周长辉战略管理课件hill7eirmtheorych13.docx

周长辉战略管理课件hill7eirmtheorych13.docx

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周长辉战略管理课件hill7eirmtheorych13

CHAPTER13

ImplementingStrategyinCompaniesthatCompeteAcrossIndustriesandCountries

SYNOPSISOFCHAPTER

Chapter13isthesecondchaptertoaddressthetopicofstrategyimplementation.Inthischapter,thefocusisonfirmsthatcompeteinmorethanoneindustryand/ormorethanonecountry.Thefirstsectiondescribesthemultidivisionalstructure,emphasizingitsadvantagesanddisadvantages.

Next,thechapterdescribesfourglobalstrategiesanddescribeshowfirmschoosethecorrectstrategy.Thispartofthechapterthendetailstherelationshipbetweenglobalstrategyandorganizationalstructure.

Thechaptergoesontodiscussentrymodesforfirmswishingtoenternewindustries,includinginternalnewventuring,jointventuring,andmergersandacquisitions.Thissectioncontainsadetaileddescriptionofactionsthatfirmscaneffectivelyuseforeachoftheseentrymodes.

Thefinalsectionrelatestheimpactthatinformationtechnology（IT）hashadonstrategyimplementation,suchastheincreaseinqualityandquantityofinformationthatcanfacilitatedecisionmaking.ThissectionalsomentionsthewaysinwhichIThasimpactedfirms,throughenablingcreationofavirtualorganizationandoutsourcing.

TEACHINGOBJECTIVES

1.Introducethemultidivisionalstructure,anditscostsandbenefits.

2.Describethefourglobalstrategiesanddescribehowfirmschoosethecorrectglobalstrategy.

3.Definetherelationshipbetweenglobalstrategyandorganizationalstructure.

4.Describethreeentrymodesforfirmswishingtoenteranewindustry,andshowhowthoseentrymodescanbeimplementedeffectively.

5.Explaintheimpactthatinformationtechnologyhashadonstrategyimplementation.

Openingcase:

GMSearchesfortherightglobalStructure

ThecasedescribesthechangesinorganizationalstructureoccurringatGMoverthelastseveraldecades.Initiallydecentralized,GMrealizedthattheautonomousinternationaldivisionsaddedtoitscoststructureleadinglowprofitmargins.Independentdivisionsreinventedcarsystemsratherthancoordinatewithotherdivisions.Inordertoreduceitsglobalcoststructure,GMcentralizedallimportantdesignandproductiondecisionsintheUS.Anothergoalofthecentralizationwastobettercoordinatetheactivitiesoftheglobalengineeringanddesigngroupstospeedcardevelopment.

TeachingNote:

Thiscasedoesagoodjobatdescribingthechallengesofamultidivisionalstructure.GM’sdecentralizationledtoincreasedcostsandlengthydevelopmenttimes.Thecompanyhopesthatthenewcentralizedstructurewillbetterimplementitsbusinessmodeltodesigncarsthatsatisfycustomerneedsmorequickly.Studentsshouldrecognize,basedonthiscase,thatorganizationstructureisnotstatic,andthatfirmsareconstantlyassessingthetradeoffsinherentineachstructuralchange.

LECTUREOUTLINE

I.Overview

A.Thischapteraddressesissuesofimplementingstrategyinmultibusinessorganizations,whichinsomecases,areextensionsofconceptsexploredinChapter12（implementationinsinglebusinessfirms）.

B.Inothercases,theincreasedcomplexityofsimultaneouslymanagingmorethanonebusinesscreatesnewconcernsandissues.

II.ManagingCorporateStrategyThroughtheMultidivisionalStructure

A.Bureaucraticcostsarelikelytobehigherinmultibusinessfirmsthaninsinglebusinessones.

B.Formultibusinessfirms,themultidivisionalstructureissuperiortothefunctionalstructure,forseveralreasons.

ShowTransparency13.1

Figure13.1:

MultidivisionalStructure

1.Eachbusinessunitisplacedinaself-containeddivisionandsuppliedwithallsupportfunctions.Thuseachpartessentiallyoperatesseparatelyfromtheotherpartsofthecompany.

2.Theofficeofcorporateheadquartersstaffiscreatedtocontrolandoverseethedivisions.Headquartersalsoprovidescorporatesupportfunctions,suchasfinanceandR&D.

3.Divisionalmanagershaveoperatingresponsibility;corporatemanagershavestrategicresponsibility.

4.Eachdivisionistreatedasaprofitcenterandcanadoptthestructureandcontrolsystemsthatbestserveitsstrategy.

C.Amultidivisionalstructurehasseveraladvantages.

1.Enhancedcorporatefinancialcontrolisoneadvantageofthemultidivisionalstructure.Theprofitabilityofthedifferentdivisionsisveryclear,allowingthecorporatestafftoreadilydeterminethebestresourceallocationscheme.

2.Enhancedstrategiccontrolisanotherbenefit,becausecorporatestaffsarefreedfromoperatingresponsibilities,andcanconcentrateoncorporatestrategy.

3.Thestructureovercomeslimitstogrowthbecauseitpermitsthecompanytooperatemanybusinesseswithoutinformationoverloadorrequiringtoomuchinterventionfromcorporatemanagers.

4.Becausedivisionalperformancehasgreatervisibility,divisionalmanagersrealizethatcorporatemanagerscandetectinefficiencies,andthusaremotivatedtoperformatahigherlevel.

D.Implementingamultidivisionalstructurehasdrawbacksaswell,andtheadvantagesmustbebalancedagainstthem.

1.Managingthebalanceofpowerbetweencorporateanddivisionalmanagersisdifficult.Theproblemliesindecidinghowmuchauthoritytocentralizeatthecorporatelevelandhowmuchtodecentralizeatthedivisionallevel.Toomuchcentralizingputsdivisionalmanagersinastraitjacket.Toomuchdecentralizing,however,maycausethecompanytolosecontroloveritsstrategy,damagingcorporateperformance.

StrategyinAction13.1:

Amoco,Arco,andBurmahCastrolBecomePartofBP

Foryears,Amocowasorganizedintothreeoperatingsubsidiaries:

exploration,refining,andchemicalsmanufacturing.Combinedwithacentralizedstructure,thisledtoatallhierarchyandslowdecisionmaking.Intensepricecompetitioninthe1990sspurredthefirmtolookforcostsavings,andthefirmswitchedtoadecentralized,multidivisionalstructure.Thestructureworked,andwhenthefirmmergedwithBPandthenacquiredARCOandBurmahCastrol,itallowedforasmoothintegrationofthenewbusinesses.

TeachingNote:

ThiscaseillustrateshowAmocowasabletofindalevelofcentralizationthatenabledcostsavingswhilealsoenablingflexibility.Amoco’ssuccessinintegratingtwoacquisitionsandamergerpartnershowsthatthestructureisworkingeffectively.AskstudentstocompareAmoco’sstructurewithGM’sandtoidentifyreasonswhyonefirmhassucceededwhiletheotherhasnot.

2.Ifthecorporatecenterputstoomuchfinancialpressureonthedivisions,theymaybeencouragedtodistorttheinformationtheysupplytocorporatemanagers.Forexample,theymaypursueshort-runratherthanlong-runprofitmaximization.

3.Divisionsmaystarttocompeteforresources,whichreducescooperationandlearningacrossunits.

4.Whendivisionsarecompeting,itisdifficulttosetfairpricesfortradingresourcesbetweenthem.EachdivisiontriestosetthehighestpriceitcantomaximizeitsownROIC,butsucheffortscanhurtcorporateperformanceandcorporateROIC.Thisisreferredtoasthetransferpricingproblem.

5.Ifdivisionsarebeingevaluatedstrictlyonreturnoninvestmenttargets,theymightcutbackonR&Dtoimprovetheirfinancialperformance.

6.Eachdivisionhasitsownsupportservices,whichcanleadtoaduplicationoffunctionsandincreasedexpenses.ThisisanespeciallycriticalprobleminregardtohighlyexpensiveR&D.

E.Afteracompanychoosesamultidivisionalstructure,itthenmustdevelopthecontrolmechanismsthatareappropriateforthatstructure.Thetypeofcontrolmechanismsthatareuseddependsonwhetherthefirmisusingunrelateddiversification,verticalintegration,orrelateddiversification.

1.Becausetherearenolinkagesbetweendivisions,unrelateddiversificationistheeasiestandcheapeststrategytomanage,withthelowestlevelofbureaucraticcosts.

a）Normally,amultidivisionalstructureisusedforthisstrategyandthecorporateheadquarterstendstobesmallbecausetheneedforintegrationamongdivisionsislow.

b）ThecontrolusedisprincipallyfinancialcontrolandcorporateheadquartersusesmeasuressuchasROICasthemainmeansofevaluatingeachdivision’sperformance.Theytreatthecorporation’sbusinessesasaninvestmentportfolio,attemptingtoallocateresourcessoastorealizethegreatestprofitability.

c）Divisionsarecompletelyautonomous,thustheideaofcorporatecultureismeaningless.

2.Verticalintegrationisthenextmostexpensivestrategytocoordinate.Bureaucraticcostsarehigherbecausecorporateheadquartersmustcontrolsequentialresourcetransfersfromonedivisiontothenext.

a）Byadoptingthemultidivisionalstructure,averticallyintegratedcompanygainscentralizedcontrol,andcorporatemanagerscancontrolresourcetransfersbetweendivisions.

b）Marketandbehaviorcontrolsarealsoappliedasthecompanyseekstostandardizeresourcetransfersandtousebudgets,aswellasROIC,toevaluatedivisionalperformance.Thecompanyalsousesrulesasacontrolmechanism.

c）Inaddition,handlingresourcetransfersincreasestheneedforintegration,andtaskforcesarelikelytobeestablishedtoguideinterdivisionalcoordination.

3.Relateddiversificationincreasesthe numberoflinkagesbetweendivisionsthathavetobemanaged,makingthisstrategythemostexpensive.

a）Outputcontrolisdifficulttomeasureduetoextensivecooperation,soculturecontrolisusedmorefrequently.

b）Integratingrolesandteamsarerequiredtointegratetheworkofmultipledivisions.

c）Rewardsystemsmustbecarefullydesigned,toensurethatmanagershaveanincentivetoshareresources.

F.Informationtechnologyhelpsdivisionsshareknowledgeandleveragecompetenc