CHAPTER -14

STRATEGY AND STRUCTURE

S.No TOPIC

14.01 Relationship between Strategy and Structure

14.02 Mechanism for Organizational Design

14.03 Structural Choice

14.04 Relating Structure to Strategy

14.05 Strategic Business Unit

14.06 Strategic Management and Multiple Strategic Business

Units

The overall function and course of a business enterprise are decided by means of the nature of
its corporate strategy. The Strategy offers the goals, objectives and guidelines for the structure
and operations of the business enterprise. Its miles through a structure that the reason and
work of the organisation are accomplished. Some structure is vital to make feasible the
effective performance of key activities and to support the efforts of the group of workers. The
structure offers the framework of an agency and its pattern of management. The manager
wishes to apprehend the importance and outcomes of organisation strategy and structure.

A chief debate has been taking area over the last 30 years regarding the relationship between
the strategy and structure of the organization. It becomes considered that the Strategy
became determined first and the organization structure then accompanied. Current research
has questioned this Strategy and taken the view that strategy and structure are interrelated . . .
even though it can now not be feasible to define which comes first; there may be a need to
ensure that strategy and structure are consistent with each other (Lynch, R. 2006).

Business strategy is a realistic plan for achieving an organization's mission and objectives.
Organizational structure is the formal layout of an enterprise's hierarchy. Both strategy and
structure are important factors of doing business, or even groups that do not have formal
strategies and structures probable still have each in a single form or any other.

Business Strategy is commonly created at the top levels of a business. Grand corporate
strategies may be crushed down into goals and procedures to ensure that the strategy is
applicable all of the ways down the organizational hierarchy. Organizational structure is
placed into region notably early in the life of a business enterprise, however, it may be
changed over time as the employer evolves. Business strategy and organizational structure
may additionally appear to be unique principles at the beginning glance, but there are some of
the critical correlations among the two.

PROCESS

Business proprietors generate strategies the use of some of the managerial tools. Qualitative
tools, which include SWOT evaluation -- a device that identifies internal strengths and
weaknesses, as well as external opportunities and threats -- can help managers to perceive
strategic opportunities. Quantitative tools, including the reports generated through Total
Quality Management software, can assist to provide insight right into a corporation's
strengths and find hidden problems the use of statistical models.

STRUCTURE
A company's organizational structure needs to guide its strategy. Employees all levels of the
business enterprise ought to be empowered to successfully entire the obligations necessary to
reap organizational goals, and company structure can useful resource or preclude employees
of their roles. The structure also can dictate the means via which techniques are shaped.
Bureaucratic groups tend to generate a majority of strategic ideas at the pinnacle stages of
management. Organizations with flatter systems, however, regularly contain quite a number
employees in strategy sessions.

STRATEGY

A business proprietor's preliminary strategy can often dictate the form of the corporation's
structure. An entrepreneur with desires of using a surprisingly educated and educated staff
with massive leeway to innovate and attempt new thoughts, for example, is likely to structure
his employer to be as flat as viable. The opposite would be true of an entrepreneur who
wishes to enter a line of the commercial enterprise with a historically excessive employee
turnover rate, together with telemarketing, on the grounds that it can be hard to retain
particularly professional exertions in high turnover industries (Ingram D.2009).

ORGANIZATION STRUCTURE

Organisation structure specifies the firm's formal reporting relationships, strategies, controls
and authority, & decision-making approach.

Therefore, organization structure includes three components:

Administrative structure: This structure signifies division of labour in the

corporation. This consists of dividing work into responsibilities or roles along with
operations, logistics and transportation, and training, and recombining them into
administrative gadgets, e.g., branches, departments or divisions in keeping with undertaking,
feature, and/or region. The structure depicted in organisation charts, including tables of
organization and gadget is the executive structure.

Responsibility Structure: This includes the department of responsibility & authority to

individuals within the organisation.

Control Structure: This includes company’s gadget of measuring and evaluating overall
performance on the basis of administrative structure & responsibility structure.
14.01 RELATIONSHIP BETWEEN STRATEGY AND
STRUCTURE
There are two main views on the connection between approach and structure. Consistent with
Alfred Chandler 'structure follows strategy'.

Current studies have questioned the view that 'structure continually follows strategy', and
argued as a substitute that 'strategy regularly follows structure'. This 2d view, that 'strategy
follows structure', is based on the concept that managers already running within a particular
organisational structure will take the structure without any consideration and only recollect
techniques that will 'fit ‘with the existing structure.

Combining those arguments, we are able to say that 'strategy & structure' have a reciprocal
relationship. Corporation structure is an important thing for powerful strategy
implementation method. The success of a company depends on how well a company's
enterprise strategy is matched to its organizational structure. Growing an agency structure
that efficiently helps the firm's strategy is tough. For a successful implementation of
employer method, a company structure needs to have following characteristics.

Structural stability

This gives the firm a potential to correctly manage its each day work routines.

Structural flexibility

This affords the firm an opportunity to discover competitive probabilities & then allocate
sources to activities so that it will shape the competitive advantages the firm will want to be
successful destiny.

However, the strategy has a much extra vital have an impact on structure than the reverse.
However, on the end organization shape have to provide adequate balance & flexibility that is
important for successful implementation of the strategy. The Strategy that a company comes
to a decision to follow will govern the decision about the organisation shape with the
intention to be suitable for the company however once in place company structure impacts
the choice about future techniques because of organizational inertia derived from business
enterprise shape that inhibits efforts to change.

Evolutionary pattern of organizational structure & strategy

Pre-bureaucratic structures

That is the fittest form of structure & is commonly primarily based on traditional or
charismatic dominance. The structure is absolutely centralized & lacks standardization of
obligations. This is useful in dealing with easy obligations.

Bureaucratic structures

It has the positive degree of standardization & is useful in dealing with barely extra
complicated & big scale companies.

Functional structures

The structure is more standardized & centralized. The enterprise is split into separate
purposeful divisions & personnel inside a particular division perform precise features. This
form of structure is beneficial in firms that offer standardized items & offerings at low cost &
in the high extent.

Divisional structure

This is also called as product structure. Organisation is divided into divisions & each division
has its own resources & functions. Divisions can be based on geographies or
products/services.

Matrix structure

This structure combines the features of both functional & divisional structure.

14.02 MECHANISM FOR ORGANIZATIONAL DESIGN

Intends to provide a quick sketch of the structure and mechanisms of corporate governance in
India. Earlier than discussing the country of the corporate governance in India and its
economy, it is far essential to provide a few primary information. India is a large country with
considerable heterogeneity in its population and economic base. India has extra than 20
professional languages spoken by using ova (Yasheng Huang & Tam Khanna,) 1 Billion
pwpie spread in more or less 28 states with tremendous rural and concrete populations.
Because the geographic and climatic conditions are varying substantially for the duration of
India, there exists the wide variety of products and offerings within the international market
milieu.
The subject matter of company governance is to ensure the accountability of positive people
in an agency through mechanisms that attempt to reduce or cast off the fundamental-agent
problem. The company governance is a multi-faceted difficulty. A related however, separate
thread of discussions specializes in the effect of a corporate governance system in economic
efficiency, with a robust emphasis on shareholders' welfare. There are yet other factors to the
company governance concern, such as the stakeholder view and the company governance
models around the arena. In India, the query of company governance has come up mainly
inside the wake of economic liberalization, deregulation of enterprise and enterprise, the
demand for a new corporate ethos and stricter compliance with the law of the land. Inside the
context of the unique situation in India wherein the financial establishments preserve great
stakes in corporations, the responsibility of the directors, including nonexecutive directors
and nominees, has come into sharp awareness(Paradigm charted secretary 1997).

14.03 STRUCTURAL CHOICE

Businesses must have some shape of leadership to achieve success, finally creating
hierarchies of executives, managers, coordinators and staff members. A simple organizational
structure commonly includes an owner delegating responsibilities to person employees who
document to him. As the organization grows, workforce contributors begin to specialize, with
the owner giving Bob all the enterprise’s marketing duties, Lisa office management
responsibilities and Dave the task of preserving the business’s computers up and running. As
an employer grows and has the greater frequent want for specific activities, it creates a useful
organizational structure, with advertising, accounting, income, administration, human assets
and data generation departments. If an agency has multiple product traces or brands, it would
expand a divisional structure, with overhead capabilities centralized in a company office,
however, manufacturing functions handled at every division. A matrix structure allows each
product line to have it is very own, independent departments.

Organizational Structure refers back to the way in which a corporation’s activities are
divided, grouped and coordinated into relationships between managers and personnel,
managers and managers and personnel and employees. Structure balances the need for
specialization with the want for integration. It affords a proper method of decentralization and
centralizing regular with the organizational and control desires of the strategy. The following
five foundation kinds are currently used by most commercial enterprise corporations:

(1) Simple structure

(2) Functional Structure

(3) Divisional Structure

(4) Strategic Business Unit

(5) Matrix Structure

(1) Simple structure

The energy of an easy organizational structure is that it permits an enterprise owner tight
control over company’s operation. No decisions are made without the approval, and he or she
is privy to each vital selection made. there is no hesitation at the a part of personnel in a
simple structure, because their orders come without delay from the pinnacle, no longer a
branch head or mid-degree supervisor a subordinate might question. Agencies make decisions
faster with an easy structure, due to the fact there are no layers of management that ideas or
requests want to climb before approval.

Some of the troubles of the use of a simple organizational structure revolve around the
workload of the proprietor or individual on the pinnacle. A proprietor would possibly come to
be swamped with work if he has to approve each selection at a business enterprise.
corporations that use simple organizational systems even when they’ve brought much
personnel with specialized jobs regularly do so due to the fact the proprietor can’t convey
himself to delegate, making the team of workers contributors anticipate approval on actions
they're qualified to take themselves. If an owner is unwell, in an assembly or on an enterprise
journey, the complete organization can come to be paralyzed, because no one can move
forward to take benefit of an opportunity or resolve a problem until the proprietor is available
once more (Sam Ashe-Edmunds ).

This simple organizational structure is maximum widely practised in smaller corporations,

wherein the coordination of labour may be successfully based around a narrow set of sports
and decision makers, who're capable of coordinate sports quickly and efficaciously.

The simplicity of an easy organizational structure makes it conscious of new demanding

situations and makes it easy to coordinate activities within the employer. but, this structure
will become inadequate whilst the business enterprise grows in length, and when the
surrounding surroundings of the agency grow in complexity. when the size of the agency and
the environmental complexity will increase, the pinnacle of the simple structure may
additionally get overloaded with facts. This information overload may additionally
compromise the effectiveness of the decision-making done on the organizational pinnacle,
and make the corporation slower in its edition to new conditions. developing agencies, in
changing and dynamic environments, may additionally, therefore, want to specialize and
formalize its organizational structure, so that paintings have to now not be as heavily
coordinated with the aid of the organizational top. Likewise, companies may additionally
need to distinguish activities into subtasks and hire professionals accountable for a given
subtask formerly treated by using e.g. the enterprise proprietor. In the end, organizations can
also want to decentralize a number of the choice-making energy to lower tiers of the
organization, in order that selections are made via human beings answerable for the subtask,
and who controls particular expertise and information about the handling of the given
subtask.

The simple structure is stated to be characterized maximum by means of what it is far no as

opposed to by way of what it is. The simple structure is not always difficult. It has a low
diploma of departmentalization extensive spans of control authority centralized in a single
individual and little formalization. The simple structure is a ‘flat’ organization enterprise it
usually has only two or three vertical a loose frame of employees, and one character in which
the decision authority is centralized.

(2) Functional Structure

In a purposeful organizational structure, an agency's reporting relationships are grouped

primarily based on speciality or functional area. For example, there might be separate
departments for marketing, accounting, and engineering. Normally, all of the functional heads
will document at once to the employer president or CEO.

A functional structure is one of the most common organizational structures. Underneath this
structure, the company groups employees according to a specialised or comparable set of
roles or tasks. At the same time as practical structures operate properly in stable environments
in which strategies are less willing to modifications or dynamism, the extent of bureaucracy
makes it tough for businesses to respond to changes within the market quickly.

While businesses use a practical organizational structure, people with comparable expertise
and abilities are grouped collectively. This makes it possible for employees to turn out to be
experts in their discipline. It demands for an overall performance management system that
permits for the promotion, development and visibility of character abilities inside their
purposeful region. The specialization that useful systems hone enables to bring about in-depth
information and ability improvement some of the personnel, and this could help you achieve
your organization's practical goals. Specialization leads to operational efficiencies and
enhances productivity level.

Due to their experience, workers with specialized capabilities can perform duties speedy,
effectively and with more self-belief, therefore reducing the prevalence of work-related
mistakes. Further, the clean nature of the profession route inside the useful unit makes it
feasible for personnel to be especially encouraged to boost their careers as they circulate up
in the hierarchy. The primary purpose of practical structures in companies is to deliver the
complete human and informational resources together to satisfy the enterprise’s goals. This
could be a really perfect structure for small corporations that focus on one product or services
because you can maximize overall performance via encouraging peer cooperation amongst
extraordinary units at numerous levels of management through supervision and coordination.

Weakness: Management Issues

Communication in organizations with functional organizational systems may be rigid because

of the standardized methods of operation and the excessive diploma of formalization. This
may further make the decision-making process sluggish and inflexible. Seeing that it's miles
extra bureaucratic, functional devices are regularly no longer accountable to each other, and
negative horizontal coordination within the departments can occur. Lack of innovation and
confined views of organizational goals, together with too much cognizance, can have an
effect on employees' motivation. As your corporation develop and you create more useful
gadgets, the extent of autonomy inside units would possibly growth, making it tough with a
view to coordinate all of the gadgets successfully. Weakness: Unit Coordination even though
useful units often carry out with a high level of efficiency, their degree of cooperation with
every different is every now and then compromised. Such corporations may have trouble
working properly with every different as they will be territorial and unwilling to cooperate.
The prevalence of infighting amongst gadgets might also reason delays, decreased
commitment due to competing hobbies, and wasted time, making tasks fall behind schedule.
This, in the end, can carry down manufacturing levels common, and the organisation-huge
employee commitment in the direction of assembly organizational goals (Davoren J).
A functional organization structure is a hierarchical organization structure wherein people are
grouped as according to their area of specialization. These people are supervised by way of a
useful supervisor with expertise in the same area. This expertise enables him correctly make
use of the abilities of personnel, which in the end facilitates companies in achieving its
enterprise targets. In this sort of organization structure, human beings are classified in line
with the function they carry out within the business enterprise. The organizational chart for a
practical agency structure indicates the president, vice president, finance branch, sales
department, customer service, management, and so on. Every department may have its own
branch head that might be liable for the overall performance of this segment. This allows the
company manages the best and uniformity of overall performance. These extraordinary
departments are now and again known as “silos”. This indicates the system is vertical and
disconnected. The communication flows via the department heads to the top management.
Here, all authority (i.e. finances allocation, useful resource allocation, decision-making, and
many others.) remains with the functional supervisor. Usually, the placement of the mission
supervisor does not exist in this type of organization structure. Even if this function exists,
the position of the venture supervisor can be very limited and he will need permission from
the practical supervisor to fulfill his necessities. The task supervisor may have the title of a
coordinator or an expediter. The practical organization structure is appropriate for a business
enterprise which has ongoing operations and produces fashionable merchandise or goods,
together with manufacturing industries (Usmani F.). As apposed to simple organizational
structures, functional structures are useful for relatively big companies. Employees within the
functional structure are differentiated to perform a specialized set of tasks. For instance, the
marketing department would be staffed only with marketers responsible for the marketing of
the company's products.

This specialization leads to operational efficiencies where employees become specialists

within their own realm of expertise. The most typical problem with a functional
organizational structure is however that communication within the company can be rather
rigid, making the organization slow and inflexible. Therefore, lateral communication between
functions become very important, so that information is disseminated, not only vertically, but
also horizontally within the organization.

Functional structures are frequently characterised by using a massive degree of formalization,

making every characteristic reliant on standardized ways of working. Decision-making
energy is regularly centralized on the top of the hierarchy.
Functional organizational systems are best suitable for corporations producing standardized
items and services at large volumes and low cost. Consequently, practical systems may be
only for companies working in as an alternative strong environment with low rates of trade
and dynamism.

As opposed to e.g. a simple organizational structure, the useful shape works except when the
surrounding environment is instead strong, and while clients anticipate a standardized range
of products now not the problem to continuous alternate in e.g. taste, fashion or innovation. If
the surroundings turn into more complex and uncertain, the functional structure may not be
the exceptionally suitable structure for the employer, and the employer may additionally need
to trade their structure in order to deal with new challenges and uncertainties.

Organizational systems inclusive of the divisional structure and the matrix structure could be
the answer for agencies operating in extra unsure and complex environments, and the answer
for groups supplying a vast range of merchandise to different consumer segments.

(3) Divisional Structure

A divisional shape is a way of designing a company in order that its miles cut up into semi-
self reliant gadgets known as divisions. At the same time as the divisions have manipulated
over their everyday operations, they nevertheless are answerable to a government that gives
the overall approach for the employer and coordinates its implementation the various
divisions. Massive organizations, specifically huge multinational businesses, utilize a
divisional structure. As an example, standard cars changed into one of the first agencies to put
into effect the divisional shape. This kind of structure is also referred to as a multidivisional
structure, or M-shape, corporation.

A divisional organizational structure offers a larger business enterprise the ability to segregate
huge sections of the business enterprise's commercial enterprise into semi-autonomous
organizations. These groups are primarily self-managed and centred upon a narrow thing of
the enterprise's products or services. As with every employer structure, divisions have both
strengths and weaknesses.

A divisional organizational structure normally consists of numerous parallel groups

specializing in a single product or service line. Examples of a product line are the numerous
vehicle manufacturers under trendy automobiles or Microsoft's software program systems.
One example of a provider line is Bank of America's retail, commercial, making an
investment and asset management hands. Not like departments, divisions are extra
independent, each with its own pinnacle executive--often a vice chairman--and commonly
control their own hiring, budgeting and advertising. Though small agencies rarely use a
divisional structure, it is able to work for such corporations as marketing corporations which
have devoted the group of workers and budgets that focus on predominant clients or
industries.

Advantages

Divisions work well because they allow a crew to awareness of a single product or service,
with a leadership structure that supports its essential strategic objectives. Having its personal
president or vice president makes it more likely the division will get hold of the assets it
needs from the employer. In addition, a department's consciousness lets it build a not unusual
tradition and esprit de corps that contributes each to higher morale and a higher
understanding of the division's portfolio. That is far most advantageous to having its product
or service dispersed among a couple of departments through the organization.

Disadvantages

A divisional shape additionally has weaknesses. An employer created from competing

divisions may additionally allow workplace politics in preference to sound strategic thinking
to affect its view on such subjects as the allocation of enterprise assets. As a result, one
department will occasionally act to undermine any other. Additionally, divisions can carry
compartmentalization that may lead to incompatibilities. As an instance, Microsoft's
enterprise-software program department developed the Social Connector in Microsoft
workplace Outlook 2010. They have been not able to integrate Microsoft SharePoint and
home windows live till months after Social Connector should interface with MySpace and
LinkedIn. Some specialists counselled that Microsoft's divisional structure contributed to a
situation where in its personal merchandise had been incompatible across internal business
devices.

Alternatives

Large businesses that need the point of interest of a department may want to alternatively
spin-off right into a free-status subsidiary. Smaller corporations can work through
fundamental projects through committed departments or ad-hoc cross-practical work groups.
Making It Work

To achieve success, divisions ought to be nicely managed. Government management is the

single maximum important determinant of fulfilment for a business enterprise using a
divisional structure. The top leaders need to understand what each division is doing and offer
leadership to the department chiefs on a way to accommodate new strategic directions or
extra efficiently companion across divisions. In addition, the executives ought to have a
stable hold close of resource use. Having a shared pool of centrally, controlled resources like
administrative aid or workplace equipment can lessen charges and organizational complexity.
(Gillikin J)

(4) Strategic Business Unit

A strategic commercial enterprise unit, popularly referred to as SBU, is a fully useful unit of
an enterprise that has its personal imaginative and prescient and direction. Commonly, a
strategic commercial enterprise unit operates as a separate unit; however, it is also an
essential part of the company. It reports to the headquarters about its operational status.

A strategic commercial enterprise unit or SBU operates as an unbiased entity, but it has to
report immediately to the headquarters of the business enterprise about the status of its
operation. It operates independently and is centred on a goal market. It is large sufficient to
have its own assist functions which include HR, training departments and many others. There
are several blessings of getting an SBU. This principle works high quality for organizations,
which have multiple product structures. The quality example of SBU are groups like Proctor
and Gamble, LG and so forth. These businesses have exceptional product classes under one
roof. As an instance, LG as an employer makes customer durables.

It makes refrigerators, washing machines, air-conditioners in addition to televisions. These

small units are formed as separate SBUs so that revenues, prices as well as earnings may be
tracked independently. Once a unit is given an SBU status, it may make its very own
decisions, investments, budgets and so on. It will likely be quick to react when the product
market takes a shift or changes begin happening before the shift occurs.

(5) Matrix Structure

A matrix form of organisational structure combines the traditional departments visible in
functional systems with task teams. In a matrix structure, individuals work throughout teams
and tasks as well as within their personal department or function.

As an instance, a venture or assignment team established to increase a brand new product

may include engineers and layout specialists as well as those with advertising, financial,
employees and production abilities.

These groups can be brief or everlasting relying upon the duties they are requested to finish.
Every group member can find himself/herself with managers - their ordinary practical
supervisor as well as the group leader of the task.

Matrix structures have advantages and disadvantages.

Advantages

 Can help to break down traditional department barriers, improving communication

across the entire organisation
 Can allow individuals to use particular skills within a variety of contexts
 Avoid the need for several departments to meet regularly, so reducing costs and
improving coordination
 Likely to result in greater motivation amongst the team members
 Encourages cross-fertilisation of ideas across departments – e.g. helping to share good
practice and ideas
 A good way of sharing resources across departments – which can make a project more
cost-effective

Disadvantages

 Members of project teams may have divided loyalties as they report to two line
managers. Equally, this scenario can put project team members under a heavy
pressure of work.
 There may not be a clear line of accountability for project teams given the complex
nature of matrix structures.
 Difficult to co-ordinate
  It takes time for matrix team members to get used to working in this kind of structure
 Team members may neglect their functional responsibilities

It is important to remember that a matrix structure often sites alongside a traditional

functional structure – it is not necessarily a replacement.

An example of a matrix structure is illustrated below:

A matrix organizational structure is an organization structure wherein the reporting

relationships are set up as a grid, or matrix, as opposed to within the conventional hierarchy.
In other phrases, employees have twin reporting relationships - normally to each a functional
supervisor and a product manager.

A matrix agency is a structure in which there may be multiple line of reporting managers.
Effectively, it means that the employees of the organization have more than one boss!

The matrix corporation structure is complex, however, helps in accomplishing the ultimate
intention i.e. reaching higher productivity. It has numerous benefits. This form of structure is
used in corporations which have diverse lines and services. It breaks the monotony and
offers more flexibility to the organization. Personnel work with colleagues of different
departments who have their knowledge in different functions.

Whilst specific people from diverse departments work together, it allows clear up troubles in
an extra efficient manner. It does result in the overall development of employees, as each one
is uncovered to exclusive features other than their core job. Here personnel are assigned a
activity or a venture out of doors their personnel department for an, especially temporary
period. These groups are made from people with numerous expertises who have come
together and formed a team to gain a particular purpose. However, there are some demanding
challenges as well. In matrix corporation structure, ambiguity could come in, if you
(personnel) are not positive which supervisor to report to. This also way that employees
might be harassed approximately their role and obligation. Other than that, within the matrix
organizational structure it turns into notably hard for the organisation to gauge the employee's
overall performance in a selected venture. The matrix structure seems to be a bit greater high-
priced to the agency than the traditional one because it employs more managers.

Concerning structure to Strategy, the first aspect of Relating on structure strategy in structure
pertains to the form of capabilities that the business enterprise referring to the structure
should facilitate to perform. There are tests which any proper company structure ought to
accomplish. First -implement the method well, sure features have to be accomplished.
Consequently, the relating structure should make certain that all the necessary activities are
finished and there is no duplication in the performance of the -activities. Second, an interest’s
contribution to strategy have to determine its rank and site in the organisational hierarchy. As
a result, key activities must by no means be subordinated to non-key activities. Revenue
earning or result-generating activities ought to never subordinate to support activities. By
using making achievement inflicting for -the important building blocks for the structure, the
probabilities are significantly stepped forward that method may be efficiently implemented.

The second one component of structure strategy suit pertains to the adaptive -individual of
the environmental stress at the business enterprise. Business enterprise has to interact
constantly with its surroundings and the interplay a few form of modifications are introduced
constantly within the company. If the change is a minor one and is derived in the purview of
mounted programmes of motion, the alternate can be absorbed within the device;
fundamental or rapid adjustments throw the enterprise out of equilibrium seriously affecting
its functioning. The new equilibrium is reached with the aid of taking new programmes.
Consequently, the agency structure should be able -absorb up these changes.

In referring to the structure of strategy, following strategic principles establishing can be

helpful. These standards are not strictly according -with conventional concepts of setting up.
Those ideas are taken into consideration be specifically pertinent for a firm with a couple of
products and multiple industry market opportunities.

These have to also in structure the smaller but developing companies in a dynamic volatile
environment.

1. To the quantity duplication and rate may be prevented. it is exceptionally acceptable to

relate – vast regions of authority and duty to effects favoured with given markets, industries,
or sets of customers. The organization through the market can produce the highest degree of
strategic awareness.

2. It is far better to delegate authority and decentralise strategic planning and operations for
organizations which are particularly mature, predictable, and strong. This frees top
management for strategic planning inside the particularly unknown areas of opportunities.

3. Strategic planning for the unknown regions has to be centralised as this calls for near
supervision of top management. The crucial early choices in unknown fields can pose
important unpredictable risks on aid allocations and technological commitments that are
some of the maximum vital decision areas for the management.

4. In centralization-decentralization continuum, there should be centralised measurements.

This means after-the-reality measurement and now not the manipulate that is affected by the
divisional heads.

5. Emphasis should be on end result-cantered as opposed to earnings centred decentralisation.

It is not essential to impact total income and loss dimensionalisation with a view to delegate
decision -making authority’ to decrease echelon managers.

Decentralisation can be constrained to those key running and aid regions which have within
their makeup change-off troubles which a subordinate supervisor can clear up to affect well
timed and market knowledgeable strategic decision. In different words, neither centralization
nor decentralisation is reduced and dried propositions. Many graduations are available to
creative management, and entrepreneurial form of responsibilities may be assigned with
considerable leverage for attaining consequences without turning in complete profit
responsibility.
Various varieties of business enterprise structure and their suitability to strategies propose that
nobody form is appropriate for all situations. Consequently, many groups choose an
aggregate of more than one structure. Show off the business enterprise structure (partial on
the pinnacle degree best) of Hindustan Lever restricted which is largely an aggregate of
useful and divisional structures. The employer has constituted certain status committees.
Except, ad hoc committees and corporations are constituted each time they want arises.

14.05 STRATEGIC BUSINESS UNIT

A strategic enterprise unit is a fully functional and wonderful unit of an enterprise that
develops its personal strategic imaginative and prescient and course. Within big corporations,
there are numerous smaller specialised divisions that work closer to precise projects and
goals, and we see this organizational setup regularly in international organizations. The
strategic enterprise unit, frequently known as an SBU, stays a crucial component of the
agency and must report to headquarters approximately their operational reputation. Usually,
they will operate as an unbiased company with a selected awareness of target markets and are
huge enough to keep internal divisions along with finance, HR, and so on.

there are many amazing examples of SBUs that we can relate to. For example, well-known
electric has 49 SBUs in such markets as home equipment, aerospace, electronics, and so on.
LG operates along the identical lines, with SBUs competing in electronics and home
equipment, amongst others. So, why does every of those SBUs differentiate from every
different and nevertheless belong to the equal business enterprise? We will discuss that now.

The strategic business unit is described as the independent unit of organization with same
organisational goals. Strategic commercial enterprise gadgets are created based totally
available on the market segments catered through employer and are normally created to grow
earnings. Every strategic commercial enterprise unit has its own budget and also has its very
own income objectives along with advertising plan and hence act as the impartial enterprise
within the primary organization. Hence organisation stocks the responsibility with strategic
business units and for this reason work for the betterment of business enterprise as the whole.

Organizational structure based on strategic business devices (SBUs) is one of the kinds of
formal organizational structure. They are generally used for large businesses operating in
numerous fields - consisting of businesses operating in many markets in many countries.
 Organizational structure based totally on strategic commercial enterprise devices (SBUs) is
one of the types of formal organizational structure. They are usually used for huge
organisations running in diverse fields - which includes groups working in lots of markets in
many countries.

To keep away from any decision-making focused simplest within the crucial management,
there are created separate strategic commercial business units - SBUs. They have quite a big
flexibility in management and selection making, simplest to the extent of world method the
organization ought to coordinate its activities with the top management. the arrangement of
massive corporations into SBUs is an instance of decentralization.

Spiting an organization into SBUs we pick wherein the motives which include geographic,
technological, marketing (client and cultural) help us to cut up the corporation into smaller,
independent, workable devices which can be governed through common (centralized) policy
and strategy.

Other types of the formal organizational structure:

1. Functional Organizational Structure

2. Linear Organizational Structure
3. Matrix Organizational Structure
4. Staff & Line Organizational Structure

Related terms and methods:

I. Corporation
II. Decentralization
III. Formal Organizational Structure
IV. Manager
V. Multinational Corporation
VI. Organizational Architecture
VII. Organizational Chart
VIII. Organizational Unit
IX. Typology of Organizational Structure

11.06 STRATEGIC MANAGEMENT AND MULTIPLE STRATEGIC

BUSINESS UNITS
In a small enterprise, which focuses on one service or product line, the corporate level
strategy serves the complete commercial enterprise. here the proprietor of the company ( sole
dealer ) formulates company strategy ( long-term goals ) and is carried out at the subsequent
decrease level by way of practical plans and regulations. In a massive and a couple of
enterprise companies, there exist a unique levels or devices of control inside an enterprise
entity, that are widely known as company level and functional level.

REFRENCES
David Ingram Strategy and Structure of an Organization ;(2009)
Davoren J. Functional Structure Organization Strength & Weakness;
http://smallbusiness.chron.com/functional-structure-organization-strength-weakness-
60111.html

FahadUsmani What is a Functional Organization Structure?;

https://pmstudycircle.com/2012/08/what-is-a-functional-organization-structure/
FunctionalOrganizationalStructure; http://www.businessmate.org/Article.php?ArtikelId=184

http://smallbusiness.chron.com/simple-organizational-structure-63451.html

http://smallbusiness.chron.com/strategy-structure-organization-2765.html
http://www.businessmate.org/Article.php?ArtikelId=183

http://www.iibmindialms.com/library/management-basic-subjects/strategic-
management/mechanism-relating-structure-strategy/

https://economictimes.indiatimes.com/definition/matrix-organization

https://managementmania.com/en/strategic-business-units-sbus

https://study.com/academy/lesson/strategic-business-units-examples-definition-quiz.html

https://www.citeman.com/3954-the-simple-structure-and-bureaucracy.html

https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/16678-strategic-
business-unit.html

https://www.tutor2u.net/business/reference/matrix-structures

https://www.ukessays.com/essays/commerce/relationship-between-strategy-and-structure-
commerce-essay.php

Jason Gillikin Advantages & Disadvantages of Divisional Organizational Structure ;

http://smallbusiness.chron.com/advantages-disadvantages-divisional-organizational-structure-
611.html

Lynch, R. Corporate Strategy, fourth edition, Financial Times Prentice Hall (2006), pp. 576,
580.

The corporate governance: the paradigm charted secretary October 1997.

Yasheng Huang & Tm Khanna, 'Can India Overtake China?' Foreign Policy, July-August
2003; The Economist (2006); Business Week (2005) (article on ChinaIndia).
EXERCISE

Case Study

The Nakamura Lacquer organisation (NLC) of Kyoto, Japan, employed numerous thousand
guys and produced 500,000 pieces of lacquer tableware annually, with its Chrysanthmum
brand turning into Japan's exceptional recognised and bestselling emblem. The yearly take
advantage of operations became $250,000.

The marketplace for lacquerware in Japan appeared to have matured, with the production
regular at 500,000 pieces 12 months. NLC did practically no enterprise out of doors Japan.
In might also 2000, (tons on your chagrin!) the ambitious and dynamic, Mr Nakamura
(Chairman, NLC) obtained two offers from American groups wishing to promote lacquer
ware in America.

The primary offer became from the national China Corporation. It turned into the most
important producer of properly fine dinnerware within the U.S., with their “Rose and Crown”
logo accounting for almost 30% of overall sales. They were willing to present a company
order for three years for annual purchases of four hundred, 000 units of lacquer dinnerware,
delivered in Japan and at five% more than what the Japanese jobbers paid. However,
Nakamura would have to forego the Chrysanthemum trademark to “Rose and Crown” and
adopt now not to promote lacquer ware to anyone else in the U.S.

The second one provide was from Sammelback, Sammelback and Whittaker (henceforth
SSW), Chicago, the largest dealer of inn and restaurant resources inside the U.S. They
perceived a U.S. market of 600,000 sets a year, looking ahead to it to head up to 2 million in
round 5 years. For the reason that eastern authorities did now not allow remote places
investment, SSW changed into inclined to price range $1.5 million for the next years toward
advent and promoting. Nakamura would promote his “Chrysanthemum” emblem but ought to
deliver distinctive illustration to SSW for five years at trendy rate prices and also forego his
earnings margin toward paying returned of the $ 1.5 million.

Q. what should Mr Nakamura do and analyse the situation.