requires organizational arrangements that emphasize divisional competition rather than cooperation, and three benefits are expected from this internal competition: 1. Internal competition creates flexibility, allowing resources to be allocated to the division that is working with the most promising technol ogy to fuel the entire firm’s success. 2. Internal competition challenges the status quo and inertia, because division heads know that future resource allocations are a product of excellent current performance as well as superior positioning of their division in terms of future performance. 3. Internal competition motivates effort. BUSINESS POLICY° LEARNING NOTES
Chapter 11: Organizational Structure and Controls 11-8 TABLE 11.1 - Characteristics of the Structures Necessary to Implement the Related Constrained, Related Linked, and Unrelated Diversification Strategies Table 11.1 provides a handy reference that can be used to compare the structural attributes of the Cooperative, SBU, and Competitive M-form structures based on the degree that operations are centralized or decentralized extent to which each form uses integrating mechanisms emphasis on subjective or objective criteria for appraising divisional performance linkages to corporate, SBU, and/or divisional performance as bases for divisional incentive compensation 5 Discuss the organizational structures used to implement three international strategies. Matches between International Strategies and Worldwide Structures Forming proper matches between international strategies and organizational structures intended to support their use facili tates the firm’s efforts to effectively coordinate and control its global operations. Importantly, recent research findings confirm the validity of the strategy/structure matches discussed. Using the Worldwide Geographic Area Structure to Implement the Multidomestic Strategy Although centralization of decision-making authority has been recognized as a means of achieving coordination (and control) in organizations, some strategies require that local business units (or divisions) have the flexibility that will enable them to adapt to local market preferences. This may mean that a decentralized structure will be needed to provide this flexibility. The multidomestic strategy is a strategy in which strategic and operating decisions are decentralized to business units in each country to facilitate tailoring of products to each country. The structure used to implement the multidomestic strategy is the worldwide geographic area structure , an organizational form in which national interests dominate and that fa cilitates managers’ efforts to satisfy local or cultural differences. FIGURE 11.8 - Worldwide Geographic Area Structure for Implementing a Multidomestic Strategy The worldwide geographic area structure is characterized by: an emphasis on differentiation or adaptation to local market preferences or cultural requirements individual national market operations as decentralized and independent corporate headquarters coordinating movement of financial resources organization representing a decentralized federation The multidomestic strategy requires a decentralized structure.
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- Summer '12
- Business, multidivisional structure