BUSI690 Rothaermel Ex 3
Rothaermal Exercise 3
Ryan Cherry
BUSI 690 – Policy and Strategy in Global Competition
February 1, 2015
Chapter 11
Discussion Question 11.1: Why is it important for an organization to have alignment between its strategy and organizational structure?
The relationship between an organization’s strategy and structure are extremely important because it “directly impacts a firm’s performance” (Rothaermel, 2013, p. 309). Also, as an organization grows, it should reevaluate the current strategy and structure to ensure that it remains the optimal choice for the organization (Rothaermel, 2013). The four types of organizational structures, listed in order of least to most complex according to Rothaermel (2013), are: (1) simple, (2) functional, (3) multidivisional, and (4) matrix.
The simple structure is for small firms or organizations that are just starting out (Rothaermel, 2013). The decision-making structure is quite flat, as “the founders tend to make all the important strategic decisions” (Rothaermel, 2013, p. 309). Growth will often cause the higher-ups to feel overwhelmed under this type of structure, requiring the organization to adopt a different, more complex structure (Rothaermel, 2013).
A functional structure groups employees into teams, allowing for increased decision-making at lower levels of the managerial chain (Rothaermel, 2013). The opportunity for specialization allows for the functional structure to be employed with each of the business-level strategies: cost leadership, differentiation, or integration (Rothaermel, 2013). One of the hurdles to overcome would be the likely increase in difficulties which arise from departmentalization of the varying teams (Rothaermel, 2013). The best way to overcome such a hurdle is through cross-functional teams (Rothaermel, 2013).
Whenever the organization seeks greater diversification, into varying product lines and service offerings, it will likely look into utilizing a multidivisional structure
Ryan Cherry
BUSI 690 – Policy and Strategy in Global Competition
February 1, 2015
Chapter 11
Discussion Question 11.1: Why is it important for an organization to have alignment between its strategy and organizational structure?
The relationship between an organization’s strategy and structure are extremely important because it “directly impacts a firm’s performance” (Rothaermel, 2013, p. 309). Also, as an organization grows, it should reevaluate the current strategy and structure to ensure that it remains the optimal choice for the organization (Rothaermel, 2013). The four types of organizational structures, listed in order of least to most complex according to Rothaermel (2013), are: (1) simple, (2) functional, (3) multidivisional, and (4) matrix.
The simple structure is for small firms or organizations that are just starting out (Rothaermel, 2013). The decision-making structure is quite flat, as “the founders tend to make all the important strategic decisions” (Rothaermel, 2013, p. 309). Growth will often cause the higher-ups to feel overwhelmed under this type of structure, requiring the organization to adopt a different, more complex structure (Rothaermel, 2013).
A functional structure groups employees into teams, allowing for increased decision-making at lower levels of the managerial chain (Rothaermel, 2013). The opportunity for specialization allows for the functional structure to be employed with each of the business-level strategies: cost leadership, differentiation, or integration (Rothaermel, 2013). One of the hurdles to overcome would be the likely increase in difficulties which arise from departmentalization of the varying teams (Rothaermel, 2013). The best way to overcome such a hurdle is through cross-functional teams (Rothaermel, 2013).
Whenever the organization seeks greater diversification, into varying product lines and service offerings, it will likely look into utilizing a multidivisional structure
References: Rothaermel, F. T. (2013). Strategic Management. New York: McGraw-Hill/Irwin. Walmart. Our story. Retrieved on January 25, 2015, from http://corporate.walmart.com/our-story/