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Figure Note
Characteristics of the worldwide product divisional structure are presented in Figure
11.9. They illustrate the centralized nature of the structure.
FIGURE 11.9
Worldwide Product Divisional Structure for Implementing a Global Strategy
The worldwide product divisional structure is characterized by:
• An emphasis on inter-division coordination devices to facilitate global economies of scale
and scope
Using the Combination Structure to Implement the Transnational Strategy
The last international strategy (the transnational strategy) combines multidomestic and
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The transnational strategy is often implemented through two possible combination structures:
a global matrix structure or a hybrid global design.
FIGURE 11.10
Hybrid Form of the Combination Structure for Implementing a Transnational Strategy
In this design, some divisions are oriented toward products whereas others are oriented
toward market areas. Thus, in some divisions, where the geographic area is more important,
the division managers are area-oriented. In other divisions, where worldwide product
coordination and efficiencies are more important, the division manager is more product-
oriented.
Teaching Note
Many features of the transnational strategy are tricky to sort out. Emphasize that point
here with the chapter’s discussion of the combination structure.
6
Define strategic networks and discuss how strategic center firms implement
such networks at the business, corporate, and international levels.
Matches between Cooperative Strategies and Network Structures
As discussed in Chapter 9, firms often may develop multiple strategic alliances to implement
cooperative strategies.
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Figure Note
Figure 11.11 illustrates the structure of the strategic network.
FIGURE 11.11
A Strategic Network
The strategic center firm sits in the middle of the strategic network so that it can coordinate
the activities of network members firms.
Note: Four critical aspects of functions performed by the strategic center firm—strategic
outsourcing, capability development, technology management, and managing learning
processes—are discussed next.
As coordinator or manager of activities carried out by partners in the strategic network, the
strategic center firm—and other network partners—should note four critical aspects of the
strategic center firm’s functions:
1. Strategic Outsourcing
2. Development of Competencies
3. Technology Management
4. Race to Learn (or Managing Learning Processes)
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Emphasizing the race to learn implies that the strategic center firm must encourage positive
rivalry among partner firms that strengthen each partner’s (as well as the network’s) value
chain. The effectiveness of the center firm is related to how well it learns to manage learning
processes among network partners.
IMPLEMENTING BUSINESS-LEVEL COOPERATIVE STRATEGIES
Recall from Chapter 9 that complementary assets at the business level can be vertical or
horizontal. Vertical complementary strategic alliances are more common than horizontal
alliances and generally are focused on buyer-supplier relationships.
With Toyota’s strategic network of vertical alliances in Japan, Toyota, as the strategic center
firm:
IMPLEMENTING CORPORATE-LEVEL COOPERATIVE STRATEGIES
It is less difficult to select a strategic center firm in corporate-level cooperative strategic
alliances structured as centralized franchise networks than in those that are decentralized sets
of diversified strategic alliances.
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IMPLEMENTING INTERNATIONAL COOPERATIVE STRATEGIES
Competing across national borders increases the complexity of the task of managing strategic
networks that have been formed through international cooperative strategies and stifles the
selection of a strategic center firm because great differences may exist among the regulatory
environments of partners’ home countries.
Figure Note
Configuration of a distributed strategic network is illustrated in Figure 11.12.
FIGURE 11.12
A Distributed Strategic Network
Although the distributed strategic network has a primary or main strategic center firm, it also
is characterized by multiple strategic center firms that are distributed throughout the world.
ANSWERS TO REVIEW QUESTIONS
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1. What is organizational structure and what are organizational controls? What are
the differences between strategic controls and financial controls? What is the
importance of these differences?
Organizational structure specifies the firm’s formal reporting relationships, procedures,
controls, and authority and decision-making processes. Influencing managerial work,
structure essentially details the work to be done and how that work is to be accomplished.
Organizational controls guide the use of strategy, indicate how to compare actual and
expected results, and suggest actions to take to improve performance when it falls below
expectations. When properly matched with the strategy for which they were intended,
structure and controls can be a competitive advantage.
2. What does it mean to say that strategy and structure have a reciprocal relationship?
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3. What are the characteristics of the different functional structures used to
implement the cost leadership, differentiation, integrated cost
leadership/differentiation, and focused business-level strategies?
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Firms using the differentiation strategy produce products that customers perceive as being
different in ways that create value for them. With this strategy, the firm wants to sell
nonstandardized products to customers with unique needs. Relatively complex and flexible
reporting relationships, frequent use of cross-functional product development teams, and a
strong focus on marketing and product R&D rather than manufacturing and process R&D (as
with the cost leadership form of the functional structure) characterize the differentiation form
of the functional structure (see Figure 11.3). This structure contributes to the emergence of a
development-oriented culture—a culture in which employees try to find ways to further
differentiate current products and to develop new, highly differentiated products.
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Firms using the integrated cost leadership/differentiation strategy want to sell products that
create value because of their relatively low cost and reasonable sources of differentiation.
The cost of these products is low “relative” to the cost leader’s prices while their
differentiation is “reasonable” compared to the clearly unique features of the differentiator’s
products.
4. What are the differences among the three versions of the multidivisional (M-
form) organizational structures that are used to implement the related constrained,
the related linked, and the unrelated corporate-level diversification strategies?
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The three variants of the multidivisional or M-form structure that should be used to
implement corporate-level strategies are the cooperative form, SBU form, and competitive
form.
The related constrained strategy is best implemented using the cooperative form of the
multidivisional structure. This bears out in practice because the cooperative form is an
organizational structure that uses many integration devices and horizontal human resource
practices to foster cooperation and integration among the firm’s divisions. The cooperative
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6. What is a strategic network? What is a strategic center firm? How is a strategic
center used in business-level, corporate-level, and international cooperative
strategies?
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MINI-CASE
Unilever Cooperates with Many Firms and Nonprofit Organizations to Implement Its
Strategy While Creating a More Sustainable Environment
Unilever is a European-based global consumer products company with a strong sustainable
environment strategy. To improve efficiencies, Unilever has adopted a worldwide product
structure. The company emphasizes the geographic areas using a transnational strategy while
ANSWERS TO MINI CASE DISCUSSION QUESTIONS
1. Why have consumer product companies headquartered in Europe historically
used the multidomestic strategy? In your view, is this an effective choice of
international strategy for these firms? Why or why not?
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2. To implement its “sustainable business model,” what types of strategies is
Unilever considering for us and why?
3. What organizational structure will Unilever need to use to reach its
sustainability objectives?
4. What issues about organizational structure surface as a result of Unilever’s
proposed strategies and objectives regarding sustainability?
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ADDITIONAL QUESTIONS AND EXERCISES
The following questions and exercises can be presented for in-class discussion or assigned as
homework.
Application Discussion Questions
1. Why do firms experience evolutionary cycles in which there is a fit between strategy and
structure, punctuated with periods in which strategy and structure are reshaped? Have
students provide examples of global firms that have experienced this pattern.
2. Ask students to select an organization (for example, an employer, a social club, or a
nonprofit agency) of which they currently are members. What is this organization’s
structure? Is the organization using the structure that is appropriate, given its strategy? If
not, what structure should it use?
3. Have students use the Internet to find a firm that uses the multidivisional structure.
Which form of the multidivisional structure is the firm using? What is there about the
firm that makes it appropriate for it to use the M-form?
4. Through reading the business press, students should identify a firm implementing the
global strategy and one implementing the multi-domestic strategy. What organizational
structure is being used in each firm? Are these structures allowing each firm’s strategy to
be implemented successfully? Why or why not?
5. Students should define strategic and financial controls for a businessperson in the local
community. Ask the businessperson to describe the use of each type of control in his or
her business. In which type of control does the businessperson have the greatest
confidence? Why?
Ethics Questions
1. When a firm changes from the functional structure to the multidivisional structure, what
responsibilities does it have to current employees?
2. Are there ethical issues associated with the use of strategic controls? With the use of
financial controls? If so, what are they?
3. Are there ethical issues involved in implementing the cooperative and competitive M-
form structures? If so, what are they? As a top-level manager, how would you deal with
them?
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4. Global and multi-domestic strategies call for different competitive approaches. What
ethical concerns might surface when firms attempt to market standardized products
globally? When they develop different products or approaches for each local market?
5. What ethical issues are associated with the view that the “redesign of organizations
throughout a society—indeed, globally—entails losses as well as gains”?
INSTRUCTOR’S NOTES FOR MINDTAP
Cengage offers additional online activities, assessments and resources inside MindTap, our
online learning platform. The following activities can be assigned within MindTap for
students to complete.
INSTRUCTOR’S NOTES FOR DIRECTED
CASE
Principled Entrepreneurship and Shared Leadership:
The Case of TEOCO [The Employee Owned Company]
This case features a company that has a very interesting organizational structure. That
company is The Employee Owned Company, or better known as TEOCO. Atul Jain, the
founder of TEOCO, wanted to base his company on the people who help run it, the
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INSTRUCTOR’S NOTES FOR EXPERIENTIAL
EXERCISES
Building a Better Mousetrap: The Relationship between Strategy and Structure
This experimental exercise is intended to give students a scenario that applies directly to
this chapter and the knowledge gained with the previous chapters in a problem solving
setting. The purpose of this exercise is to show how organizational structure works in
alignment with strategy to improve business performance.
The students will act as a consultant to a firm that recently changed its structure as a
counter measure to declining performance. Research indicates that firms tend to change
structure when declining performance forces them to do so. Effective managers anticipate
the need for structural change and quickly modify structure to better accommodate the
firm’s strategy when evidence calls for that action.
Students will be asked to:
You can make this exercise for individual students by limiting the scope of the research
to be less in depth and/or to the factors that the instructor feels is most important. Guide a
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discussion during the research and help the students discover why the firm performed
those exact actions, instead of possible alternatives.
INSTRUCTOR’S NOTES FOR VIDEO EXERCISES
The media quiz offers additional opportunities for students to apply the concepts in the
chapter to a real-world scenario as it is described in news reports.
Title: Interview with former Google CEO Eric Schmidt
RT: 5:35
Topic Key: Organizational Structure, Strategic Management,
1. Many speculate that Schmidt decided to release his role as CEO to Larry
Page, the co-founder, to capitalize on what was previously a core competency
– innovation. How would the change of CEO impact Google and inspire
innovation?
2. Speed and decisiveness is one of the reasons Schmidt thought that becoming
Chairman of the Board and releasing the CEO role was the best decision.
What change may also be recommended for Google if speed and decisiveness
are issues?
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