STRATEGYANDSTRUCTURE-IUNorthwest.ppt

STRATEGY AND STRUCTURE STRATEGY IMPERATIVE STRATEGY-DEFINED TWO VIEWS OF STRATEGY STRATEGY HISTORY LEVELS OF STRATEGY GENERAL MOTORS THE STRATEGY IMPERATIVE CHANDLER’S THESIS – 1960’s CHANDLER, CONT’D GROWTH STRATEGIES I The initial stage typically involves plants, sales offices, or warehouses in a single industry, a single location, and performance of a single function. If successful, they follow a predictable path. GROWTH STRATEGIES II The first growth stage is VOLUME EXPANSION, producing selling and distributing more of their product or service to customers. GROWTH STRATEGIES III The next stage of growth is GEOGRAPHIC EXPANSION, continuing what it was already doing in new geographical areas, with new field units. GROWTH STRATEGIES IV The third growth strategy is VERTICAL INTEGRATION, as firms either buy or create other functions. GROWTH STRATEGIES V The ultimate growth strategy, PRODUCT DIVERSIFICATION, involving the firm in new industries either through merger, acquisition, or creation (product development). CHANDLER, CONT’D As a firm moves through each stage, it must change its organization structure in successive steps through System 1 to System 4 (Likert) structural types. The initial System 1 structure is appropriate because volume expansion of a single product or service in a single industry stresses low unit cost (efficiency) and maximum resource utilization (production), with relatively low concern for response to change and uncertainty. CHANDLER, CONT’D The change to geographic expansion, and ultimately, product diversification increases the firm’s concern for adaptability and flexibility in the face of diverse and complex environments. Thus, the organization structures of such firms are characterized by product-based divisions and departments, decentralized authority, and relatively wide spans of control. LIKERT SYSTEM 1 Also known as: Bureaucratic, Classical, Formalistic, Mechanistic Characteristics: high specialization of labor, homogeneous departm