Summary
Samenvatting Organizational Structure
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Summary of the Organizational structure exam chapters
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OS summaryCH8
Strategy = the specific pattern of decisions and actions that managers take to use core
competences to achieve a competitive advantage and outperform competitors.
→ is developed to increase the value it can create for its stakeholders
Core competences = the skills and abilities in value creation activities that allow a company to
achieve superior efficiency, quality, innovation, or customer responsiveness
Sources of core competences:
● Specialized resources, two kinds of resources
● Coordination abilities, ability to coordinate its functional and organizational resources to
create maximal value
● Transferring core competences abroad
● Establishing a global network
● Gaining access to global resources and skills
● Using global learning to enhance core competences
Two kinds of resources:
1. Functional resources = the skills possessed by an organization’s functional personnel
2. Organizational resources = the attributes that give an organization a competitive
advantage such as the skills of the top management or possession of valuable and
scarce resources
Levels of strategy:
1. Functional-level strategy = plan of action to strengthen an organizations functional and
organizational resources, as well as its coordination abilities, in ord to create core
competences.
According to contingency theory, an organizations design should permit each function to
develop a structure that suits its human and technical resources
The structure most conducive to the development of functional abilities in R&D is a flat
decentralized structure in which mutual adjustment among teams is the main way of
coordinating human and technical resources.
To create value at the functional level, organization’s strategy must allow and encourage each
function to develop a core competence in lowering costs or differentiating its products from
those of competitors.
, 2. Business-level strategy = plan to combine functional core competences in
order to position the organization so that it has a competitive advantage →
responsibility of the top-management team
Challenge = to take the core competences created by its functions and combine them to take
advantage of opportunities in the environment to create value.
3. Corporate-level strategy = plan to use and develop core competences so that the
organization can not only protect and enlarge its existing domain but can also expand
into new domains
4. Global expansion strategy = a plan that involves choosing the best strategy to expand
into overseas markets to obtain scarce resources and develop core competencies
Factors that affect an organizations choice of structure:
● Wider range of products → greater control over development, marketing and
production
● Seeks to find new customer groups → structure that serves the needs of the
customers
● Pace of new product development increases → increase coordination among
its functions
Vertical integration = a strategy in which an organization takes over and owns its suppliers
(backward) or its distributors (forward)
Related diversification = entering a new domain in which it can use one or more of its existing
core competences to create a low-cost or differentiated competitive advantage in that new
domain
→ requires lateral communication between divisions as well as vertical
communication between divisions and corporate headquarters.
→ multidivisional matrix structure is often used to increase integration
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