Page 209 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 11: Structural Implementation

in corporate strategy lead to changes in organisational structure. He also concluded that Notes
organisations follow a pattern of development from one kind of structural arrangement to
another as they expand. According to Chandler, these structural changes occur because the old
structure was not suitable. Chandler therefore proposed the following as the sequence of what
occurs:
1. New strategy is created
2. New administrative problems emerge

3. Economic performance declines
4. New appropriate structure is invented

5. Profit returns to its previous level
Chandler found that in their early years, corporations such as DuPont and General Motors had
a centralized functional structure, which was suitable for a limited range of products. As they
added new product lines and created their own distribution networks, the old structure became
too complex. Therefore, they shifted to a decentralized structure with several autonomous
divisions.

11.3 Improving Effectiveness of Traditional Organisational Structures

In the changed times and situations, traditional organisational structure is crumbling under the
weight of ever-increasing regulations that drive greater accountability and transparency. Smart
companies are on the forefront of building new and improved structures that support and
enhance this new compliance environment, and best practices are emerging.
The best structure for an organisation is determined by many aspects of its situation – the
technology, size, environment and strategy. Frequently, structures evolve as the organisation
moves from one stage of growth to the next. The external and internal environments affect
structural design in different ways.

Example: 1. An organisation which faces a stable environment may use functional
structure.
2. A volatile environment demands a rapid-response capability, flexibility
and quick decision-making. Such demands can be better met by the
creation of a divisional or a matrix type of structure.
According to Mintzberg, there are four main characteristics of the environment that influence
structure.
Table 11.1: Environmental Types and their Impact on Organisational Structure

Type of Range Consequences for Organizational
Environment Structure
Rate of change Static Dynamic As rate of change increases, the
organization needs to be kept more
flexible
Degree of Simple Complex Greater complexity needs more
complexity formal co-ordination
Market complexity Involved in single market As markets become more diversified,
involved in diversified divisionalisation becomes advisable
markets
Competitive Passive Hostile Greater hostility probably needs the
situation protection of greater centralisation

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Type of Dominant Preferred Strategies Planning and
Culture Objectives Control Systems
Defender Desire for a Specialisation; cost-efficient Centralised,
secure and stable production; marketing detailed control;
niche in market emphasizes price and service emphasis on cost
to defend current business; efficiency; extensive
tendency to vertical use of formal
integration planning
Prospector Location and Growth through product and Emphasis on
exploitation of market development (often in inflexibility
new product and spurts); constant monitoring decentralised
market of environmental change; control; use of ad
opportunities multiple technologies hoc measurements
Analyser Desire to match Steady growth through Very complicated;
new ventures to market penetration; coordinating roles
present shape of exploitation of applied between functions
business research, followers in the (e.g. product
market mangers); intensive
planning.