BU398 Chapter Notes - Chapter 2: Organizational Culture, Organizational Chart

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30 Jan 2013
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
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,
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
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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 Approaches
Focus on different parts of the organization
Organizations bring resources into the environment which are transformed
into outputs
Goals approach
Identifying an organizations output goals and assessing how well the
organization has attained those goals
Operative goals important
Used in businesses because goals can be readily measured
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