• The importance of organizational structure and the concept of the
boundaryless organization in implementing strategies • The growth patterns of major corporations and the relationship between a firm’s strategy and its structure • Each of the traditional types of organizational structure—simple, functional, divisional, and matrix • The relative advantages and disadvantages of traditional organizational structures • The implications of a firm’s international operations for organizational structure • The different types of boundaryless organizations—barrier-free, modular, and virtual—and their advantages and disadvantages
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-4 Exhibit 10.1 Growth Patterns of Large Corporations Phase 1 Strategy: Low revenue base; simple product-market scope Structure: Simple
Phase 2 Strategy: Increase in revenues; engage in vertical integration Structure: Functional
Phase 3 Strategy: Expand into new, related product-markets and/or geographical areas Structure: Divisional
Phase 4 Strategy: Expand into international markets Structure: International Division, Geographic Area, Worldwide Product Division, Worldwide Functional, or Worldwide Matrix STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin 10-5 Exhibit 10.2 Functional Structure
Chief Executive Officer or President
Manager Manager Manager Manager Manager Manager
Production Engineering Marketing R&D Personnel Accounting
Lower-level managers, specialists, and operating personnel
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-6 Functional Structure Advantages Disadvantages • Pooling of specialists • Differences in functional enhances coordination and orientations impede control communication and coordination • Tendency for specialists to • Centralized decision making develop a short-term perspective enhances an organizational and a narrow functional perspective across functions orientation • Efficient use of talent • Functional area conflicts may • Career paths and overburden top level decision makers professional development in • Difficult to establish uniform specialized areas are performance standards facilitated
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-7 Exhibit 10.3 Divisional Structure
Chief Executive Officer or President
Corporate Staff
Division A Division B Division C
General Manager General Manager General Manager
Manager Manager Manager Manager Manager Manager
Production Engineering Marketing R&D Personnel Accounting
Lower-level managers, specialists, and operating personnel
Organized Organized similarly to similarly to Division 1 Division 1
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-8 Divisional Structure Advantages Disadvantages • Increases strategic and • Increased costs incurred operational control, permits through duplication of executives to address strategic personnel, operations, and issues investment • Quick response to environmental changes • Dysfunctional competition • Increased focus on products and among divisions may detract markets from corporate performance • Minimizes problems associated • Difficulty in maintaining with sharing resources across uniform corporate image functions • Overemphasis on short-term • Facilitates development of general managers performance
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-9 Exhibit 10.4 Matrix Structure
Chief Executive Officer or President Corporate Staff
Manager Manager Manager Manager Manager Manager Public
Administration Projects Manufacturing Engineering Marketing Relations and Human Resources Project A
Project B
Project C
Project D
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-10 Matrix Structure Advantages Disadvantages • Increases market • Dual reporting relationships responsiveness through can result in uncertainty collaboration and synergies regarding accountability • Allows more efficient • Intense power struggles may utilization of resources lead to increased levels of conflict • Improves flexibility, • Working relationships may be coordination, and more complicated and communication resources duplicated • Increases professional • Excessive reliance on development through teamwork may impede timely broader responsibilities decision making
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-11 The Multi-Divisional Structure
Chief Executive Officer
Corporate Office (Staff)
North Latin Europe Asia Africa Australia America America
Product A Product B Product C Product D
A structure based on geographic lines usually
implies a multi-domestic international strategy STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin 10-12 The Multi-Divisional Structure
Chief Executive Officer
Corporate Office (Staff)
Product A Product B Product C Product D
A structure based on product lines usually
implies a global international strategy
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-13 The Multi-Divisional Structure
A Transnational International Strategy
is likely to utilize a structure that results in emphasis on both geographic and product structures
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-14 Boundaryless Organizational Designs
Barrier-Free -Under-defined -Fluid -Team-based Modular -Value-Chain, not Hierarchy -Specialization and Outsourcing
Virtual -The Organization as a Dynamic
Network -Strategic Alliances -Networking
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-15 Exhibit 10.6 Pros and Cons of the Barrier-Free Organization Pros Cons • Leverages the talents of all • Difficult to overcome political and employees authority boundaries both inside • Enhances cooperation, and outside the organization coordination, and information- • A lack of leadership and vision can sharing with internal and lead to coordination problems. external constituencies • Time-consuming and difficult-to- • Enables a quicker response to manage democratic processes market changes • A lack of high levels of trust can impede performance
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-16 Exhibit 10.7 Pros and Cons Of the Modular Organization Pros Cons • Directs a firm to its critical • Inhibits common vision through activities reliance on outsiders • Maintains full strategic control • Diminishes future competitive over most the critical activities— advantages if critical technologies core competencies or competences are outsourced • Achieves “best in class” • Increases the difficulty of bringing performance throughout the value activities back into the firm chain • May lead to an erosion of cross- • Leverages core competencies by functional skills outsourcing with smaller capital • Decreases operational control and commitment potential loss of control over a • Encourages information sharing supplier and accelerates organizational learning
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
10-17 Exhibit 10.8 Pros and Cons of the Virtual Organization Pros Cons • Enables the sharing of costs, • Harder to determine where one skills, risks company ends and another begins • Enhances access to global due to close interdependencies markets • Leads to potential loss of • Increases market responsiveness operational control among • Creates a “best of everything” partners organization since each partner • Results in loss of strategic control brings their core competencies over emerging technology • Encourages both individual and • Requires new and difficult-to- organizational knowledge- acquire managerial skills sharing and accelerates organizational learning
STRATEGIC MANAGEMENT CHAPTER 10 Gregory G. Dess and G. T. Lumpkin
