Q1. What is the relationship between strategy and structure?

Strategy primarily refers to the roadmap laid out by an organization. The principal
objective of strategy is to ensure that an organization achieves the set targets in order
to sustain and grow in an increasingly competitive world. On the other hand, a structure
is the manner in which the internal resources of a company get connected with each
other. More specifically, structure is concerned with different groups that can be formed
within an organization. For example, an organization having a functional structure will
operate through the different functions such as Marketing, Finance, and Manufacturing.

Strategy is the main driver that decides the structure an organization. Also, in case the
structure of a company is not synchronized with its strategy, then the company may not
be able to achieve the set targets. For example, a company with a diversified product
portfolio and has a functional structure (organized as per various functions such as
Marketing, Finance and Operations) will not be able to compete effectively in each of
the product categories. As a result, the company may start losing the market share of
its products.

Evidently, structure plays a critical role in the accomplishment of an organization’s

overall strategy. Another notable aspect is that both strategy and structure need to be
continuously inter-linked in order to achieve desired results.

Coca-Cola, for example, operates on a multi-divisional (M-form) structure wherein the

company has structured its global business according to different regions in the world.
More specifically, Coca-Cola has five main geographic operating segments that
operate as Strategic Business Units (SBUs). The SBUs report to a parent company
based at the corporate headquarters. Since Coca-Cola operates through an SBU
model, it has adopted a related-linked strategy. Coca-Cola offers related products in
the global market. Some of the products are same, while some are different but related.
For example, Coca-Cola (a carbonated drink) is a global product of the company,
whereas; Lilt is a local product that serves the markets in Great Britain and Ireland.
Coca-Cola’s other products are part of its overall product offering i.e. soft drinks. Under
soft drinks, the company caters to segments such as sports and health. Therefore, a
related-linked strategy best serves the goals of the company, as it has a related-
diversified business. The strategy helps the company to provide enough space to each
SBU for decision-making.
Coca-cola’s structure is in line with its overall strategy, which is enumerated below:

1. Accelerate carbonated soft drinks growth, led by Coca-Cola

2. Broaden the family of products, wherever appropriate e.g. bottled water, tea,
coffee, juices, energy drinks

3. Grow system profitability & capability together with the bottlers

4. Creatively serve customers (e.g. retailers) to build their businesses

5. Invest intelligently in market growth

6. Drive efficiency & cost effectiveness by using technology and

7. Large scale production to control costs

8. Enabling our people to achieve extraordinary results everyday

It is evident from above that Coca-Cola intends to achieve holistic and sustainable
growth. The company has operations across the world and intends to be profitable in
each of the region. As a result, it becomes imperative for the company to provide
adequate autonomy to each of SBU operating in different geographic regions.
Providing autonomy is critical because a fairly autonomous SBU will be able to take
independent decisions to compete in the local environment. A non-autonomous or
semi-autonomous SBU will not be efficient, as it will need the approval of the Parent to
execute a strategy. This may become counter-productive in a fast-paced and
competitive environment. Also the Parent company, based in another part of the world,
may not be fit to take a decision regarding its competitive strategy in another country.
Since each country or region has its own unique needs and requirements, decisions by
the Parent company may not be in sync with the requirements of the other country.

Coca-Cola also understands that a flexible structure will provide enough opportunities
to its employees to work in a team. In addition, a flexible structure encourages greater
sharing of best practices among different specialist teams operating in the company.
Greater collaboration will help Coca-Cola to foster creativity and innovation, thereby
enabling its employees to realize their maximum potential.
Therefore, an M-form structure is best suited for Coca-Cola.

Attributes of Multi-divisional Structures

Structural Cooperative SBU Competitive

Characteristics

Type of Strategy Related- Mixed related Or Unrelated

unrelated
Constrained

Degree of Centralized at the Centralized in Decentralized to

Centralization Corporate Office SBUs Division

Use of Integrating Extensive Moderate Nonexistent

Synergies
Mechanisms Synergies Synergies

Divisional Subjective / Strategic and Financial Criteria

Performance Strategic Criteria Financial Criteria

Appraisal

Divisional Incentive Corporate Corporation, Divisional

Compensation Performance Division & SBU Performance

The business strategy must focus on how to move and disseminate information and it
must not only accommodate communications, it must create the environment that
fosters shared ideas, brainstorming sessions, and documentation distribution. There is
a greater need for true leadership that identifies individual talent and facilitates learning
and growth. The company grows as quickly as talent and learning and individuals must
be “free” to expand and to create – without fear of budget restraints, but with respect to
project deadlines and also to resources.
Q2: What is the correlation between Culture of an organization and its
structure?

Organizational structure is a formal system wherein employees, with well defined roles
and responsibilities, communicate with other such members/employees for the
achievement of common objectives. The structure of an organization is tangible and
physical, which means that it is visible to internal as well as external stakeholders of a
company. An organization’s structure is based on the overall strategy, which drives the
policies and procedures of an organization. Consequently, the policies decide the
behaviour of managers and other associates within a company. An organization’s
structure also helps in understanding the existing hierarchical levels and Span of
Control.

On the other hand, the culture of an organization is based on shared values, norms and
individual group & behaviour. More specifically, the culture of an organization is more
informal in nature and is based on collective ideas & values shared by the employees.
The ways in which various tasks are performed at different levels also defines the
culture of an organization.

Structure and culture in organisations exist in close alignment. Structure is one of the
determinants of culture; conversely, culture has been shown to have an influence on
the organisational structure and operational systems in an organisation. Both are
mechanisms for the coordination of organisations: structure as an integrating
mechanism for organisational activities, and culture as an integrating mechanism
concerned with behaviour and values within organisations.

Organisations and individuals need an understanding of these mechanisms in order to

manage uncertainty in the face of ever-changing markets and business conditions. An
effective alignment of structure and culture provides a means of getting people to work
together to reach strategic goals and achieve an organisation’s vision. Together they
provide a focus to enable organisations and individuals to reduce uncertainty, variability
and ambiguity, so providing a framework for acting in a consistent manner. Structure
and culture have overlapping functions; however one mechanism is not necessarily a
substitute for the other.

While structure helps an organization in defining objectives, the culture helps in

achieving those objectives in viable manner. Therefore, culture is also critical in the
achievement of the defined objectives. More specifically, culture is a function of
behaviour and relationships patterns.

Coca-Cola gives high priority to its culture, which is evident from its emphasis on team
work and employee empowerment. Team work is critical because it helps in greater
collaboration and results in the creation of original ideas. On the other hand, enabling
employees to contribute towards the growth of the company helps them to feel part of
the overall team and motivates them to perform better. Culture also depends on
channels of communication, as open communication channels help in fostering
relationships over a longer term. As a result, an organization will be able to realize
invisible benefits of long-term relationships with its stakeholders.