Kelompok 4 - Tugas 4 Manajemen Strategik Anita Nad

UNIVERSITY OF INDONESIA
GROUP ASSIGNMENT
STRATEGIC MANAGEMENT
CORPORATE STRATEGY :
Organizational Design : Structure, Culture, and Control
1. Agus Winarta - 1906329606

2. Andreas imanuel T - 1906329695
3. Anita Zahra A - 1806248961
4. Foya Ziqel Zozalbo - 1906330034
5. Nadya Rachmatul P - 1906330394
6. Nityaningrum Duatibumi - 1906420686
MAGISTER MANAGEMENT
FACULTY OF ECONOMY AND BUSINESS UNIVERSITY OF INDONESIA
2020
CHAPTER 11 – Organizational Design : Structure, Culture, and Control
11. 1 Organizational Design and Competitive Advantage

Organizational design is the process of creating, implementing, monitoring, and modifying
the structure, processes, and procedures of an organization. The key components of
organizational design are structure, culture, and control. The goal is to design an organization
that allows managers to effectively translate their chosen strategy into a realized one.
Because strategy implementation transforms strategy into actions and business models, it
often requires changes within the organization. However, strategy implementation often fails
because managers are unable to make the necessary changes due to the effects on resource
allocation and power distribution within an organization.
Organizational Inertia : The Failure of Established Firms

To implement a formulated business strategy successfully, structure must accommodate
strategy, not the other way around. This reversal implies that some managers consider only
strategies that do not change existing organizational structures; they do not want to confront
the inertia that often exists in established organizations. Inertia, a firm’s resistance to change
the status quo, can set the stage for the firm’s subsequent failure.
Note that organizational inertia is often the result of success in a particular market during a
particular time; it becomes difficult to argue with success. The pattern for successful firms
often follows a particular path:
1. Mastery of, and fit with, the current environment.
2. Success, usually measured by financial measurements.
3. Structures, measures, and systems to accommodate and manage size.
4. A resulting organizational inertia that tends to minimize opportunities and challenges
created by shifts in the internal and external environment.
Shift in the external or internal environment can lead to a firm’s downfall in the future, when
the tightly coupled system of strategy and structure experiences :
Inside the oval, the longer internal arrows show the firm’s tightly coupled organizational
design over time. The shorter internal arrows indicate pressures radiating from internal shifts
such as accelerated growth, a change in the business model, entry into new markets, a change
in the top management team (TMT), or mergers and acquisitions
Organizational Structure
Organizational structure determines how the work efforts of individuals and teams are
orchestrated and how resources are distributed. In particular, an organizational structure
defines how jobs and tasks are divided and integrated, delineates the reporting relationships
up and down the hierarchy, defines formal communication channels, and prescribes how
individuals and teams coordinate their work efforts. The key building blocks of an
organizational structure are:
 Specialization : the degree to which a task is divided into separate jobs—that is, the
division of labor. Specialization requires a trade-off between breadth and depth of
knowledge. While a high degree of the division of labor increases productivity, it can
also have unintended side-effects such as reduced employee job satisfaction due to
repetition of tasks.
 Formalization : captures the extent to which employee behavior is steered by explicit
and codified rules and procedures. Formalized structures are characterized by detailed
written rules and policies of what to do in specific situations
 Centralization : refers to the degree to which decision making is concentrated at the
top of the organization. Different strategic management processes match with different
degrees of centralization: Top-down strategic planning takes place in highly
centralized organizations/ Planned emergence is found in more decentralized
organizations
 Hierarchy : determines the formal, position-based reporting lines and thus stipulates
who reports to whom. The number of levels of hierarchy, in turn, determines the
managers’ span of control— how many employees directly report to a manager
Mechanistic VS Organic Organizations

 Mechanistic organizations are characterized by a high degree of specialization and
formalization and by a tall hierarchy that relies on centralized decision making.
Communication and authority lines are top-down and well defined
 Organic organizations have a low degree of specialization and formalization, a flat
organizational structure, and decentralized decision making. Organic structures tend to
be correlated with the following: a fluid and flexible information flow among
employees in both horizontal and vertical directions; faster decision making; and
higher employee motivation, retention, satisfaction, and creativity. Organic
organizations also typically exhibit a higher rate of entrepreneurial behaviors and
innovation. Mechanistic structures allow for standardization and economies of scale,
and often are used when the firm pursues a cost-leadership strategy at the business
level.
11.2 Strategy and Structure
Simple Structure
Functional Structure
Multidivisional Structure
M-Form and Corporate Strategy. To achieve an optimal match between strategy and structure,
different corporate strategies require different organizational structure :
- Firms that follow a single-business or dominant-business strategy generally employ a
functional structure.
- Firms that pursue either related or unrelated diversification, the M-form is the preferred
organizational structure.
- Firms using the M-form organizational structure to support a related-diversification strategy
tend to concentrate decision making at the top of the organization.
- Firms using the M-form structure to support an unrelated-diversification strategy often
decentralize decision making.
Disadvantage. Moving from the functional structure to the M-form results in adding another layer of
corporate hierarchy. This goes along with all the known problems of increasing bureaucracy, red tape
and sometimes duplication of efforts. It also slows decision making because in many instances a
CEO of an SBU must get approval from corporate headquarters when making major decision that
mght affect a second SBU or the corporation as a whole. Also, since each SBU in the M-form is
evaluated as a standalone profit-and-loss center, SBUs frequently end up competing with each other
for resources such as capital and managerial talent, but they also need to cooperate to share
competencies.
Matrix Structure
To reap the benefits of both the M-form and the functional structure, many firms employ a mix of
these two organizational forms, called a matrix structure. The benefits of the M-form are domain
expertise, economies of scale, and the efficient processing of information, meanwhile the benefit of
the functional structure are responsiveness and decentralized focus. Firms rend to use a global matrix
structure to pursue a transnational strategy, in which the firm combines the benefits of a
multidomestic strategy (high local responsiveness) with those of a global-standardization strategy
(lowest-cost position attainable).
Matrix Structure and Global Strategy

- In an international strategy, the company leverages its home-based core competency by moving
into foreign markets. An international strategy is advantageous when the company faces low
pressure for both local responsiveness and cost reduction. The best match for an international
strategy is a functional organizational structure, which allows the company to leverage its core
competency most effectively.
- When a multinational enterprise pursues a multidomestic strategy, it attempts to maximize local
responsiveness in the face of low pressures for cost reduction. An appropriate match for this type
of global strategy is the multidivisional organizational structure.
- When following a global-standardization strategy, the MNE attempts to reap significant
economies of scale as well as location economies by pursuing a global division of labor based on
wherever best-of-class capabilities resied at he lowest cost.
Disadvantage. It is usually difficult to implement : implementing two layers of organizational
structure creates significant organizational complexity and increases administrative costs. Also,
reporting structures in a matrix are often not clear. In particular, employees can have trouble
reconciling goals presented by their two or more supervisors. Less-clear reporting structures can
undermine accountability by creating multiple principal-agent relationships. This can make
performance appraisals more difficult. Adding an additional layer of hierarchy can also slow decision
making and increase bureaucratic costs.
11.3 Organizational Culture : Values, Norms, and Artifacts

Organizational culture describes the collectively shared values and norms of an organization’s
members. Values define what is considered important. Norms define appropriate employee attitudes
and behaviors. Strong cultures emerge when the company’s core values are widely shared among the
firm’s employees and when the norms have been internalized. Corporate culture finds its expression
in artifacts. Artifacts include elements such as the design and layout of physical space, symbols,
vocabulary, what stories are told and what events are celebrated. A unique culture that is strategically
relevant can also be the basis of a firm’s competitive advantage.
Where Do Organizational Cultures Come From?
How Does Organizational Culture Change?
Organizational Culture and Competitive Advantage
11.4 Strategic Control-and-Reward Systems

Input Controls
Output Controls
11.5 Implication for the Strategist
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UNIVERSITY OF INDONESIA

Organizational Design : Structure, Culture, and Control

1. Agus Winarta - 1906329606

11. 1 Organizational Design and Competitive Advantage

Organizational Inertia : The Failure of Established Firms

Mechanistic VS Organic Organizations

Matrix Structure and Global Strategy

11.3 Organizational Culture : Values, Norms, and Artifacts

Where Do Organizational Cultures Come From?

How Does Organizational Culture Change?

Organizational Culture and Competitive Advantage

11.4 Strategic Control-and-Reward Systems

11.5 Implication for the Strategist

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