Professional Documents
Culture Documents
Business Strategy
4 External Environment
5 Internal Environment
6 Competitive Positioning
Corporate Strategy
7 Diversification
8 Mergers & Acquisitions
9 Global Strategy
Strategy Process
10 Organizational Structure and Control
11 Strategic Leadership
© 2007 Prof. Dr. Bernd Venohr 2
Overview
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr 7
Division of labor tasks and integration/coordination
Division of labor
–vertical: levels of authority
–horizontal: specialization of tasks
Integration mechanism
–IT/data management systems: controlling systems;
performance measurement systems; resource allocation
procedures; budgeting processes
–Manager control systems: selection of employees;
reward/punishments; career path
–Coordination systems: decision responsibility assignments;
committees; task forces
CEO
STRENGTHS: WEAKNESSES:
President/CEO _
R&D | Finance| Planning| Marketing | HR
STRENGTHS: WEAKNESSES:
Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,”
Organizational Dynamics (Winter 1979): 431.
© 2007 Prof. Dr. Bernd Venohr 17
Matrix Organization with dual reporting lines:
Managers report to both business unit and functional
executives who report to CEO
CEO
Business
Unit A
Business
Unit B
Business
Unit C
Business
Unit D
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr 19
Strengths and Weaknesses of matrix organization structure
STRENGTHS: WEAKNESSES:
– Achieves coordination necessary to – Dual authority, which can be
meet dual demands from customers frustrating and confusing
– Flexible sharing of human – Means managers need good
interpersonal skills and extensive
resources across products
training
– Suited to complex decisions and – Is time consuming; involves frequent
frequent changes in unstable meetings and conflict resolution
environment sessions
– Provides opportunity for both – Will not work unless participants
functional and product skill understand it and adopt collegial
development rather than vertical-type relationships
– Best in medium-sized organizations – Requires great effort to maintain
with multiple products power balance
Source: Adapted from Robert Duncan, “What Is the Right
Organization Structure? Decision Tree Analysis Provides the
Answer,”Organizational Dynamics (Winter 1979): 429.
© 2007 Prof. Dr. Bernd Venohr 20
Overview
Corporate Staff
Service Divisions Finance Business R&D Human Legal
Development Resources
GE GE GE
GE Aircraft GE Trans- GE
Industrial Appliances Supply
Engines portation Plastics
Systems
GE
GE Power GE Medical GE GE
Specialty NBC
Systems Systems Lighting Capital
Materials
Managing the
individual Monitoring and controlling business
businesses performance
Managing
linkages Sharing and transferring resources and
between capabilities
businesses
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr
The Development of Strategic Planning Techniques:
General Electric in the 1970’s
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr
Portfolio Planning Models: Their Uses in Strategy Formulation
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr
Portfolio Planning Models: The BCG Growth-Share Matrix
Earnings: low, unstable, growing
Cash flow: negative Earnings: high stable, growing
Annual real rate of market growth (%)
?
Strategy: analyze to determine Cash flow: neutral
HIGH
Strategy: divest
LOW HIGH
Relative market share
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr
Corporate Control over the Businesses
2 basic approaches
High
Centralized
PLANNING INFLUENCE
Strategic
planning
Strategic
control
Holding Financial
company control
Low
CONTROL INFLUENCE
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch.;
Goold and Campbell "Strategies and Styles“ and "Adding Value from Corporate Headquarters"
© 2007 Prof. Dr. Bernd Venohr
Each management style is different and has different
strengths and weaknesses. Key is that a fit exist between
the way the “parent” operates and the improvement opportunities
that exist in particular businesses
Centre dividion relationships
Approach Key features Advantages Dangers Examples
KEY ISSUE - How does the corporate center add value to the business?
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6;
Porter, Michael, From Competitive Advantage to Corporate Strategy, HBR, May-June 1987
© 2007 Prof. Dr. Bernd Venohr
Rethinking the Management of Multibusiness Corporations:
Lessons from General Electric
Jack Welch’s transformation of GE’s structure and management systems:
Delayering - from 9 or 10 layers of hierarchy to 4 or 5 and decentralizing decisions
Hard-driving, results-oriented atmosphere prevails. All businesses are held to a
standard of being #1 or #2 in their industries worldwide as well as achieving good
business results.
Reformulating strategic planning - from formal, document-intensive analysis to direct
face-to-face discussion of key issues
Redefining the role of HQ - from checker, inquisitor, and authority to facilitator, helper,
and supporter
Coordinating role of HQ - corporate HQ to lead in creating the “boundaryless
corporation” where innovations and ideas flow and where horizontal coordination occurs
to respond to new opportunities
HQ as change agent - corporate HQ driving force for continual organizational change
Reliance upon “workout sessions” to identify, debate, and resolve “burning issues”;
Commitment to Six Sigma Quality
Successful leaders spend time convincing organization members chosen strategy is
right and competent strategy execution is top priority: Building and nurturing a
culture promoting good strategy execution
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr
New Assignment and Outlook next Session
– Brief page presentation on each company; send in advance per e-mail or bring
presentation on usb stick
High B
U
I L
H D
O
Medium L
H D
A
R
V
Low E
S
T
Low Medium High
Business Unit Position
Industry Attractiveness Criteria Business Unit Position
- Market size - Market share (domestic,
- Market growth global, and relative)
- Industry profitability - Competitive position
- Inflation recovery - Relative profitability
- Overseas sales ratio
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr
Do Portfolio Planning Models Help or Hinder Corporate
Strategy Formulation?
ADVANTAGES DISADVANTAGES
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004), Ch. 6
© 2007 Prof. Dr. Bernd Venohr