted to
sales organization structure would be flat decentralized, mutual adjustment.
2. Business Level: plan to combine functional core competences in order to position the
organization so that it has a competitive advantage in its domain.
If the organization wants to promote differentiation, the structure would be matrix,
product team, a complex structure with decentralization would be best suited.
The company which follows such strategy is Apple, since they work on differentiation
and also have matrix structure to back it up.
3. Corporate Level Strategy: Corporate level Strategy fundamentally is concerned
with the selection of businesses in which the company should compete and with the
development and coordination of that portfolio of businesses.
The structure of Organization practicing Corporate Level Strategy would be:
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http://www.slideshare.net/vikasiba/
organisation-structure-design
Where by the decision will be taken by the CEO and different Divisions will be created for
Organizations to operate in with different products best suited for each Division.
4. Global Strategy: plan involves choosing the best strategy to expand into overseas
markets to obtain scare resources and develop core competences. Global strategy can
play a crucial role in strengthening a company’s control over its environment.
Structure would be:
Global Geographic Structure: each region of a country or area of the world is
served by self-contained division. Managers locate different divisions in each of
the world regions where the organization operates. For example.
http://www.slideshare.net/vikasiba/organisation-structure-design
Global Matrix Structure: an organization structure that simultaneously groups
people and resources by function and product. The structure is very flexible and
can respond rapidly to the need for change. For example
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http://www.slideshare.net/vikasiba/organisation-structure-design
Global Product Group Structure: each product division, not the country or
regional managers, takes responsibility for deciding where to manufacture its
products and how to market them in foreign countries. For example two types of
structure would fit under such attempt.
http://www.slideshare.net/vikasiba/organisation-structure-design
2nd would be Product team Structure where members are permanently assigned to a cross
functional team and report only to the product team manager or to one of his subordinates.
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http://
www.slideshare.net/vikasiba/organisation-structure-design
It is highly recommended for each and every company to first determine its strategy and then to
select a structure to cope up with it for the successful running of the organization, having any
random structure for a developed strategy would fail to achieve objectives, a defined structure
should be the aim of every company to follow its strategy.
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6.0 Conclusion
A strategy without an organization structure behind it is just a set of ideas. And an organization
structure without a strategy is inert: it has no guiding force, no way of knowing what to do or
where to go. The relationship is like that of a racing car and its driver. The latter cannot even
begin to compete unless he has a car; the former will never move out of garage unless there is a
driver behind the wheel.
The key to success for any organization is to ensure that the strategy and the organization
structure are fully aligned with each other. Rather than privileging one over the other, equal
attention had to be given to both. In practice this means that managers must both alter the
organization structure to make certain that the organization is able to carry out the strategy and at
the same time ensure the strategy is realistic and implementable sometimes the structure is to
rigid to modify. A steady incremental change in both strategy and structure, keeping both aligned
with each other in a kind of balancing act, adjusting the organization as the strategic
implementation process went on and requirements changed, altering the strategy if it became
clear that the organization lacked the competencies to carry out certain parts of it ensures a
successful running organization practice.
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7.0 References1) Provenmodels.com, 2010, structure follows strategy, [Online], Available
at:http://www.provenmodels.com/7, [Accessed on 10th February 2010]
2) Morgen Witzel, 2009, Strategy and organization, [Online], Available at:
http://www.fsn.co.uk/channel_human_resources/strategy_and_organisation, [Accessed
on 12th February 2010]
3) Easy-Strategy.com, 2010, Igor Ansoff, [Online], Available at: http://www.easy-
strategy.com/igor-ansoff.html, [Accessed on 14th February 2010]
4) Vikasiba, 2009, Organization Structure & Design, [Online], Available at:
http://www.slideshare.net/vikasiba/organisation-structure-design, [ Accessed on 16th
February 2010]
5) QuickMBA, 2007, Strategic Management [Online], Available at:
http://www.quickmba.com/strategy/levels/, [Accessed on 18th February 2010]
6) Mandi J Luis, 2010, Mintzberg’s Organizational Configurations, [Online], Available at:
http://www.mindtools.com/pages/article/newSTR_54.htm, [Accessed on 19th february]
7) Deepak Agarwal, 2010, what businesses model your organization follows “Structure-
Shapes Strategy” or Strategy-Shapes-Structure?, [Online], Available at: appon 21st
February 2010]
8) Knowledge Inn, 2010, STRATEGIES OF Coca cola, [Online], Available at:
http://kninn.blogspot.com/2010/02/strategies-of-coca-cola.html, [Accessed on 22nd
February 2010]
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8.0 APPENDIXThe comparison of Strategy follows Structure and Structure follows Strategy
Structure follows Strategy Strategy follows StructureThe application is widely practiced in
organizations which are profit motive and are
looking forward to make innovative products
and creating an extra value for customers
following Blue ocean strategy.
The cost incurred in change the whole structure
is relatively high, and is too risky a poor
strategy can lead to organization going into
insolvency/ bankrupt.
Many authors have supported this view, and
today many successful companies around the
globe also practice it, such as Coca cola,
Nokia, Sony, Apple, Ford, and Dell.
The application is widely practiced in
organizations which not profit motive and are
too huge in size and are mostly public limited
companies, for them getting things done matter
not how to get it done, they satisfied with the
current system and show resistance to any
change.
The cost incurred is not high as compared to
changing the whole structure and is more
feasible approach in terms of risk, effort and
workforce satisfaction.
Not many author had their view on this, and
also not many companies can be found
practicing it.
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