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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
C. Balance the Demands for Control/Differentiation with the Need for
Coordination/Integration
1. Specialization of work and effort allows a unit to develop greater expertise, focus,
and efficiency.
a) So it is that some organizations adopt functional, or similar, structures.
2. The rise of a consumer culture around the world has led brand marketers to realize
D. Restructure to Emphasize and Support Strategically Critical Activities
1. Restructuring is redesigning an organizational structure with the intent of
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
2. At the heart of the restructuring trend is the notion that some activities within a
3. Two developments that have become key ways many firms sought to improve
4. Business process reengineering (BPR), was originally advocated by consultants
approach.
a) BPR is intended to place the decision-making authority that is most relevant
b) This is accomplished through a form of empowerment, facilitated by
5. Business reengineering reduces fragmentation by crossing traditional departmental
lines and reducing overhead to compress formerly separate steps and tasks that are
strategically intertwined in the process of meeting customer needs.
a) This “process orientation,” rather than a traditional functional orientation,
b) This is usually accomplished by assembling a multifunctional, multilevel
c) Customer focus must permeate all phases.
(1) Develop a flowchart of the total business process, including its
(2) Try to simplify the process first, eliminating tasks and steps where
(3) Determine which parts of the process can be automated; consider
introducing advanced technologies that can be upgraded to achieve
gains down the road.
(4) Evaluate each activity in the process to determine whether it is strategy-
(5) Weigh the pros and cons of outsourcing activities that are noncritical or
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
structure.
e) Exhibit 11.10, Global Strategy in Action, provides an example of the need
f) Downsizing and self-management at operating levels are additional
g) Downsizing is eliminating the number of employees, particularly middle
h) The arrival of a global marketplace, information technology, and intense
Exhibit 11.12, Top Global Strategist.
l) One of the outcomes of downsizing was increased self-management at
m) Cutbacks in the number of management people left those who remained with
more work to do.
o) Spans of control, traditionally thought to maximize under 10 people, have
p) This delegation, also known as empowerment, is accomplished through
q) It is also seen through efforts to create distinct businesses within a
r) Whatever the terminology, the idea is to push decision making down in the
s) The result is often the elimination of up to half the levels of management
IV. Creating Agile, Virtual Organizations
A. Corporations today are increasingly seeing their “structure” become an elaborate
network of external and internal relationships.
1. This organizational phenomenon has been termed the virtual organization, which
is defined as a temporary network of independent companies—suppliers,
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
2. An agile organization is one that identifies a set of business capabilities central to
high-profitability operations and then builds a virtual organization around those
capabilities, allowing the agile firm to build its business around the core, high-
profitability information, services, and products.
3. Creating an agile, virtual organization structure involves outsourcing, strategic
based organization.
4. Let’s examine each of the approaches to creating a virtual organization in more
B. Outsourcing—Creating a Modular Organization
1. Outsourcing was an early driving force for the virtual organization trend.
a) Outsourcing is simply obtaining work previously done by employees inside
(1) Managers have found that as they attempt to restructure their
(2) This has particularly been the case of numerous staff activities and
(3) But it can also refer to primary activities that are steps in the business’s
(4) Further scrutiny has led managers to conclude that these activities either
(5) If this is so, then the business can enhance its competitive advantage by
b) Choosing to outsource activities has been likened to creating a “modular”
organization.
(1) A modular organization provides products or services using different,
c) Many organizations long ago starting outsourcing functions like payroll,
(1) But outsourcing today has moved into virtually every aspect of what a
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
d) Outsourcing IT services, call center services, and routine computer
e) Business process outsourcing (BPO) is the most rapidly growing segment of
f) Perhaps the more controversial trends involve product design and even
g) Outsourcing as a means to create an agile, virtual organization has many
(1) It can lower costs incurred when the activity outsourced is done in-
house.
(2) It can reduce the amount of capital a firm must invest in production or
service capacity.
h) Outsourcing is not without its “cons,” however; there are several:
(1) Outsourcing involves loss of some control and reliance on “outsiders.”
(2) Outsourcing can create future competitors.
(3) Skills important to a product or service are “lost.”
i) Its potential disadvantages not withstanding, outsourcing has become a key,
standard means by which agile, virtual organization structures are built.
(1) It has become an essential building block, most firms in any market
allow them to remain cost competitive, dynamic, and able to develop
their future core competencies.
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
(2) As outsourcing moves from sourcing manufacturing and IT
management to all business management processes, careful attention
C. Strategic Alliances
1. Strategic alliances are arrangements between two or more companies in which
relationship.
a) They are different from outsourcing relationships because the requesting
2. Advantages
a) Leverages several firms’ core competencies.
b) Limits capital investment.
c) Flexible.
d) Networking and relationship building.
(1) Alliances get companies together, sometimes even competitors.
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
3. Disadvantages
a) Loss of control.
(1) A firm in an alliance by definition cedes ultimate control to the broader
b) Can be hard to establish good management control of the project—loss of
operational control.
(1) Where multiple firms have interrelated responsibilities for a sizable,
(1) One strategic alliance can consume the majority attention of strategic
4. Where technology development is the focus of the alliance, or maybe part of it,
firms partnered together may also compete in other circumstances.
a) Or they may have the potential to do so.
5. Strategic alliances have proven a very popular mechanism for many companies
seeking to become more agile competitors in today’s dynamic global economy.
a) It has proven a major way for small companies to become involved with
D. Toward Boundaryless Structures
1. Management icon Jack Welch coined the term boundaryless organization, to
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
2. Boundaries, or borders, arise in four “directions” based on the ways we
traditionally structure and run organizations:
a) Horizontal boundaries—between different departments or functions in a
3. Outsourcing, strategic alliances, product-team structures, reengineering,
restructuring—all are ways to move toward boundaryless organization.
a) Culture and shared values across an organization that value boundaryless
behavior and cooperation help enable these efforts to work.
4. As noted at the beginning of this section, globalization has accelerated many
5. The Web’s contribution electronically has simultaneously become the best
analogy in explaining the future boundaryless organization.
a) And it is not just the Web as in the Internet, but a weblike shape of
successful organizational structures in the future.
development to manufacturing—to outsiders who can perform those
functions with greater efficiency.
g) Exhibit 11.14, From Traditional Structure to B-Web Structure, illustrates
this evolution in organization structure to what it calls the B-Web, a truly
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
6. Managing this intricate network of partners, spin-off enterprises, contractors, and
freelancers will be as important for managing internal operations.
a) Indeed, it will be hard to tell the difference.
E. Ambidextrous Learning Organization
1. The evolution of the virtual organizational structure as an integral mechanism
2. A shift from what Subramanian Rangan calls exploitation to exploration indicates
a) Rather than going to markets to exploit brands or for inexpensive resources,
b) This shift in the intent of the structure, then, is to seek information, to create
c) Demand in another part of the world could be a new-product trend-setter at
d) So a firm’s structure needs to be organized to enable learning, to share
e) Others look to companies like 3M or Procter & Gamble that allow slack time,
f) This perspective is similar to the boundaryless notion—accommodate the
g) So having structures that emphasize coordination over control, that allow
flexibility (are ambidextrous), that emphasize the value and importance of