Chapter Ten: Creating Effective Organizational Designs 1.

Why is it important for managers to carefully consider the type of organizational structure that they use to implement their strategies? Structures help to ensure that resources are used effectively in accomplishing an organizations mission. Structure provides a means of balancing two conflicting forces: a need for the division of tasks into meaningful groupings and the need to integrate such groupings in order to ensure efficiency and effectiveness. Structure identifies responsibilities and hierarchical relationships. It also influences the flow of information as well as the context and nature of human interactions. 2. Briefly trace the dominant growth pattern of major corporations from simple structure to functional structure to divisional structure. Discuss the relationship between a firms strategy and its structure. Simple structure: oldest, and most common, organizational form. Most organizations are very small and have a single or very narrow product line in which the owner-manager (or top executive) makes most of the decisions. The owner-manager controls all activities, and the staff serves as an extension of the top executive. Functional structure: the major functions of the firm are grouped internally. When an organization is small (15 employees or less), it is not necessary to have a variety of formal arrangements and groupings of activities. As firms grow, however, excessive demands may be placed on the owner-manager in order to obtain and process all of the information necessary to run the business. Chances are the owner will not be skilled in all specialties and will need to hire specialists in the various functional areas. Divisional structure: is organized around products, projects, or markets. Each of the divisions, in turn, includes its own functional specialists who are typically organized into departments. A divisional structure encompasses a set of relatively autonomous units governed by a central corporate office. 3. What are the relative advantages and disadvantages of the types of organizational structuresimple, functional, divisional, matrixdiscussed in the chapter?

4. When a firm expands its operations into foreign markets, what are the three most important factors to take into account in deciding what type of structure is most appropriate? What are the types of international structures discussed in the text and what are the relationships between strategy and structure?

(1) the type of strategy that is driving a firms foreign operations, (2) product diversity, and (3) the extent to which a firm is dependent on foreign sales The primary types of structures used to manage a firms international operations are: International division Geographic-area division Worldwide functional Worldwide product division Worldwide matrix 5. Briefly describe the three different types of boundary-less organizations: barrier-free, modular, and virtual. A barrier-free organization enables a firm to bridge real differences in culture, function, and goals to find common ground that facilitates information sharing and other forms of cooperative behavior. Eliminating the multiple boundaries that stifle productivity and innovation can enhance the potential of the entire organization. The modular organization outsources non-vital functions, tapping into the knowledge and expertise of best in class suppliers, but retains strategic control. Outsiders may be used to manufacture parts, handle logistics, or perform accounting activities. The value chain can be used to identify the key primary and support activities performed by a firm to create value. The virtual organization can be viewed as a continually evolving network of independent companiessuppliers, customers, even competitorslinked together to share skills, costs, and access to one anothers markets. The members of a virtual organization, by pooling and sharing the knowledge and expertise of each of the component organizations, simultaneously know more and can do more than any one member of the group could do alone. 6. What are some of the key attributes of effective groups? Ineffective groups?

7. What are the advantages and disadvantages of the three types of boundaryless organizations: barrier-free, modular, and virtual? Barrier-Free Advantages Leverages the talents of all employees Enhances cooperation, Disadvantages Difficult to overcome political and authority boundaries inside and outside the organization Lacks strong leadership and

coordination, and information sharing among functions, divisions, SBUs, and external constituencies Enables a quicker response to market changes through a singlegoal focus Can lead to coordinated win-win initiatives with key suppliers, customers, and alliance partners Modular Advantages Directs a firms managerial and technical talent to the most critical activities Maintains full strategic control over most critical activitiescore competencies Achieves best in class performance at each link in the value chain Leverages core competencies by outsourcing with smaller capital commitment Encourages information sharing and accelerates organizational learning

common vision, which can lead to coordination problems Time-consuming and difficult-tomanage democratic processes Lacks high levels of trust, which can impede performance

Disadvantages Inhibits common vision through reliance on outsiders Diminishes future competitive advantages if critical technologies or other competencies are outsourced Increases the difficulty of bringing back into the firm activities that now add value due to market shifts Leads to an erosion of crossfunctional skills Decreases operational control and potential loss of control over a supplier

Virtual Advantages Enables the sharing of costs and skills Disadvantages Harder to determine where one company ends and another begins, due to close interdependencies among players Leads to potential loss of operational control among partners Results in loss of strategic control over emerging technology Requires new and difficult-toacquire managerial skills

Enhances access to global markets Increases market responsiveness Creates a best of everything organization since each partner brings core competencies to the alliance Encourages both individual and organizational knowledge sharing and accelerates organizational

learning 8. When are ambidextrous organizational designs necessary? What are some of their key attributes? The ambidextrous organizational designs were more effective than the other three designs on both dimensions: launching breakthrough products or services (adaptation) and improving the performance of the existing business (alignment).