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Unit 13
Unit 13
Implementation:
Structures and Systems
Structure
13.1 Introduction
13.2 Caselet
Objectives
13.3 Structure of an Organization
13.4 Virtual Organization
13.5 Which is the Best Organizational Structure?
13.6 Organizational Systems
13.7 Complementarity of Strategy, Structure and Systems
13.8 Case Study
13.9 Summary
13.10 Glossary
13.11 Terminal Questions
13.12 Answers
13.13 References
13.1 Introduction
In the strategic war between Hindustan Unilever and Nirma in the Indian detergent
market during the mid-1980s, which factor enabled HLL to regain its market
position or supremacy? Was it the brilliant strategic conception of product
expansions in the form of Rin, Wheel and Sunlight or the way they were
marketed? In Parle products success with the pioneering Indian mineral water
Bisleri (which was selling at `10 per litre when good quality milk such as DMS
was selling at `7 per litre), which was more important: innovative concept of
bottled water or making the product acceptable to millions of Indians? What
enabled ITC to transform the Indian rural market with the breakthrough innovation
of e-choupal? Was it the brilliant idea or the execution of it?
This brings us to a fundamental question: Is formulation of strategy more
important or its implementation? This is a continuing debate in strategic
management literature. There are exponents on either side. But, one thing is
clear: the real test of a strategy is in its implementation. Only implementation
can determine the success or failure of a strategy. Even the most perfect strategy
or plan may fail if it is not implemented properly. It is said that a technically
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imperfect plan implemented well may deliver better results than a perfect plan
which does not get off the paper.1 Many companies spend large amount of
time, energy and resources in developing a strategic plan without giving enough
thought to implementation.
Implementation of a strategy or plan depends on three sets of organizational
factors, namely, the structure of the organization, various functional areas and
operations and behavioural (people) aspects. Strategic analysts, therefore,
distinguish between three types or forms of implementation: structural and systems
implementation, functional and operational implementation and behavioural
implementation. These three forms of implementation are interrelated or
interdependent (Figure 13.1). Strategy implementation, in terms of more detailed
forms or components, is shown in Figure 13.2.
13.2 Caselet
The e-choupal initiative started by ITC was conceived to overcome some
of the challenges faced by Indian farmers such as fragmented farms, weak
infrastructure and the involvement of numerous intermediaries in the sale
and purchase of produce. The e-choupal initiative directly links the rural
farmers with ITC for the procurement of agriculture and aquaculture
products, such as soybeans, coffee, and prawns. Traditionally, these
commodities were procured by ITC and other companies from mandis (major
agricultural marketing centers in rural areas), and a long chain of
intermediaries (middlemen) was involved in buying the produce from farmers
and moving it to the mandis. Through e-choupals, these farmers can now
directly negotiate the sale of their produce with ITC.
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The e-choupal model has been quite effective, not only because of its
innovative concept but also because it has been well executed. Every echoupal centre is equipped with a computer and Internet connectivity, which
enables the farmers to obtain information on mandi prices and good farming
practices, and to place orders for agricultural inputs, such as seeds and
fertilizers. This helps farmers in improving the quality of produce and
obtaining better prices. Elected from the village itself, a literate farmer acts
as the interface between the illiterate farmers and the computer. So, although
the primary objective of the project was to bring efficiency to ITCs
procurement process, an important byproduct is the increased
empowerment of rural farmers where e-choupals have been established.
Source: http://siteresources.worldbank.org/INTEMPOWERMENT/Resources/
14647_E-choupal-web.pdf
Objectives
After studying this unit, you should be able to:
Discuss the structure of an organization and various structural types
Use the concept and tool of the virtual organization
Analyse different organizational systems
Discuss the complementarity of strategy, structure and systems
Identify the root organizational structure
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Self-Assessment Questions
1. The structure of an organization defines the _________and _______of
management in a hierarchical way.
2. The most elementary form of structure is the _______, which represents
an organization owned and managed by a single individualthe
entrepreneur.
3. A _________is based on differentiation and allocation of primary functions
such as production, marketing, finance, and HR along with certain
delegation of powers.
4. The fundamental factor in the _____is to identify independent product/
market segment which requires distinct strategies.
5. A _______is a need-based or project-based structure which does not
follow the conventional lines of hierarchy or control.
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Self-Assessment Questions
6. The ________is an organization without a formal structure and is like an
extended network.
7. The in-house resources and activities of a virtual organization are generally
(a) Large
(b) Outsourced
(c) Maximized
(d) Nil
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Self-Assessment Questions
8. The structure that works best under stable market/environmental
conditions with less need for cross-departmental coordination and
communication is
(a) functional structure
(b) Divisional structure
(c) Matrix structure
(d) SBU structure
9. The structure that is most effective under changing markets/environmental
conditions which require more innovations and faster adaptation is
(a) Functional structure
(b) Divisional structure
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actual appraisal systems are based on an appropriate mix of the two types of
factors to make the system more acceptable and reliable.
Also, relevance or suitability of the evaluation method to the corporate
strategy adopted by an organization should be considered. For example, if a
stability strategy is followed, the objective of the appraisal system should be to
focus on improving efficiency in current operations. Improvement of efficiency
in current operations, combined with initiative, can also help to achieve shortterm growth. For long-term growth, i.e., growth through expansion or
diversification, focus should be on long-term managerial characteristics of
initiative, aggressiveness, risk taking attitude, etc. The evaluation system should
lay emphasis on these factors and be structured accordingly.
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Self-Assessment Questions
10. The planning system in any organization depends heavily on the ________.
11. The __________ is essentially concerned with the development of
individual managers and preparing them better for organizational activities
including planning, strategy making and implementation.
12. The _________system assesses managerial performance in terms of
organizational objectives, priorities, and strategies.
13. The objective of the ________system is to ensure that implementation of
strategy takes place according to plan.
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Strategy
Growth/expansion/acquisition/
divestment
Stability/controlled growth
Structure
Entrepreneurial/divisional SBU/
matrix
Divisional/functional/holding company
Participative
Directive
MIS
Decision-orientation
Efficiency-orientation
Management
development
External-focussed; need-based;
contingency
Internal-focussed; programmed
Motivation
Monetary/non-monetary
Monetary/non-monetary
Systems
Planning
Evaluation
Control
Formal/informal; direct/indirect
Predominantly formal/direct
Source: Adapted from A Kazmi, Business Policy and Strategic Management (2005),
344 (Exhibit 10.13).
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Activity 2
Discuss the complementarity or otherwise of strategy, structure and systems
of any of these companies: L&T, Tata Steel and Crompton Greaves. Write
down your observations in a report.
Self-Assessment Questions
14. Environmental factors, strategies, structures and systems can be
combined in the form of a _______matrix.
15. The combinations of strategies, structures and systems presented in the
matrix are to be taken as more _______rather than definitive.
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The refinery, along with two new departments, IT & Supply Chain and R&D,
came under the director (refineries); all the other five customer-centred
SBUs were to report to the director (marketing). The corporate support
functions were to remain under the direct charge of the CMD. Each SBU
was to have its own support functionfinance, HR, sales, logistics, etc.
During the process of formation of SBUs, delayering had also taken place
the number of layers in the organization reduced from seven to four.
Implementation of the new structural design involved redefinition of role
and responsibilities and redeployment of more than 2,000 personnel. New
roles had been created primarily to increase customer interface. Since the
support functions were now located within the SBUs, the new structure
included lateral linkage mechanism for better synergy.
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13.9 Summary
Let us recapitulate the important concepts discussed in this unit:
Implementation of a strategy or plan depends on three sets of factors: the
structure (includes systems) of the organization, various functional areas
and operations, and behavioural (people) aspects.
Structure of an organization defines the levels and roles of management
in a hierachical way. One can also say that an organization structure
spells out the way tasks, functions and responsibilities are allocated for
implementing a policy or strategy.
Structural forms or types, in practice, are many more than depicted by
the four stages of organizational development. In addition to the stage of
development, structural forms are determined by corporate philosophy or
goals, organizational concepts of business or business strategy.
Ten probable structural forms are: i. entrepreneurial structure, ii. functional
structure, iii. divisional structure, iv. SBU structure, v. matrix structure, vi.
project-based structure, vii. team-based structure, viii. network structure,
ix. holding company structure, and x. intermediate structure. More common
structural forms are: functional structure, divisional structure, SBU structure
and matrix structure.
Virtual organization is one of the latest developments in evolution of
organizational structures and designs. This is an organization without a
formal structure. It is a temporary network of independent companies
suppliers, customers, even erstwhile rivalslinked by information
technology to share skills, costs and access to one anothers markets.
In the implementation of strategy, organizational structures are supported
by organizational systems. Six major systems are important from the
strategy point of view: planning system, management information system
(MIS), management development system (MDS), motivation system,
evaluation system and management control system (MCS).
13.10 Glossary
Functional structure: A structure based on differentiation and allocation
of primary functions such as production, marketing, finance, and HR along
with certain delegation of powers.
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13.12 Answers
Answers to Self-Assessment Questions
1. levels, roles
2. entrepreneurial structure
3. functional structure
4. SBU structure
5. matrix structure
6. Virtual organization
7. (b) Outsourced
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13.13 References
1. Jauch, L R, R Gupta, and W F Glueck. 2004. Business Policy and Strategic
Management. 6th ed. New Delhi: Frank Bros & Co.
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G Johnson, and K Scholes, Exploring Corporate Strategy, 6th ed. (2005), 422.
10
11
L R Bittel, ed., Encyclopedia of Professional Management (New York: McGraw Hill, (1978).
12
A Kazmi, Business Policy and Strategic Management, 2nd ed. (New Delhi: Tata McGraw
Hill, 2005), 342.
13
A Phadnis, What Money Cant Buy, Business Standard (The Strategist), December, 12,
2000.
14
A Phadnis, What Money Cant Buy, Business Standard (The Strategist), December, 12,
2000