PowerPoint to accompany

Organisation Theory
CONCEPTS AND CASES

5e
Stephen Robbins Neil Barnwell

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Chapter 5

Strategy

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Objectives
This chapter examines the main theories which link strategy and structure. It also examines the industry-structure relationship

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Strategy
Strategy is one of the contingencies which can influence the structure that an organisation can adopt. Strategy is the determination of the basic long-term goals and objectives of an organisation and the adoption of courses of action and allocation of resources necessary for carrying out these goals.

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Strategy continued:
Strategy may be planned through a rational process of determining goals and guidelines. Or it may emerge from a pattern of significant decisions over time. Either way, determining strategy is a very political process.

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Comparison of planning and evolutionary mode of decision making

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Strategy
Businesses often have different strategies for each business unit or division.

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Levels of strategy

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Chandlers strategy-structure thesis

Chandler was an economic historian who studied nearly 100 US companies for the period 1000 to 1950. He found that as companies diversified their product range they tended to divisionalise along product lines. He concluded that structure followed strategy.

Robbins, Barnwell: Organisation Theory 5e 2007 Pearson Education Australia

Chandlers thesis

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Chandlers thesis continued:

But Chandlers sample consisted mainly of firms in new industries which had adopted a growth strategy. This raises problems in generalising to other types of firms and industries.

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Miles and Snows strategic types

Miles and Snow proposed three strategies each of which was associated with certain structural characteristics. Defenders: Aimed to produce a limited set of products at which they were cost competitive. They aimed to maximise efficiency. Prospectors: Aimed to find and exploit new market opportunities. They aimed to be flexible. Analysers: Aimed to move into new products and markets after their viability has been proven.

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Miles and Snow continued:

Reactors had no identifiable strategy and hence inconsistent structural patterns.

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Miles and Snow continued:

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Porters competitive strategies

Porter developed similar strategic types called cost leadership, differentiation and focus.

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Skills, resources and structural requirements of Porters strategic types

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Strategy and globalisation

Bartlett and Ghoshall proposed that multinational corporations could be categorised into four strategic types. Each strategic type had its own structural characteristics.

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Bartlett and Ghoshals four strategic types

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Bartlett and Ghoshals four strategic types continued:

International strategy Competencies developed at the centre, with knowledge transferred to local units. Some adaptation occurs at local level to adapt product to market conditions. Not a great need for worldwide coordination or integration. Product divisionalisation is common form Multidomestic strategy local self sufficient units with little coordination between them. Low need for a common culture. Divisionalisation based upon geographic area

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Bartlett and Ghoshals four strategic types continued:

Global strategy Most operational decisions centralised. Knowledge retained in central locations. Extensive world wide coordination and integration. Common culture to promote cooperation. World wide product division Transnational strategy Mixed centralised and decentralised form with knowledge being widespread. Very high need for coordination leads to world wide matrix. Uncommon strategy because of mangement difficulties

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Industry-structure relationship
Industry and structure may also be related. Certain industries have common characteristics so it would not be surprising if firms in the same industry had had common structures.

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Two variable analyses of industries

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Summarising the strategystructure relationship

Strategy determination may be a rational process but in many cases is both political and opportunistic. Strategies may be grouped into a number of classifications. Each strategic classification is accompanied by common structural characteristics. This chapter has examined a number of such classifications.

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Summarising the strategystructure relationship continued:

But is possible for strategy to follow structure. Once an organisation has invested heavily in plant, equipment and processes, major changes to strategy are unlikely.

Also it is difficult to isolate strategy from other organisational activities.

There is also a lag between introduction of a new strategy and any changes in structure.

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Discussion points
Under what conditions would you expect strategy to exert a significant influence upon structure? Discuss the way in which strategy is determined in an organisation you are familiar with. Link the strategic changes to any structural change. Discuss whether the nature of the industry a firm is in, limits its strategic and structural options.

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