Topic 6: Strategy, Organization Design and Effectiveness by Oeii (Grupo 1)

Strategy, Organization Design and Effectiveness

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Bibliography

• Daft et al. (2020). Chapter 3.

BBLKOR PHY OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

The Role of Strategic Direction in Organization Design

• An organization is created to achieve some purpose, which is decided by those who establish and develop it, such as the chief executive officer (CEO) and the top management team.
• Organization design is used to implement goals and strategy and thereby influences the prospects of success.

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Organization Direction, Design and Effectiveness

3 60 N.E 08 100 120External Environment Opportunities Threats Uncertainty Resource availability Organization Design Effectiveness Outcomes Strategic Direction CEO, Top management team Define mission, official goals Select operational goals, competitive strategies Production technology Human resource policies, incentives Competing values Internal Situation Strengths Weaknesses Distinctive competence Leader style Past performance Structural form-learning vs. efficiency Information and control systems Resources Efficiency Goal attainment Organizational culture Interorganizational linkages OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Organizational Purposes: Mission

4Izationa SION Mission 340 20 . The mission describes the organization's vision, its shared values and beliefs and its reason for being. . It is sometimes called the official goals, referring to the formally stated definition of business scope and outcomes that the organization is trying to achieve. · A mission statement communicates to internal and external stakeholders what the organization stands for and what is trying to achieve. NE ON . MISSIO 40 60 OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Organizational Purpose: Airbnb's Mission Statement

5Organizational Purpose Mission EXHIBIT 3.2 Airbnb's Mission Statement ION . MISSION . 20 NW 40 NE 60 MISSIC Airbnb's mission is to create a world where people can belong through healthy travel that is local, authentic, diverse, inclusive and sustainable. Airbnb uniquely leverages technology to economically empower millions of people around the world to unlock and monetize their spaces, passions and talents to become hospitality entrepreneurs. Source: press.airbnb.com/about-us/ OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Organizational Purpose: CVS Health Mission Statement

6Organizational Purpose Mission ION . MISSION . 20 NW 40 NE 60 MISSIC Mission Statement for CVS Health WE ARE A pharmacy innovation company CVSHealth OUR STRATEGY Reinventing pharmacy OUR PURPOSE Helping people on their path to better health OUR VALUES Innovation Collaboration Caring Integrity Accountability OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Organizational Purpose: Operative Goals

• Operative goals describe specific measurable outcomes and are often concerned with the short run.
• Overall performance
• Resources
• Market
• Employee development
• Innovation and change
• Productivity

GOALS OEII (Grupo 1). Prof. José Luis Roldán Salg

Organizational Purpose: Types of Operative Goals

8Organizational Purpose Operative goals Overall Performance Goals Market Goals Resource Goals Employee Development Goals Innovation and Change Goals Productivity Goals OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Organizational Purpose: Volvo Transformation Programme

9Organizational Purpose Operative goals - Overall performance EXHIBIT 3.3 Volvo Transformation Programme Delivering Profit Improvement 25.7 18.3 2012 Reorganization, brand positioning and new strategy Operating Income Excl. Restructuring Charges, SEK bn Operating Cash Flow, Industrial Operations, SEK Bn 2013 Extensive product renewal and launch of efficiency programme 2014 Execute efficiency programme and drive organic growth 2015 Deliver profitability improvement 11 12 13 14 15 11 12 13 14 15 Reference: The Volvo Group Annual and Sustainability Report 2015. OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Organizational Purpose: Importance of Goals

• Official goals and mission statements describe a value system for the organization. They legitimize the organization.
• Operative goals relate to key tasks of the organization. They are more explicit and wohl yd'atively well defined. Operative goals ance serve several purposes:
• Employee direction and motivation
• Decision guidelines
• Standards of performance

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Goal Types and Purposes

11OEII (Grupo 1). Prof. José Luis Roldán Salgueiro Goal Types and Purposes Mission, Official Goals · Communicate purpose and values · Bestow legitimacy Operating Goals · Provide employee direction and motivation · Offer decision guidelines . Define standards of performance

Selecting Strategy and Design

• What is a strategy? . It is a plan for interacting with the competitive environment. Managers must select a specific strategy and design options in order to achieve official and operative goals within the competitive environment.
• Two models for formulating strategies:
• Porter's Competitive Strategies
• Miles and Snow's Strategy Typology
• Each provides a framework for competitive action.

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Porter's Competitive Strategies

• Three competitive strategies
• Low cost leadership: This strategy tries to increase market share by emphasizing low cost compared to competitors (e.g., Ryanair).
• Differentiation: Organizations attempt to distinguish their products or services from others in the industry (e.g., Rolex watches).
• Focus: Focused low cost and focused differentiation. The organization concentrates on a specific regional market or buyer group (e.g., Puma).

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Porter's Competitive Strategies Examples

14Porter's Competitive Strategies Differentiation Low-cost Leadership Focus on uniqueness Focus on efficiency, low cost Starbucks Coffee Co. Example (broad scope): Apple Example (broad scope): ASDA Ryanair Puma Example (narrow scope): Edward Jones Investments Example (narrow scope): Costcutter Volotea Managers Choose Which to Emphasize OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Miles and Snow's Strategy Typology

15Miles and Snow's Strategy Typology . This typology is based on the idea that managers seek to formulate strategies that will be congruent with external environment. OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Miles and Snow's Strategy Typology: Prospector

• The prospector strategy is to innovate, take risks, seek out new opportunities and grow.
• This strategy is suited to a dynamic, growing environment, where creativity is more important than efficiency.

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Miles and Snow's Strategy Typology: Defender

17WORLD FIRST WAR CENTENARY rial War Museums Miles and Snow's Strategy Typology · Defender . The defender strategy is concerned with stability or even retrenchment. · This strategy seeks to hold onto current customers, but it neither innovates nor seeks to grow. . The defender is concerned primarily with internal efficiency and control to produce reliable, high- quality products for existing customers. · This strategy can be successful when the organization exists in a declining industry or a stable environment. OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Miles and Snow's Strategy Typology: Analyzer

18C Miles and Snow's Strategy Typology · Analyzer . The analyzer tries to maintain a stable business while innovating on the periphery. . It seems to lie midway between the prospector and the defender. . The analyzer attempts to balance efficient production for current product lines with the creative development of new product lines OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Miles and Snow's Strategy Typology: Reactor

• The reactor strategy is not really a strategy at all.
• Reactors respond to environmental threats and opportunities in an ad hoc fashion.
• In a reactor strategy, top management has not defined a long-range plan, or given the organization an explicit mission or goal, so whatever actions are taken that seem to meet immediate needs

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

How Strategies Affect Organization Design

Porter's Competitive Strategies and Organization Design

• Strategy: Differentiation Organization Design: · Learning orientation; acts in a flexible, loosely knit way, with strong horizontal coordination · Strong capability in research · Values and incorporates mechanisms for customer intimacy · Rewards employee creativity, risk taking and innovation
• Strategy: Low-Cost Leadership Organization Design: · Efficiency orientation; strong central authority; tight cost control, with frequent, detailed control reports · Standard operating procedures · Highly efficient procurement and distribution systems · Close supervision; routine tasks; limited employee empowerment

Miles and Snow's Strategy Typology and Organization Design

• Strategy: Prospector Organization Design: · Learning orientation; flexible, fluid, decentralized structure · Strong capability in research
• Strategy: Defender Organization Design: · Efficiency orientation; centralized authority and tight cost control · Emphasis on production efficiency; low overhead · Close supervision; little employee empowerment
• Strategy: Analyzer Organization Design: · Balances efficiency and learning; tight cost control with flexibility and adaptability · Efficient production for stable product lines; emphasis on creativity, research, risk taking for innovation
• Strategy: Reactor Organization Design: · No clear organizational approach; design characteristics may shift abruptly, depending on current needs

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro

Emerging Concepts in Business Strategy

• Chan Kim and Renée Mauborgne's Blue Ocean Strategy. They divide up markets into:
• Red oceans are market segments that are already being exploited: where strategy is geared towards finding ways to gain an edge over competitors. The red oceans are crowded and returns on strategic innovation decline over time.
• Blue oceans are industries or business ideas that are not currently in existence, and so thus the size of the blue ocean market space is unknown. Products can take advantage of the 'blue ocean' space and generate strong profits.

OEII (Grupo 1). Prof. José Luis Roldán Salgueiro