Implementing Strategy in Companies

That Compete Across Industries and

Countries

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 Functional or product structures are not
sufficient when a company enters new
industries
 Multidivisional structure innovations
 Divisions (operating responsibility)
 Corporate headquarters staff to monitor divisions
(strategic responsibility)
 Each division may be organized differently

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 Enhanced corporate financial control
 Enhanced strategic control
 Growth
 Stronger pursuit of internal efficiency

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 Establishing the divisional-corporate
authority relationship
 Distortion of information
 Competition for resources
 Transfer pricing
 Short-term R&D focus
 Duplication of functional resources

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 Unrelated diversification
 Easiest and cheapest strategy to manage
 Allows corporate managers to evaluate divisional
performance easily and accurately
 Divisions have considerable autonomy
 No integration among divisions is necessary

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 Vertical integration
 More expensive than unrelated diversification
 Multidivisional structure provides necessary controls to
achieve benefits from the control of resource transfers
 Must strike balance between centralized and
decentralized control
 Divisions must have input regarding resource transfer
 Managed through a combination of corporate and
divisional controls

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 Related diversification
 Multidivisional structure allows gains from the transfer,
sharing, or leveraging of R&D knowledge, industry
information, and customer bases across divisions
 Difficult to measure performance of individual divisions
 High bureaucratic costs
 Integration and control at divisional level is required
 Incentives and rewards for cooperation are necessary

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 IT provides a common software platform that can make it
less problematic for divisions to share information
 IT facilitates output and financial control
 IT helps corporate managers react more quickly because of
higher-quality, more timely information
 IT makes it easier to decentralize control to divisional
managers, but react quickly if necessary
 IT makes it difficult to distort information because of
standardized information
 IT eases the transfer pricing problem

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 Multidomestic strategy
 Local responsiveness; decentralized control
 International strategy
 Centralized R&D and marketing; other functions
are decentralized
 Global strategy
 Cost reductions; centralized functions
 Transnational strategy
 Local responsiveness and cost reduction

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 Global-area structure
 All value creation activities duplicated and
overseas division established in every country of
operation
 Decentralized authority
 Managers at global headquarters evaluate
performance of overseas divisions
 No integrating mechanisms needed
 No global organizational culture
 Duplication of specialist activities raises costs
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 International division structure
 Used when a company sells domestically made products in
markets abroad
 Foreign sales organization added to existing structure;
same control system
 Customization is minimal
 Subsidiary handles local sales and distribution
 Behavior controls keep the home office informed
 International division coordinates flow of different
products across different countries
 Domestic and overseas managers may compete for
control of strategy making

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 Global product-division structure
 All value chain activities located to allow
efficiency, quality, and innovation
 Problems of coordinating and integrating global
activities
 Structure must lower bureaucratic costs and
provide central control
 Product division headquarters coordinates
activities
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 Global Matrix Structure
 Lower cost structures and differentiate activities
 Decentralized control provides flexibility for local issues,
but product and corporate managers at headquarters
have centralized control to coordinate company
activities on global level
 Knowledge and experience can be transferred
 Global corporate culture
 IT integration mechanisms provide coordination
 Bureaucratic costs are high

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 Internal new venturing
 Structure, control, and culture must encourage
creativity and give intrapreneurs autonomy and
freedom to develop and champion new products
and allow corporate managers to monitor
profitability and fit
 Organization-wide new venturing vs. separate
new-venture division

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 Joint venturing
 Managing culture differences
 Allocating authority and responsibility
 Mergers and acquisitions
 Must establish new lines of authority
 Must streamline operations
 In unrelated acquisitions, managers must understand the
new industry
 Must standardize control systems
 Must recognize culture differences

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 IT and strategy implementation
 Knowledge leveraging through IT to achieve low
costs and differentiation
 Flattening the organization, moving toward
decentralization and increased integration
through IT
 Virtual organization
 Knowledge management system

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 Strategic outsourcing and network structure
 IT increases the efficiency of inter-organizational
relationships
 Business-to-business (B2B) networks
 Network structure

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