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Copyright © 2014 by The McGraw-Hill Education All rights reserved.
19e Global Edition
THOMPSON | PETERAF | GAMBLE | STRICKLAND
CHAPTER 10
BUILDING AN ORGANIZATION CAPABLE OF BUILDING AN ORGANIZATION CAPABLE OF
GOOD STRATEGY EXECUTION: PEOPLE, GOOD STRATEGY EXECUTION: PEOPLE,
CAPABILITIES, AND STRUCTURECAPABILITIES, AND STRUCTURE
MANAGEMENT POLICIES & CORPORATE STRATEGY
19e Global Edition
THOMPSON | PETERAF | GAMBLE | STRICKLAND
CHAPTER 10
BUILDING AN ORGANIZATION CAPABLE OF BUILDING AN ORGANIZATION CAPABLE OF
GOOD STRATEGY EXECUTION: PEOPLE, GOOD STRATEGY EXECUTION: PEOPLE,
CAPABILITIES, AND STRUCTURECAPABILITIES, AND STRUCTURE
MANAGEMENT POLICIES & CORPORATE STRATEGY
10–2
1.Gain command of what managers must do to execute strategy
successfully.
2.Learn why hiring, training, and retaining the right people
constitute a key component of the strategy execution process.
3.Understand that good strategy execution requires continuously
building and upgrading the organization’s resources and
capabilities.
4.Recognize what issues to consider in establishing a strategy-
supportive organizational structure and organizing the work
effort.
5.Become aware of the pros and cons of centralized and
decentralized decision making in implementing the chosen
strategy.
1.Gain command of what managers must do to execute strategy
successfully.
2.Learn why hiring, training, and retaining the right people
constitute a key component of the strategy execution process.
3.Understand that good strategy execution requires continuously
building and upgrading the organization’s resources and
capabilities.
4.Recognize what issues to consider in establishing a strategy-
supportive organizational structure and organizing the work
effort.
5.Become aware of the pros and cons of centralized and
decentralized decision making in implementing the chosen
strategy.
EXECUTING STRATEGYEXECUTING STRATEGY
Strategy ExecutionStrategy Execution
●Is operations-driven, involving management of both Is operations-driven, involving management of both
people and business processes.people and business processes.
●Is a job for the whole management team, not just a Is a job for the whole management team, not just a
few senior managers.few senior managers.
●Can take years longer to develop as a real Can take years longer to develop as a real
proficiency than implementing strategy. proficiency than implementing strategy.
●Requires a determined commitment to change, Requires a determined commitment to change,
action, and performance.action, and performance.
10–3
Strategy ExecutionStrategy Execution
●Is operations-driven, involving management of both Is operations-driven, involving management of both
people and business processes.people and business processes.
●Is a job for the whole management team, not just a Is a job for the whole management team, not just a
few senior managers.few senior managers.
●Can take years longer to develop as a real Can take years longer to develop as a real
proficiency than implementing strategy. proficiency than implementing strategy.
●Requires a determined commitment to change, Requires a determined commitment to change,
action, and performance.action, and performance.
10–3
A FRAMEWORK FOR EXECUTING A FRAMEWORK FOR EXECUTING
STRATEGYSTRATEGY
Committing to Executing a Strategy:Committing to Executing a Strategy:
●Entails figuring out the specific techniques, actions, Entails figuring out the specific techniques, actions,
and behaviors necessary for a smooth strategy-and behaviors necessary for a smooth strategy-
supportive operation.supportive operation.
●Following through to get things done and deliver Following through to get things done and deliver
results.results.
●Making things happen (leadership) and making them Making things happen (leadership) and making them
happen right (management).happen right (management).
10–4
STRATEGYSTRATEGY
Committing to Executing a Strategy:Committing to Executing a Strategy:
●Entails figuring out the specific techniques, actions, Entails figuring out the specific techniques, actions,
and behaviors necessary for a smooth strategy-and behaviors necessary for a smooth strategy-
supportive operation.supportive operation.
●Following through to get things done and deliver Following through to get things done and deliver
results.results.
●Making things happen (leadership) and making them Making things happen (leadership) and making them
happen right (management).happen right (management).
10–4
FIGURE 10.1The 10 Basic Tasks of the Strategy Execution Process
Chapter 10
Chapter 12
Chapter 11
The Action Agenda
for Executing Strategy
10–5
Chapter 10
Chapter 12
Chapter 11
The Action Agenda
for Executing Strategy
10–5
1.1.Staff the organization with Staff the organization with
managers and employees managers and employees
capable of executing the capable of executing the
strategy well.strategy well.
2.2.Build the organization’s Build the organization’s
capabilities required for capabilities required for
successful strategy execution.successful strategy execution.
3.3.Create a strategy-supportive Create a strategy-supportive
organizational structure.organizational structure.
4.4.Allocate sufficient budgetary Allocate sufficient budgetary
(and other) resources to the (and other) resources to the
strategy execution effort.strategy execution effort.
5.5.Institute policies and Institute policies and
procedures that facilitate procedures that facilitate
strategy execution.strategy execution.
6.6.Adopt best practices and business Adopt best practices and business
processes that drive continuous processes that drive continuous
improvement of execution activities.improvement of execution activities.
7.7.Install information and operating Install information and operating
systems that enable personnel to systems that enable personnel to
carry out their strategic roles carry out their strategic roles
proficiently.proficiently.
8.8.Tie rewards and incentives directly Tie rewards and incentives directly
to the achievement of strategic and to the achievement of strategic and
financial targets.financial targets.
9.9.Instill a corporate culture that Instill a corporate culture that
promotes good strategy execution.promotes good strategy execution.
10.10.Exercise the internal leadership Exercise the internal leadership
needed to propel strategy needed to propel strategy
implementation forward.implementation forward.
THE PRINCIPAL COMPONENTS OF THE PRINCIPAL COMPONENTS OF
THE STRATEGY EXECUTION PROCESSTHE STRATEGY EXECUTION PROCESS
10–6
managers and employees managers and employees
capable of executing the capable of executing the
strategy well.strategy well.
2.2.Build the organization’s Build the organization’s
capabilities required for capabilities required for
successful strategy execution.successful strategy execution.
3.3.Create a strategy-supportive Create a strategy-supportive
organizational structure.organizational structure.
4.4.Allocate sufficient budgetary Allocate sufficient budgetary
(and other) resources to the (and other) resources to the
strategy execution effort.strategy execution effort.
5.5.Institute policies and Institute policies and
procedures that facilitate procedures that facilitate
strategy execution.strategy execution.
6.6.Adopt best practices and business Adopt best practices and business
processes that drive continuous processes that drive continuous
improvement of execution activities.improvement of execution activities.
7.7.Install information and operating Install information and operating
systems that enable personnel to systems that enable personnel to
carry out their strategic roles carry out their strategic roles
proficiently.proficiently.
8.8.Tie rewards and incentives directly Tie rewards and incentives directly
to the achievement of strategic and to the achievement of strategic and
financial targets.financial targets.
9.9.Instill a corporate culture that Instill a corporate culture that
promotes good strategy execution.promotes good strategy execution.
10.10.Exercise the internal leadership Exercise the internal leadership
needed to propel strategy needed to propel strategy
implementation forward.implementation forward.
THE PRINCIPAL COMPONENTS OF THE PRINCIPAL COMPONENTS OF
THE STRATEGY EXECUTION PROCESSTHE STRATEGY EXECUTION PROCESS
10–6
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦When strategies fail, it is often because of poor When strategies fail, it is often because of poor
execution. Strategy execution is therefore a execution. Strategy execution is therefore a
critical managerial endeavor.critical managerial endeavor.
♦The two best signs of good strategy execution The two best signs of good strategy execution
are whether a company is meeting or beating are whether a company is meeting or beating
its performance targets and whether they are its performance targets and whether they are
performing value chain activities in a manner performing value chain activities in a manner
that is conducive to companywide operating that is conducive to companywide operating
excellence.excellence.
10–7
♦When strategies fail, it is often because of poor When strategies fail, it is often because of poor
execution. Strategy execution is therefore a execution. Strategy execution is therefore a
critical managerial endeavor.critical managerial endeavor.
♦The two best signs of good strategy execution The two best signs of good strategy execution
are whether a company is meeting or beating are whether a company is meeting or beating
its performance targets and whether they are its performance targets and whether they are
performing value chain activities in a manner performing value chain activities in a manner
that is conducive to companywide operating that is conducive to companywide operating
excellence.excellence.
10–7
BUILDING AN ORGANIZATION CAPABLE BUILDING AN ORGANIZATION CAPABLE
OF GOOD STRATEGY EXECUTION: OF GOOD STRATEGY EXECUTION:
THREE KEY ACTIONSTHREE KEY ACTIONS
1.1.StaffingStaffing:: Assemble a strong management Assemble a strong management
team and a cadre of competent employees.team and a cadre of competent employees.
2.2.DevelopingDeveloping: Renew, upgrade, and revise : Renew, upgrade, and revise
resources and capabilities to match chosen resources and capabilities to match chosen
strategy.strategy.
3.3.StructuringStructuring: Create strategy-supportive : Create strategy-supportive
organization capable of good strategy organization capable of good strategy
execution.execution.
10–8
OF GOOD STRATEGY EXECUTION: OF GOOD STRATEGY EXECUTION:
THREE KEY ACTIONSTHREE KEY ACTIONS
1.1.StaffingStaffing:: Assemble a strong management Assemble a strong management
team and a cadre of competent employees.team and a cadre of competent employees.
2.2.DevelopingDeveloping: Renew, upgrade, and revise : Renew, upgrade, and revise
resources and capabilities to match chosen resources and capabilities to match chosen
strategy.strategy.
3.3.StructuringStructuring: Create strategy-supportive : Create strategy-supportive
organization capable of good strategy organization capable of good strategy
execution.execution.
10–8
FIGURE 10.2Building an Organization Capable of Proficient Strategy
Execution: Three Types of Paramount Actions
10–9
Execution: Three Types of Paramount Actions
10–9
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦Putting together a talented management team Putting together a talented management team
with the right mix of experiences, skills, and with the right mix of experiences, skills, and
abilities to get things done is one of the first abilities to get things done is one of the first
steps to take in launching the strategy-steps to take in launching the strategy-
executing process.executing process.
10–10
♦Putting together a talented management team Putting together a talented management team
with the right mix of experiences, skills, and with the right mix of experiences, skills, and
abilities to get things done is one of the first abilities to get things done is one of the first
steps to take in launching the strategy-steps to take in launching the strategy-
executing process.executing process.
10–10
STAFFING THE ORGANIZATIONSTAFFING THE ORGANIZATION
Putting Together a Strong Management Team:Putting Together a Strong Management Team:
●Planners who ask tough questions and figure out Planners who ask tough questions and figure out
what needs to be done.what needs to be done.
●Implementers who can select, manage, and lead the Implementers who can select, manage, and lead the
right people.right people.
●Executors who turn decisions into actions that drive Executors who turn decisions into actions that drive
the changes that produce sustainable competitive the changes that produce sustainable competitive
advantage.advantage.
Key Takeaway:Key Takeaway:
●A critical mass of talented activist managersA critical mass of talented activist managers
10–11
Putting Together a Strong Management Team:Putting Together a Strong Management Team:
●Planners who ask tough questions and figure out Planners who ask tough questions and figure out
what needs to be done.what needs to be done.
●Implementers who can select, manage, and lead the Implementers who can select, manage, and lead the
right people.right people.
●Executors who turn decisions into actions that drive Executors who turn decisions into actions that drive
the changes that produce sustainable competitive the changes that produce sustainable competitive
advantage.advantage.
Key Takeaway:Key Takeaway:
●A critical mass of talented activist managersA critical mass of talented activist managers
10–11
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦In many industries, adding to a company’s In many industries, adding to a company’s
talent base and building intellectual capital are talent base and building intellectual capital are
more important to good strategy execution than more important to good strategy execution than
additional investments in capital projects.additional investments in capital projects.
10–12
♦In many industries, adding to a company’s In many industries, adding to a company’s
talent base and building intellectual capital are talent base and building intellectual capital are
more important to good strategy execution than more important to good strategy execution than
additional investments in capital projects.additional investments in capital projects.
10–12
RECRUITING, TRAINING, AND RECRUITING, TRAINING, AND
RETAINING CAPABLE EMPLOYEESRETAINING CAPABLE EMPLOYEES
Intensively screen and evaluate applicants to ensure Intensively screen and evaluate applicants to ensure
selecting those who are best-suited and best-fitted.selecting those who are best-suited and best-fitted.
Provide training programs throughout employee careers.Provide training programs throughout employee careers.
Rotate promising people through challenging, and skill-Rotate promising people through challenging, and skill-
stretching international assignments.stretching international assignments.
Make the work environment stimulating and engaging Make the work environment stimulating and engaging
so that the firm is considered a great place to work.so that the firm is considered a great place to work.
Use an assortment of financial incentives and other perks Use an assortment of financial incentives and other perks
to retain employees.to retain employees.
Coach average performers to improve their skills and Coach average performers to improve their skills and
capabilities, while weeding out underperformers.capabilities, while weeding out underperformers.
10–13
RETAINING CAPABLE EMPLOYEESRETAINING CAPABLE EMPLOYEES
Intensively screen and evaluate applicants to ensure Intensively screen and evaluate applicants to ensure
selecting those who are best-suited and best-fitted.selecting those who are best-suited and best-fitted.
Provide training programs throughout employee careers.Provide training programs throughout employee careers.
Rotate promising people through challenging, and skill-Rotate promising people through challenging, and skill-
stretching international assignments.stretching international assignments.
Make the work environment stimulating and engaging Make the work environment stimulating and engaging
so that the firm is considered a great place to work.so that the firm is considered a great place to work.
Use an assortment of financial incentives and other perks Use an assortment of financial incentives and other perks
to retain employees.to retain employees.
Coach average performers to improve their skills and Coach average performers to improve their skills and
capabilities, while weeding out underperformers.capabilities, while weeding out underperformers.
10–13
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦The best companies make a point of recruiting The best companies make a point of recruiting
and retaining talented employees—the and retaining talented employees—the
objective is to make the firm’s entire workforce objective is to make the firm’s entire workforce
(managers and rank-and-file employees) a (managers and rank-and-file employees) a
genuine competitive asset.genuine competitive asset.
10–14
♦The best companies make a point of recruiting The best companies make a point of recruiting
and retaining talented employees—the and retaining talented employees—the
objective is to make the firm’s entire workforce objective is to make the firm’s entire workforce
(managers and rank-and-file employees) a (managers and rank-and-file employees) a
genuine competitive asset.genuine competitive asset.
10–14
ILLUSTRATION CAPSULE 10.1ILLUSTRATION CAPSULE 10.1
““Build From Within”: P&G’s ApproachBuild From Within”: P&G’s Approach
to Management Developmentto Management Development
♦Why would you want to work as a manager for Why would you want to work as a manager for
Proctor and Gamble?Proctor and Gamble?
♦What long-term organizational problems could What long-term organizational problems could
result from a heavy reliance on promote-from-result from a heavy reliance on promote-from-
within?within?
10–15
““Build From Within”: P&G’s ApproachBuild From Within”: P&G’s Approach
to Management Developmentto Management Development
♦Why would you want to work as a manager for Why would you want to work as a manager for
Proctor and Gamble?Proctor and Gamble?
♦What long-term organizational problems could What long-term organizational problems could
result from a heavy reliance on promote-from-result from a heavy reliance on promote-from-
within?within?
10–15
ACQUIRING, DEVELOPING,ACQUIRING, DEVELOPING,
AND STRENGTHENING AND STRENGTHENING
KEY RESOURCES AND CAPABILITIESKEY RESOURCES AND CAPABILITIES
DevelopDevelop
capabilities capabilities
internallyinternally
Acquire capabilities
through mergers
and acquisitions
Access capabilities
via collaborative
partnerships
Approaches to Build Building
and Strengthening Capabilities
10–16
AND STRENGTHENING AND STRENGTHENING
KEY RESOURCES AND CAPABILITIESKEY RESOURCES AND CAPABILITIES
DevelopDevelop
capabilities capabilities
internallyinternally
Acquire capabilities
through mergers
and acquisitions
Access capabilities
via collaborative
partnerships
Approaches to Build Building
and Strengthening Capabilities
10–16
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦Building new competencies and capabilities is Building new competencies and capabilities is
a multistage process that occurs over a period a multistage process that occurs over a period
of months and years. It is not something that is of months and years. It is not something that is
accomplished overnight.accomplished overnight.
10–17
♦Building new competencies and capabilities is Building new competencies and capabilities is
a multistage process that occurs over a period a multistage process that occurs over a period
of months and years. It is not something that is of months and years. It is not something that is
accomplished overnight.accomplished overnight.
10–17
DEVELOPING CAPABILITIES DEVELOPING CAPABILITIES
INTERNALLYINTERNALLY
Coordinate and Coordinate and
integrate the efforts integrate the efforts
of work groups and of work groups and
departmentsdepartments
Strengthen the
firm’s base of skills,
knowledge, and
intellect
Managerial Actions to Develop
Competencies and Capabilities
10–18
INTERNALLYINTERNALLY
Coordinate and Coordinate and
integrate the efforts integrate the efforts
of work groups and of work groups and
departmentsdepartments
Strengthen the
firm’s base of skills,
knowledge, and
intellect
Managerial Actions to Develop
Competencies and Capabilities
10–18
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦A company’s capabilities must be continually A company’s capabilities must be continually
refreshed and renewed to remain aligned with refreshed and renewed to remain aligned with
changing customer expectations, altered changing customer expectations, altered
competitive conditions, and new strategic competitive conditions, and new strategic
initiatives.initiatives.
10–19
♦A company’s capabilities must be continually A company’s capabilities must be continually
refreshed and renewed to remain aligned with refreshed and renewed to remain aligned with
changing customer expectations, altered changing customer expectations, altered
competitive conditions, and new strategic competitive conditions, and new strategic
initiatives.initiatives.
10–19
SETTING STRETCH GOALS: SETTING STRETCH GOALS:
FROM CAPABILITY TO COMPETENCEFROM CAPABILITY TO COMPETENCE
Thinking
strategically
about a firm’s
knowledge and
skills base
Thinking
strategically
about a firm’s
opportunities
and challenges
Setting a stretch
goal of
developing an
organizational
ability to do
something well
Evolving the ability
into a competence
or capability by
performing it well
and at an
acceptable cost
Refreshing, updating, and
upgrading competencies and
capabilities as necessary
to gain and maintain
competitive advantage
10–20
FROM CAPABILITY TO COMPETENCEFROM CAPABILITY TO COMPETENCE
Thinking
strategically
about a firm’s
knowledge and
skills base
Thinking
strategically
about a firm’s
opportunities
and challenges
Setting a stretch
goal of
developing an
organizational
ability to do
something well
Evolving the ability
into a competence
or capability by
performing it well
and at an
acceptable cost
Refreshing, updating, and
upgrading competencies and
capabilities as necessary
to gain and maintain
competitive advantage
10–20
ACQUIRING CAPABILITIES THROUGH ACQUIRING CAPABILITIES THROUGH
MERGERS AND ACQUISITIONSMERGERS AND ACQUISITIONS
A Question of A Question of
Market Opportunity Market Opportunity
When a market opportunity can slip by
faster than a needed capability can be
created internally.
A Question of A Question of
Competitive NecessityCompetitive Necessity
When industry conditions, technology,
or competitors are moving at such a
rapid clip that time is of the essence.
A Question of A Question of
Successful IntegrationSuccessful Integration
Tacit knowledge and complex routines
may not transfer readily from one
organizational unit to another.
10–21
MERGERS AND ACQUISITIONSMERGERS AND ACQUISITIONS
A Question of A Question of
Market Opportunity Market Opportunity
When a market opportunity can slip by
faster than a needed capability can be
created internally.
A Question of A Question of
Competitive NecessityCompetitive Necessity
When industry conditions, technology,
or competitors are moving at such a
rapid clip that time is of the essence.
A Question of A Question of
Successful IntegrationSuccessful Integration
Tacit knowledge and complex routines
may not transfer readily from one
organizational unit to another.
10–21
ILLUSTRATION CAPSULE 10.2ILLUSTRATION CAPSULE 10.2
Toyota’s Legendary Production System: A Capability Toyota’s Legendary Production System: A Capability
that Translates into Competitive Advantagethat Translates into Competitive Advantage
♦What about the Toyota Production System (TPS) What about the Toyota Production System (TPS)
makes it so difficult for competitors to imitate makes it so difficult for competitors to imitate
successfully?successfully?
♦What is the relationship between continuous What is the relationship between continuous
improvement and efficiency in the TPS?improvement and efficiency in the TPS?
♦Why would an Ishikawa (fish bone) diagram be Why would an Ishikawa (fish bone) diagram be
helpful in solving problems in the TPS?helpful in solving problems in the TPS?
10–22
Toyota’s Legendary Production System: A Capability Toyota’s Legendary Production System: A Capability
that Translates into Competitive Advantagethat Translates into Competitive Advantage
♦What about the Toyota Production System (TPS) What about the Toyota Production System (TPS)
makes it so difficult for competitors to imitate makes it so difficult for competitors to imitate
successfully?successfully?
♦What is the relationship between continuous What is the relationship between continuous
improvement and efficiency in the TPS?improvement and efficiency in the TPS?
♦Why would an Ishikawa (fish bone) diagram be Why would an Ishikawa (fish bone) diagram be
helpful in solving problems in the TPS?helpful in solving problems in the TPS?
10–22
ACCESSING CAPABILITIES ACCESSING CAPABILITIES
THROUGH COLLABORATIVE THROUGH COLLABORATIVE
PARTNERSHIPSPARTNERSHIPS
Outsource the Outsource the
function requiring function requiring
the capabilities to the capabilities to
a key supplier or a key supplier or
another provideranother provider
Collaborate with
a firm that has
complementary
resources and
capabilities
Engage in a
collaborative
partnership for the
purpose of learning
how the partner
does things
Approaches to acquiring
capabilities from an external source
10–23
THROUGH COLLABORATIVE THROUGH COLLABORATIVE
PARTNERSHIPSPARTNERSHIPS
Outsource the Outsource the
function requiring function requiring
the capabilities to the capabilities to
a key supplier or a key supplier or
another provideranother provider
Collaborate with
a firm that has
complementary
resources and
capabilities
Engage in a
collaborative
partnership for the
purpose of learning
how the partner
does things
Approaches to acquiring
capabilities from an external source
10–23
THE STRATEGIC ROLE OF THE STRATEGIC ROLE OF
EMPLOYEE TRAININGEMPLOYEE TRAINING
Training Is Important In:Training Is Important In:
●Executing a strategy that requires different skills, Executing a strategy that requires different skills,
competitive capabilities, and operating methods.competitive capabilities, and operating methods.
●Organizational efforts to build skills-based Organizational efforts to build skills-based
competencies.competencies.
●Supplying technical know-how to employees Supplying technical know-how to employees
when rapidly changing technology puts a firm when rapidly changing technology puts a firm
in danger of losing its ability to compete.in danger of losing its ability to compete.
10–24
EMPLOYEE TRAININGEMPLOYEE TRAINING
Training Is Important In:Training Is Important In:
●Executing a strategy that requires different skills, Executing a strategy that requires different skills,
competitive capabilities, and operating methods.competitive capabilities, and operating methods.
●Organizational efforts to build skills-based Organizational efforts to build skills-based
competencies.competencies.
●Supplying technical know-how to employees Supplying technical know-how to employees
when rapidly changing technology puts a firm when rapidly changing technology puts a firm
in danger of losing its ability to compete.in danger of losing its ability to compete.
10–24
STRATEGY EXECUTION CAPABILITIESSTRATEGY EXECUTION CAPABILITIES
AND COMPETITIVE ADVANTAGEAND COMPETITIVE ADVANTAGE
Superior Strategy Execution Capabilities:Superior Strategy Execution Capabilities:
●Are difficult to imitate and socially complex process Are difficult to imitate and socially complex process
that take a long time to develop.that take a long time to develop.
●Maximize organizational resources and competitive Maximize organizational resources and competitive
capabilities in support of the business model.capabilities in support of the business model.
●Lower costs and permit firms to deliver more value Lower costs and permit firms to deliver more value
to customers.to customers.
●Enable a firm to react more quickly to market Enable a firm to react more quickly to market
changes, beat competitors to market with new changes, beat competitors to market with new
products and services, and gain uncontested products and services, and gain uncontested
market dominance.market dominance.
10–25
AND COMPETITIVE ADVANTAGEAND COMPETITIVE ADVANTAGE
Superior Strategy Execution Capabilities:Superior Strategy Execution Capabilities:
●Are difficult to imitate and socially complex process Are difficult to imitate and socially complex process
that take a long time to develop.that take a long time to develop.
●Maximize organizational resources and competitive Maximize organizational resources and competitive
capabilities in support of the business model.capabilities in support of the business model.
●Lower costs and permit firms to deliver more value Lower costs and permit firms to deliver more value
to customers.to customers.
●Enable a firm to react more quickly to market Enable a firm to react more quickly to market
changes, beat competitors to market with new changes, beat competitors to market with new
products and services, and gain uncontested products and services, and gain uncontested
market dominance.market dominance.
10–25
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦Superior strategy execution capabilities are Superior strategy execution capabilities are
the only source of sustainable competitive the only source of sustainable competitive
advantage when strategies are easy for advantage when strategies are easy for
rivals to copy.rivals to copy.
10–26
♦Superior strategy execution capabilities are Superior strategy execution capabilities are
the only source of sustainable competitive the only source of sustainable competitive
advantage when strategies are easy for advantage when strategies are easy for
rivals to copy.rivals to copy.
10–26
MATCHING ORGANIZATIONAL MATCHING ORGANIZATIONAL
STRUCTURE TO THE STRATEGYSTRUCTURE TO THE STRATEGY
Ensuring that Structure Follows Strategy By:Ensuring that Structure Follows Strategy By:
●Deciding which value chain activities to perform Deciding which value chain activities to perform
internally and which to outsource.internally and which to outsource.
●Aligning the firm’s organizational structure with its Aligning the firm’s organizational structure with its
strategy.strategy.
●Determining how much authority to delegate.Determining how much authority to delegate.
●Facilitating collaboration with external partners and Facilitating collaboration with external partners and
strategic allies.strategic allies.
10–27
STRUCTURE TO THE STRATEGYSTRUCTURE TO THE STRATEGY
Ensuring that Structure Follows Strategy By:Ensuring that Structure Follows Strategy By:
●Deciding which value chain activities to perform Deciding which value chain activities to perform
internally and which to outsource.internally and which to outsource.
●Aligning the firm’s organizational structure with its Aligning the firm’s organizational structure with its
strategy.strategy.
●Determining how much authority to delegate.Determining how much authority to delegate.
●Facilitating collaboration with external partners and Facilitating collaboration with external partners and
strategic allies.strategic allies.
10–27
FIGURE 10.3Structuring the Work Effort to Promote
Successful Strategy Execution
10–28
Successful Strategy Execution
10–28
DECIDING WHICH VALUE CHAIN DECIDING WHICH VALUE CHAIN
ACTIVITIES TO PERFORM INTERNALLY ACTIVITIES TO PERFORM INTERNALLY
AND WHICH TO OUTSOURCEAND WHICH TO OUTSOURCE
Outsourcing’s Execution-Related Benefits:Outsourcing’s Execution-Related Benefits:
●Helps in outclassing rivals in strategy-critical activities Helps in outclassing rivals in strategy-critical activities
and in turning a core competence into a distinctive and in turning a core competence into a distinctive
competence.competence.
●Decreases bureaucracies, flattens structure, speeds Decreases bureaucracies, flattens structure, speeds
decision making, and shortens respond time to decision making, and shortens respond time to
changing market conditions.changing market conditions.
●Adds to a firm’s capabilities and contributes to better Adds to a firm’s capabilities and contributes to better
strategy execution through partnerships with strategy execution through partnerships with
suppliers and channel partners.suppliers and channel partners.
10–29
ACTIVITIES TO PERFORM INTERNALLY ACTIVITIES TO PERFORM INTERNALLY
AND WHICH TO OUTSOURCEAND WHICH TO OUTSOURCE
Outsourcing’s Execution-Related Benefits:Outsourcing’s Execution-Related Benefits:
●Helps in outclassing rivals in strategy-critical activities Helps in outclassing rivals in strategy-critical activities
and in turning a core competence into a distinctive and in turning a core competence into a distinctive
competence.competence.
●Decreases bureaucracies, flattens structure, speeds Decreases bureaucracies, flattens structure, speeds
decision making, and shortens respond time to decision making, and shortens respond time to
changing market conditions.changing market conditions.
●Adds to a firm’s capabilities and contributes to better Adds to a firm’s capabilities and contributes to better
strategy execution through partnerships with strategy execution through partnerships with
suppliers and channel partners.suppliers and channel partners.
10–29
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦Wisely choosing which activities to perform Wisely choosing which activities to perform
internally and which to outsource can lead to internally and which to outsource can lead to
several strategy-executing advantages—lower several strategy-executing advantages—lower
costs, heightened strategic focus, less internal costs, heightened strategic focus, less internal
bureaucracy, speedier decision making, and a bureaucracy, speedier decision making, and a
better arsenal of organizational capabilities.better arsenal of organizational capabilities.
10–30
♦Wisely choosing which activities to perform Wisely choosing which activities to perform
internally and which to outsource can lead to internally and which to outsource can lead to
several strategy-executing advantages—lower several strategy-executing advantages—lower
costs, heightened strategic focus, less internal costs, heightened strategic focus, less internal
bureaucracy, speedier decision making, and a bureaucracy, speedier decision making, and a
better arsenal of organizational capabilities.better arsenal of organizational capabilities.
10–30
ALIGNING THE FIRM’S ORGANIZATIONAL ALIGNING THE FIRM’S ORGANIZATIONAL
STRUCTURE WITH ITS STRATEGYSTRUCTURE WITH ITS STRATEGY
Organizational StructureOrganizational Structure
●Comprises the formal and informal arrangement Comprises the formal and informal arrangement
of tasks, responsibilities, lines of authority, and of tasks, responsibilities, lines of authority, and
reporting relationships for the firm.reporting relationships for the firm.
Structure Is Aligned with Strategy When:Structure Is Aligned with Strategy When:
●Its design contributes to the creation of value for Its design contributes to the creation of value for
customers.customers.
●Its parts are aligned with one another and also Its parts are aligned with one another and also
matched to the requirements of the strategy.matched to the requirements of the strategy.
●It lowers operating costs through lower bureaucratic It lowers operating costs through lower bureaucratic
costs and operational efficiencies.costs and operational efficiencies.
10–31
STRUCTURE WITH ITS STRATEGYSTRUCTURE WITH ITS STRATEGY
Organizational StructureOrganizational Structure
●Comprises the formal and informal arrangement Comprises the formal and informal arrangement
of tasks, responsibilities, lines of authority, and of tasks, responsibilities, lines of authority, and
reporting relationships for the firm.reporting relationships for the firm.
Structure Is Aligned with Strategy When:Structure Is Aligned with Strategy When:
●Its design contributes to the creation of value for Its design contributes to the creation of value for
customers.customers.
●Its parts are aligned with one another and also Its parts are aligned with one another and also
matched to the requirements of the strategy.matched to the requirements of the strategy.
●It lowers operating costs through lower bureaucratic It lowers operating costs through lower bureaucratic
costs and operational efficiencies.costs and operational efficiencies.
10–31
CORE CONCEPTCORE CONCEPT
♦A firm’s organizational structure comprises the A firm’s organizational structure comprises the
formal and informal arrangement of tasks, formal and informal arrangement of tasks,
responsibilities, lines of authority, and reporting responsibilities, lines of authority, and reporting
relationships by which the firm is administered.relationships by which the firm is administered.
10–32
♦A firm’s organizational structure comprises the A firm’s organizational structure comprises the
formal and informal arrangement of tasks, formal and informal arrangement of tasks,
responsibilities, lines of authority, and reporting responsibilities, lines of authority, and reporting
relationships by which the firm is administered.relationships by which the firm is administered.
10–32
♦How important is outsourcing to How important is outsourcing to
Apple’s marketplace success?Apple’s marketplace success?
♦Is outsourcing to low-wage overseas Is outsourcing to low-wage overseas
manufacturers to avoid paying higher manufacturers to avoid paying higher
wages in markets where it sells the wages in markets where it sells the
majority of its products a failure of majority of its products a failure of
corporate social responsibility by Apple?corporate social responsibility by Apple?
ILLUSTRATION CAPSULE 10.3 ILLUSTRATION CAPSULE 10.3
Which Value Chain Activities Does Apple Which Value Chain Activities Does Apple
Outsource and Why?Outsource and Why?
10–33
Apple’s marketplace success?Apple’s marketplace success?
♦Is outsourcing to low-wage overseas Is outsourcing to low-wage overseas
manufacturers to avoid paying higher manufacturers to avoid paying higher
wages in markets where it sells the wages in markets where it sells the
majority of its products a failure of majority of its products a failure of
corporate social responsibility by Apple?corporate social responsibility by Apple?
ILLUSTRATION CAPSULE 10.3 ILLUSTRATION CAPSULE 10.3
Which Value Chain Activities Does Apple Which Value Chain Activities Does Apple
Outsource and Why?Outsource and Why?
10–33
MATCHING TYPE OF ORGANIZATIONAL MATCHING TYPE OF ORGANIZATIONAL
STRUCTURE TO STRATEGY EXECUTION STRUCTURE TO STRATEGY EXECUTION
REQUIREMENTSREQUIREMENTS
Simple Structure
(Line-and-Staff)
Functional Structure
(Departmental or Unitary)
Multidivisional Structure
(Divisional or M-form)
Matrix Structure
(Composite or Combination)
Strategy
Execution
Requirements:
Chosen
Strategy
Capabilities
and
Competencies
Centralized
or
Decentralized
Control
10–34
STRUCTURE TO STRATEGY EXECUTION STRUCTURE TO STRATEGY EXECUTION
REQUIREMENTSREQUIREMENTS
Simple Structure
(Line-and-Staff)
Functional Structure
(Departmental or Unitary)
Multidivisional Structure
(Divisional or M-form)
Matrix Structure
(Composite or Combination)
Strategy
Execution
Requirements:
Chosen
Strategy
Capabilities
and
Competencies
Centralized
or
Decentralized
Control
10–34
CORE CONCEPTSCORE CONCEPTS
♦A A simple structuresimple structure ( (line-and-staff structureline-and-staff structure) )
consists of a central executive (often the consists of a central executive (often the
owner-manager) who handles all major owner-manager) who handles all major
decisions and oversees all operations with the decisions and oversees all operations with the
help of a small staff.help of a small staff.
♦A A functional structurefunctional structure is organized into is organized into
functional departments, with departmental functional departments, with departmental
managers who report to the CEO and managers who report to the CEO and
small corporate staff.small corporate staff.
10–35
♦A A simple structuresimple structure ( (line-and-staff structureline-and-staff structure) )
consists of a central executive (often the consists of a central executive (often the
owner-manager) who handles all major owner-manager) who handles all major
decisions and oversees all operations with the decisions and oversees all operations with the
help of a small staff.help of a small staff.
♦A A functional structurefunctional structure is organized into is organized into
functional departments, with departmental functional departments, with departmental
managers who report to the CEO and managers who report to the CEO and
small corporate staff.small corporate staff.
10–35
CORE CONCEPTSCORE CONCEPTS
♦A A multidivisional structuremultidivisional structure is a decentralized is a decentralized
structure consisting of a set of operating structure consisting of a set of operating
divisions organized along business, product, divisions organized along business, product,
customer group, or geographic lines, and a customer group, or geographic lines, and a
central corporate headquarters that allocates central corporate headquarters that allocates
resources, provides support functions, and resources, provides support functions, and
monitors divisional activities.monitors divisional activities.
♦A A matrix structurematrix structure combines two or more combines two or more
organizational forms, with multiple organizational forms, with multiple
reporting relationships. It is used reporting relationships. It is used
to foster cross-unit collaboration.to foster cross-unit collaboration.
10–36
♦A A multidivisional structuremultidivisional structure is a decentralized is a decentralized
structure consisting of a set of operating structure consisting of a set of operating
divisions organized along business, product, divisions organized along business, product,
customer group, or geographic lines, and a customer group, or geographic lines, and a
central corporate headquarters that allocates central corporate headquarters that allocates
resources, provides support functions, and resources, provides support functions, and
monitors divisional activities.monitors divisional activities.
♦A A matrix structurematrix structure combines two or more combines two or more
organizational forms, with multiple organizational forms, with multiple
reporting relationships. It is used reporting relationships. It is used
to foster cross-unit collaboration.to foster cross-unit collaboration.
10–36
DETERMINING HOW MUCH DETERMINING HOW MUCH
AUTHORITY TO DELEGATEAUTHORITY TO DELEGATE
Organizational Organizational
Approach to Approach to
Decision-Decision-
MakingMaking
Decentralized Decentralized
Decision Decision
MakingMaking
Centralized Centralized
Decision Decision
MakingMaking
Authority is retained
by top management
Authority delegated to
lower-level managers
and employees
10–37
AUTHORITY TO DELEGATEAUTHORITY TO DELEGATE
Organizational Organizational
Approach to Approach to
Decision-Decision-
MakingMaking
Decentralized Decentralized
Decision Decision
MakingMaking
Centralized Centralized
Decision Decision
MakingMaking
Authority is retained
by top management
Authority delegated to
lower-level managers
and employees
10–37
TABLE 10.1Advantages and Disadvantages of Centralized
versus Decentralized Decision Making
Centralized Centralized
Organizational StructuresOrganizational Structures
Decentralized Decentralized
Organizational StructuresOrganizational Structures
Basic Tenets Basic Tenets
•Decisions on most matters of
importance should be in the hands
of top-level managers who have the
experience, expertise, and judgment
to decide what is the best course of
action
•Lower-level personnel have neither
the knowledge, the time, nor the
inclination to properly manage the
tasks they are performing
•Strong control from the top is a
more effective means for
coordinating the firm’s actions
•Decision-making authority should be
put in the hands of the people closest
to, and most familiar with, the situation
•Those with decision-making authority
should be trained to exercise good
judgment
•A firm that draws on the combined
intellectual capital of all its employees
can outperform a command-and-
control firm
10–38
versus Decentralized Decision Making
Centralized Centralized
Organizational StructuresOrganizational Structures
Decentralized Decentralized
Organizational StructuresOrganizational Structures
Basic Tenets Basic Tenets
•Decisions on most matters of
importance should be in the hands
of top-level managers who have the
experience, expertise, and judgment
to decide what is the best course of
action
•Lower-level personnel have neither
the knowledge, the time, nor the
inclination to properly manage the
tasks they are performing
•Strong control from the top is a
more effective means for
coordinating the firm’s actions
•Decision-making authority should be
put in the hands of the people closest
to, and most familiar with, the situation
•Those with decision-making authority
should be trained to exercise good
judgment
•A firm that draws on the combined
intellectual capital of all its employees
can outperform a command-and-
control firm
10–38
Centralized Centralized
Organizational StructuresOrganizational Structures
Decentralized Decentralized
Organizational StructuresOrganizational Structures
Chief Advantages Chief Advantages
•Fixes accountability through
tight control from the top
•Eliminates potential for conflicting
goals and actions on the part of
lower-level managers
•Facilitates quick decision making
and strong leadership under crisis
situations
•Encourages employees to exercise
initiative and act responsibly
•Promotes greater motivation and
involvement in the business on the part
of more company personnel
•Spurs new ideas and creative thinking
•Allows fast response to market change
•Entails fewer layers of management
Advantages and Disadvantages of Centralized
versus Decentralized Decision Making (cont’d)
TABLE 10.1
10–39
Organizational StructuresOrganizational Structures
Decentralized Decentralized
Organizational StructuresOrganizational Structures
Chief Advantages Chief Advantages
•Fixes accountability through
tight control from the top
•Eliminates potential for conflicting
goals and actions on the part of
lower-level managers
•Facilitates quick decision making
and strong leadership under crisis
situations
•Encourages employees to exercise
initiative and act responsibly
•Promotes greater motivation and
involvement in the business on the part
of more company personnel
•Spurs new ideas and creative thinking
•Allows fast response to market change
•Entails fewer layers of management
Advantages and Disadvantages of Centralized
versus Decentralized Decision Making (cont’d)
TABLE 10.1
10–39
Centralized Centralized
Organizational StructuresOrganizational Structures
Decentralized Decentralized
Organizational StructuresOrganizational Structures
Primary Disadvantages Primary Disadvantages
•Lengthens response times by
those closest to the market conditions
because they must seek approval for
their actions
•Does not encourage responsibility
among lower-level managers and
rank-and-file employees
•Discourages lower-level managers
and rank-and-file employees from
exercising any initiative
•Higher-level managers may be
unaware of actions taken by
empowered personnel under their
supervision
•Puts the organization at risk if
empowered employees happen
to make “bad” decisions
•Can impair cross-unit collaboration
Advantages and Disadvantages of Centralized
versus Decentralized Decision Making (cont’d)
TABLE 10.1
10–40
Organizational StructuresOrganizational Structures
Decentralized Decentralized
Organizational StructuresOrganizational Structures
Primary Disadvantages Primary Disadvantages
•Lengthens response times by
those closest to the market conditions
because they must seek approval for
their actions
•Does not encourage responsibility
among lower-level managers and
rank-and-file employees
•Discourages lower-level managers
and rank-and-file employees from
exercising any initiative
•Higher-level managers may be
unaware of actions taken by
empowered personnel under their
supervision
•Puts the organization at risk if
empowered employees happen
to make “bad” decisions
•Can impair cross-unit collaboration
Advantages and Disadvantages of Centralized
versus Decentralized Decision Making (cont’d)
TABLE 10.1
10–40
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦The ultimate goal of decentralized decision The ultimate goal of decentralized decision
making is to put authority in the hands of those making is to put authority in the hands of those
persons closest to and most knowledgeable persons closest to and most knowledgeable
about the situation.about the situation.
10–41
♦The ultimate goal of decentralized decision The ultimate goal of decentralized decision
making is to put authority in the hands of those making is to put authority in the hands of those
persons closest to and most knowledgeable persons closest to and most knowledgeable
about the situation.about the situation.
10–41
CAPTURING CROSS-BUSINESS CAPTURING CROSS-BUSINESS
STRATEGIC FIT IN A DECENTRALIZED STRATEGIC FIT IN A DECENTRALIZED
STRUCTURESTRUCTURE
Centralizing related functions Centralizing related functions
requiring close coordination requiring close coordination
at the corporate levelat the corporate level
Enforcing close cross-Enforcing close cross-
business collaboration to business collaboration to
avoid duplication of effortavoid duplication of effort
Capturing
Cross-Business
Strategic Fit
10–42
STRATEGIC FIT IN A DECENTRALIZED STRATEGIC FIT IN A DECENTRALIZED
STRUCTURESTRUCTURE
Centralizing related functions Centralizing related functions
requiring close coordination requiring close coordination
at the corporate levelat the corporate level
Enforcing close cross-Enforcing close cross-
business collaboration to business collaboration to
avoid duplication of effortavoid duplication of effort
Capturing
Cross-Business
Strategic Fit
10–42
STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE
♦Efforts to decentralize decision making and Efforts to decentralize decision making and
give company personnel some leeway in give company personnel some leeway in
conducting operations must be tempered with conducting operations must be tempered with
the need to maintain adequate control and the need to maintain adequate control and
cross-unit coordination.cross-unit coordination.
10–43
♦Efforts to decentralize decision making and Efforts to decentralize decision making and
give company personnel some leeway in give company personnel some leeway in
conducting operations must be tempered with conducting operations must be tempered with
the need to maintain adequate control and the need to maintain adequate control and
cross-unit coordination.cross-unit coordination.
10–43
FACILITATING COLLABORATION WITH FACILITATING COLLABORATION WITH
EXTERNAL PARTNERS AND EXTERNAL PARTNERS AND
STRATEGIC ALLIESSTRATEGIC ALLIES
Strategic alliances
Outsourcing arrangements
Joint ventures
Cooperative partnerships
Creating aCreating a
Network Network
Structure:Structure:
Using Using
“relationship “relationship
managers” managers”
to build and to build and
maintain maintain
cooperativecooperative
arrangements arrangements
of value both of value both
partiesparties
10–44
EXTERNAL PARTNERS AND EXTERNAL PARTNERS AND
STRATEGIC ALLIESSTRATEGIC ALLIES
Strategic alliances
Outsourcing arrangements
Joint ventures
Cooperative partnerships
Creating aCreating a
Network Network
Structure:Structure:
Using Using
“relationship “relationship
managers” managers”
to build and to build and
maintain maintain
cooperativecooperative
arrangements arrangements
of value both of value both
partiesparties
10–44
CORE CONCEPTCORE CONCEPT
♦A A network structure network structure is the arrangement is the arrangement
linking a number of independent organizations linking a number of independent organizations
involved in some common undertaking.involved in some common undertaking.
10–45
♦A A network structure network structure is the arrangement is the arrangement
linking a number of independent organizations linking a number of independent organizations
involved in some common undertaking.involved in some common undertaking.
10–45
FURTHER PERSPECTIVES ON FURTHER PERSPECTIVES ON
STRUCTURING THE WORK EFFORTSTRUCTURING THE WORK EFFORT
Pick a basic Pick a basic
organizational organizational
design that design that
matches matches
structure to structure to
strategystrategy
Supplement
design with
appropriate
coordinating
mechanisms
Institute
collaborative
networking and
communication
arrangements
Matching Structure to StrategyMatching Structure to Strategy
10–46
STRUCTURING THE WORK EFFORTSTRUCTURING THE WORK EFFORT
Pick a basic Pick a basic
organizational organizational
design that design that
matches matches
structure to structure to
strategystrategy
Supplement
design with
appropriate
coordinating
mechanisms
Institute
collaborative
networking and
communication
arrangements
Matching Structure to StrategyMatching Structure to Strategy
10–46
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