Business Policy and Strategy II (BUS 424)

Topic 2: Strategy and Organisational Structure

Concept: Strategy

Strategy is derived from the Greek word ‘strategos’ which meansarmy.

Strategy is the determination of the basic long term goals andobjectives of an enterprise, and the adoption of courses of actionand the allocation of resources necessary for carrying out thesegoals (Chandler, 1962).

Strategy is the decision rules and guidelines required by a firmfor its orderly and profitable growth (Ansoff, 1965).

Strategy Cont.,

Strategy is the pattern of activities to be followed by an organisation inpursuit of its long-term purpose.

Strategy can be defined as the process of identifying, protecting,leveraging and renewing the strategic capabilities of an organisationthrough its definition of purpose its organisation and processes, and itschoice and support of people.

Strategy is concerned with deciding the nature, domain and scope of anorganisation’s activities

Types of Strategies

1. Entry strategies: subsidiaries, mergers and acquisitions, alliances and joint ventures,licensing agreements, franchising, and basic export and import operations.

2. Modernisation strategies: internal stability, internal expansion, external expansion,internal retrenchment, among others.

3. Diversification and integration strategies: Horizontal integration, verticalintegration, conglomerate diversification, Concentric diversification

4. Turnaround, divestment and liquidation strategies

5. Combination strategies

Concept: Organisational StructureOrganisational structure is the arrangement by which various

organisational activities are divided up, and how efforts are coordinated.

The structure helps people in the organisation to work togethereffectively.

Organisational structure points toward a continuing pattern of tasks andactivities.

A structure defines the work to be done and how to do it, implementingorganisational strategies

Types of Organisational StructureSimple

Owner

Employee Employee Employee

Functional Organisational Structure

President

Finance Production Marketing

Divisionalised Structure

President

Enterprise

Systems

Laserjet

Solutions

Consumer

Products

Sample of Functional and Divisional

Project CManager

Project BManager

Project AManager

EngineeringManager

MarketingManager

SoftwareManager

Project-Based Matrix Structure

President

Sample Horizontal Structure

Sample Geographic Structure

Sample Matrix Organisation

Core

Firm

(Canada)

Product

Development

Firm

(France)

Marketing

Firm

(U.K.)

Customer

Service

Firm

(U.S.A.)

Production

Firm

(China)

Accounting

Firm

(Canada)

Network/Virtual Organisational Structure

Sample of Virtual Network

Organisation Design Alternatives

Required Work Activities

Reporting Relationships

Departmental Grouping Options

Relationship between Strategy and Structure

Chandler opine that structure follows strategy

By 1970s, scholars began to question Chandler’s early piece with reasonssuch as strategy may not evolve from top management, environmentaldemand, structure can determine people and skills required....by thisstrategy can follow structure

In most cases organisations may need to customise their structure to fit theirstrategy

The choice of structure will depend on a number of factors including theorganisation strategy while choice of organisation strategy could also informorganisational structure

Relationship between Strategy and Structure Cont.,

Change in strategy will bring about change in organisationalstructure and could be other way.

Example:

In the first instance, to develop a strategy that will bring about innovation, aloose structure with low specialisation and low formalisation is required.......Which one determines which? ...............Is it possible for the other way?

Strategy Structure

Innovation Flat structureCost minimisation Matrix StructureEntries strategy A combination of flat and matrix

structures

Relationship between Strategy and Structure Cont.,

Cost minimisation strategy intend to tighten cost controls, avoidunnecessary expenses in every areas of business. This can be implementedwith matrix structures because it centralises control system.

Entry strategy is required when organisations plan to pursue new businessventure/market. This strategy will work with combined structure such as flatand matrix.

QUESTIONS

1. Which strategy and structure would you adopt for a small business that

is newly floated by a family and why?

2. Which strategy and organisational structure would you consider for a

business that expanding business operations from region to national

and why?

3. Explain how organisational characteristics can influence your choice of

strategy