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Chapter 2

Chapter 2- The Role of Strategic Direction in Organizational Design.docx

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Wilfrid Laurier University
Steve Risavy

Monday, January 21, 2013 The Role of Strategic Direction in Organizational Design  Organizations are created to achieve some purpose, which is achieved by the CEO and top management teams  Decide purpose and determine direction  Primary responsibility of top management: determine organizational goals, strategy, design, adapting organization to changing environment  These decisions have a tremendous impact on organization effectiveness  Direction-setting process: 1. assess opportunities and threats 2. assess strengths and weakness – define key competencies 3. define the overall mission and official goals based on the correct fit between external opportunities and internal strengths 4. structural form determined 5. Evaluate the effectiveness of organizational efforts Organizational Purpose Mission  Overall goal of the organization, reason for existence  Official goals: formally stated definition of business scope and outcomes the organization is trying to achieve  Mission Statement: communicates to current and prospective employees, customers, investors, etc. what the organization stands for and what it’s trying to achieve Operative Goals  Designate the ends sought out through the actual operating procedures of the organization and explain what the organization is actually trying to do  Describe specific measurable outcomes, concerned with the short-term 1. Overall Performance: For-profit: profitability, growth, output volume – Non-profit: delivery of service 2. Resources: acquisition of needed material and finances 3. Market: market share and standing – responsibility of marketing, sales, advertising 4. Employee Development: training, promotion, safety, growth – mangers and workers 5. Innovation and Change: internal flexibility and readiness to adapt to unexpected changes in he environment – development of products/services, processes 6. Productivity: amount of output achieved from available resources Importance of Goals  Official goals and mission statements describe a value system for the organization, legitimize the organization  Operative goals represent the primary tasks of the organization, provide a sense of direction to motivate employees  Guidelines for employee behaviour and decision making Monday, January 21, 2013 A Framework for Selecting Strategy and Design  Strategy: plan for interacting with the competitive environment to achieve organizational goals – how to get to where they want to go (goals)  Two Models: Porter’s Competitive Strategies  Framework describing three competitive strategies: 1. Focus Strategy: concentrate on a specific market or buyer group 2. Differentiation Strategy: attempt to distinguish their product/service from others in the industry 3. Low-cost Leadership: tries to increase market share by emphasizing low cost compared to competitors Miles and Snow’s Strategy Typology  Based on the idea that managers seek to formulate strategies that will be congruent with the external environment  Four strategies: 1. Prospector: innovate, take risks, seek out new opportunities, and grow – suited to dynamic, growing environments where creativity is more important than efficiency 2. Defender: stability, retrenchment, hold onto current customers, stay the same – internal efficiency and control, reliable, high- quality products – good in a declining or stable environment 3. Analyzer: stable business while innovating on old ideas – some products targeted toward stable environment with efficiency strategy, others marketed to dynamic environment with growth 4. Reactor: not a strategy, reactors respond to environmental threats and opportunities Assessing Organizational Effectiveness  Organizational goals: represent the reason for an organization’s existence and the outcomes it seeks to achieve  Effectiveness: a broad concept – extent to which multiple goals multiple goals are attained – difficult to measure  Efficiency: more limited in scope – internal amount of resources used to produce a unit of output Contingency Effectiveness App
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