Strategy, Organizational Design, and Effectiveness
The Role of Strategic Direction in Organizational Design
The organization’s direction and purpose shapes how the organization is designed and managed
The primary responsibility of top management is to determine an organization’s goals, strategy, and design,
therein adapting the organization to a changing environment.
Performance of SWOT and PEST analysis highlights the direction the organization should be taking
Organizations are created and continued in order to accomplish something. Parts of the organization establish their
own goals and objectives to help meet the overall goal, mission or purpose of the organization.
Mission (Official Goals) = value system
Overall goal and reason for existence; it is a description of the organization’s vision, its shared values and
believes, and its reason for being.
o Official goals refers to the business scope and outcomes the organization is trying to achieve
Serves as a communication tool – communicates to current or potential stakeholders what the organization
is trying to achieve.
Communicates legitimacy to internal and external stakeholders who identify with the purpose.
Operative Goals = primary tasks, more well defined
Designate the ends sought through the actual operating procedures of the organization and explain what the
organization is actually trying to do.
Describes specific, measurable outcomes and are often concerned with the short run.
Pertain to the tasks organizations must perform.
Overall Performance reflected by profitability (e.g. net income, EPS, ROI), growth, output volume
o Government and nonprofits have goals that attempt to specify the delivery of services to clients or
members within specified expense levels
Resources pertain to the acquisition of needed material (people or materials) and financial resources from
Market relate to the market share or market standing desired by the organization.
o E.g. Honda’s desire to overtake Toyota as the number one seller of cars in Japan
Employee Development refers to the training, promotion, safety, and growth of employees.
Innovation and Change pertain to internal flexibility and readiness to adapt to unexpected changes in the
o Defined in terms of the development of specific new services, products, or production processes
Productivity concern the amount of output achieved from available resources.
Must have a careful balance of operative goals.
The Importance of Goals
Act as guidelines for employee behaviour and decision making in that it set constraints on individual
behaviour and actions so that employees behave within boundaries that are acceptable to the organization
and larger society.
Provide a standard for assessment.
A Framework for Selecting Strategy and Design
Organizations need to select specific strategy options to achieve its purpose and goals
A strategy is a plan for interacting with the competitive environment to achieve organizational goals; how an
organization will achieve its goals (e.g. aggressive advertising to attract new customers).
Porter’s Competitive Strategies
Three competitive advantages: differentiation, low-cost leadership, and focus.
Then choose from a broad or narrow (focused low-cost leadership, and focused differentiation) scope
Differentiation Strategy – organizations attempt to distinguish their products or services from others in the
industry; customers are not price sensitive, can be profitable; can reduce rivalry with competitors and threat of substitute products through customer brand loyalty; requires extensive product research and design to
create a unique product, and then extensive marketing.
Low Cost Leadership Strategy – tries to increase market share by emphasizing low cost compared to
competitors; organization seeks efficiency and cost reduction controls; concerned with stability.
o E.g. WestJet
Focus – the company will try to achieve either a low-cost advantage or a differentiation advantage within a
narrowly defined market or buyer group.
Miles and Snow’s Strategy Typology
Based on the idea that managers seek to formulate strategies that will be congruent with the external environment.
o To innovate, take risks, seek out new opportunities, and grow
o Learning orientation; fluid, flexible and decentralized structure; strong research capability
o Values creativity more than efficiency
o Differentiation strategy
o E.g. RIM, Microsoft, and other leading high-tech companies
o Concerned with stability or even retrenchment; seeks to hold onto customers but neither innovates
o Internal efficiency oriented to produce reliable, high-quality products for a steady stream of