Business Strategy, Development & Application Ch08 Updated PDF

BUSINESS STRATEGY DEVELOPMENT APPLICATION Chapter 8 Developing Your Business Structure and Culture  Learning Objectives 1. Knowledge of the...

BUSINESS STRATEGY DEVELOPMENT APPLICATION Chapter 8 Developing Your Business Structure and Culture  Learning Objectives 1. Knowledge of the core components associated with designing a business system 2. An understanding of the key decision-making areas that establish an organization’s framework and strategy execution 3. An exposure to the underlying factors associated with creating an organization’s operating structure 4. An understanding of the important role an organization’s culture plays in influencing its business system and business plan execution 5. An understanding of the key criteria that determine the management approach needed to guide the business 6. An overview of restructuring and its key success metrics  Business System Design The 4 key components of a business system: 1. Organizational structure, culture & management approach 2. Control systems to manage strategic intent 3. Mechanism for effective talent management 4. Operational processes and market support & alignment Business System Design  Developing the Organizational Framework 1. What is the best structure? 2. What culture or environment is needed? 3. What management approach will best support required activities?  Structure What is Structure? Structure is not static; requires ongoing monitoring to ensure it continues to meet organizational needs; structures must change and adapt to changing conditions. Structure must ensure that products/services are delivered to the marketplace in a manner that is superior to the competition In your opinion, what are the key criteria for determining the type of organizational structure a business should evolve toward?  Types of Structure Factors that determine the organizational structure: – Organization size / Geographic dispersion – Range of business undertakings – Task specialization requirements – Nature of the work – Ability to leverage communication and technology – Perceived best way to connect with customers Structural Evolution  Types of Structure Traditional structures focus on some form of departmentalization and task specialization: – Functional – Divisional – Customer – Geographic – Matrix Types of Structure, Simplified  Functional Design for a Small Manufacturing Company Note that each functional area is dependent on the others.  Divisional Design at Hilton Hotels This design results from a strategy of related diversification. Matrix-Style Organizational Structure Characteristics of Virtual Organizations  More and more, researchers and analysts continue to emphasize the importance of culture in determining the overall level of success which organizations achieve. What is it about culture that, ultimately, enables it to exert such influence? As a manager, how do you influence the cultural fabric of an organization?  Culture and Environment Culture – the conscience and heart of an organization How the individuals behave and react to challenges How the layers of the organization interact with each other The underlying values, attitudes, and interactive relationships that govern how work is to be accomplished Affected by diversity, immigration and the interconnectivity of the global marketplace (Hofstede’s Model) Hofstede’s Cultural Dimensions Model What are the zones of cultural influence? Explain how the zones of cultural influence can be related to Hofstede’s Cultural Dimensions Model. Zones of Cultural Influence  Discuss the five key criteria that are used to determine the managerial approach an organization develops to guide the organization’s decision-making process. How are these combined to form a process for finalizing the intended managerial approach?  Key Management Approach Criteria  Centralized versus De-centralized Decision Making Centralized Decision-Making Decentralized Decision-Making Pros Cons Pros Cons Greatest efficiency; Lower-level Quicker response Potential for consistent decisions managers are less mechanism to inconsistency across empowered- low internal and external the organization morale issues Operating plan Slow response time High morale for low- Increased risk of poor remains aligned with to customer needs level managers decisions strategy and vision Inhibits development Less organizational Decisions may not be of lower-level conflict: decisions are in line with managers, negatively made on the spot organizational impacting strategy or vision organization’s long- term health Environment, History, Nature of the Decision, abilities of lower-level managers Tall versus Flat Organizations Narrow Span of Control Wider Span of Control  Strategy and Organization Design Business-level strategy – Directly influence organization design. ◼ A defender strategy – tall and centralized. ◼ A prospector strategy – flat and decentralized. ◼ An analyzer strategy – lies in the middle. Implementing the Managerial Approach Regular review of the organization’s structure and management decision-making approach As strategies change, so must the business system framework Decisions relating to structure and framework are derived from an assessment of the nature of tasks required and the most efficient and effective grouping of these tasks Management Approach Process What is restructuring? When thinking about restructuring, what three common elements should managers focus on to ensure that a successful restructuring takes place?  The Concept of Restructuring What is Restructuring? – Can be in response to the need to reduce costs, competitive pressures, change in consumer behavior, technology obsolescence, or bankruptcy – Can be a reactive business decision (liquidity, insolvency) or it can be due to positive circumstances (such as growth or acquisitions) – Goal of restructuring: Increase the value and long-term health of the organization  Typical Reasons for Restructuring to Occur Reorganization of operations to reduce costs Response to a shift in customer behavior Refocus of an organization’s efforts regarding key products and/or account relationships Integration of new technologies that significantly change operating protocols Creation of more efficient and effective outcomes resulting from the interaction of an organization’s workforce Divestiture of a portion of the organization (product line, subsidiary, etc.) Acquisition or merger by the organization Enhancement or more effective leveraging of an organization’s competitive advantage Significant transformation of the business’s underlying business model  Restructuring Elements Structural Design – What changes/adjustments to the structure will be required? Execution – What will the restructuring process look like? Communication – What is the communication plan? Restructuring: Probability of Success  Under what circumstances should an organization consider restructuring? How does the risk of a restructuring, and the probability of success relate to the complexity of the project? Can you think of any ways that an organization could mitigate these risks?  TRUE=A FALSE=B course #=1595  Management Reflection: The Importance of Business System Design Structure and culture form the backbone of the organization It is the formalized process through which organizational tasks are aligned with strategic objectives Managerial hierarchy directly influences the speed with which decisions are made, approval processes, and responsibility and accountability in the organization  Chapter Summary Business System Design (4 Key Components) Developing the Organizational Framework – Structure: Types & Building Blocks – Culture and Environment – Management Approach: 5 Core Criteria The Concept of Restructuring (3 Common Elements) Management Reflection: The Importance of Business System Design  Case for Discussion Questions: 1. Given Microsoft’s strategic focus, why was it important for Nadella to reset the corporate culture at Microsoft? 2. What do you think of some of the steps that Nadella has taken so far? What do her actions state about the importance of visionary leadership when initiating cultural change?