Chapter Two

Strategy, Organization Design,

and Effectiveness

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Organization Direction, Design, and

Effectiveness

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Organizational Purpose
Strategic intent - organizations energies and
resources are directed toward a focused,
unifying, and compelling goal

Mission
Competitive Advantage
Core Competence

Operative Goals
Overall Performance
Resources
Market
Employee Development
Innovation and Change
Productivity

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The Importance of Goals

Official goals and mission statements
describe a value system
Legitimize the organization

Operative goals serve several purposes

Employee direction and motivation
Decision guidelines
Standards of performance

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Selecting Strategy
A strategy is a plan for interacting with the
competitive environment
Managers must select specific strategy
design
Models exist to aid in formulating strategy:
Porters Five Forces
Miles and Snows Strategy Typology

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Porters Competitive Five Forces

Managers should understand forces in
industry and environment
The Threat of New Entrants
The Power of Suppliers
The Power of Buyers
The Threat of Substitutes
Rivalry among Existing Competitors

Porter suggests that companies adopt

strategies based on five forces analysis
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Porters Competitive Strategies

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Miles and Snows

Strategy Typology
Managers should seek to formulate strategy that matches
the demands of the external environment.
Prospector
Learning orientation; flexible, fluid, decentralized structure
Values creativity, risk-taking, and innovation

Defender
Efficiency orientation; centralized authority and tight cost control
Emphasis on production efficiency, low overhead

Analyzer
Balances efficiency and learning; tight cost control with flexibility and
adaptability
Emphasis on creativity, research, risk-taking for innovation

Reactor
No clear organizational approach; design characteristics may shift
abruptly depending on current needs
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How Strategy Affects

Organization Design
Strategy impacts internal
organization characteristics
Managers must design the
organization to support the
firms competitive strategy.

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Contingency Factors
Affecting Organization Design

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Assessing Organizational
Effectiveness
Managers must evaluate goals
Effectiveness can be difficult to measure
Managers determine what to measure
Effectiveness takes into consideration a range of
variables at both the organizational and
departmental levels.
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Sample Goals
Profitability
The positive gain from business operations or investments

Market Share
The proportion of the market the firm is able to capture relative
to competitors

Growth
The ability of the organization to increase its sales, profits, or
clients

Social Responsibility
How well the organization serves the community

Product Quality
The ability of the organization to achieve high quality
products/services
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Resource and Internal

Process Goals
Resource-based indicators look at the
inputs regarding processes
The use of tangible and intangible resources
in operations (i.e. supplies, people)

Internal processes must be measured for

effectiveness
Operational efficiency
Growth and development of employees

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Contingency Approaches to the Measurement of

Organizational Effectiveness

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Balance Scorecard Approach

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Design Essentials
Organization exist for a purpose
Strategic intent include competitive advantage
and core competence
Strategies may include many techniques
There are models to aid in the development of
strategy
Organizational effectiveness must be assessed
No approach is suitable for every organization
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