Readings for Midterms

I. Strategy Implementation Concerns of the General Manager / CEO

A. Human resource development
1. HRD programs are designed to ensure that employees and management staff
have appropriate skills and training required to accomplish corporate strategies.
a. Short term vs. long term needs of the firm
i. Short term (60days)
-entry level programs
-training programs on new regulations etc.
ii. Long term strategies
-cost leadership (cost allocation, production process, cost
analysis)
-market leadership ( product development, market research,
consumer behavior, etc)
b. Globalization
i. foreign languages
ii. foreign labor laws
ii. more R and D for products in global markets
c. Technological Issues
i. training in relation to employees adoption to new technology

B. Organizational structure
1. M-Form (multi divisional)
a. a corporation has operating divisions that are responsible for profits and
at the corporate level, there are organization units or departments that
provide centralized organizational functions such as HRD, Finance, Legal
and Accounting.
Example : URC
2. Holding Companies
a. own shares in subsidiary corporations and control is done through the
board members and appointed corporate officers and subsidiaries such
as president and treasurer.
Example : JG Summit
C. Organizational Change and Renewal
a. Reengineering is the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical
contemporary measures of performance such as cost, quality, service
and speed.
Example : FORD – invoiceless processing. Mazda only has five people processing
the accounts payable.
b. Managing Incrementalism – executives in large companies utilize
incremental processes as they manage complex strategy shifts.
Strategic change processes are fragmented, evolutionary and intuitive.
They are unstructured and have no rigid timetable, thus dynamic.
Example : Starbucks

D. Organizational Culture

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 1. Organizational culture represents basic assumptions that are shared by a group
and that have been found to be valid in the past so they can be taught to
newcomers in the organization:
a. Key Functions of Culture
- provides solutions to problems of external adaptation or
external survival of the firm.
- manages internal integration problems
- provides a sense identity for the firm
People and organization leaders create and change culture. Leaders particularly
visionary and articulate leaders define and institutionalize the organization’s
culture.

2. Developing a culture of diversity

Our concern is to ensure that different ways of thinking are integrated in all our
decision processes.
Example : Nestle

E. Management Control System

1. MCS are designed to address agency problems or minimize the gap between the
individual manager’s goals and the organization’s goals.
a. Management Control Structure

Type of Responsibility Centers Selected criteria for performance measurement

Revenue Centers Revenues or market share
Discretionary Cost Centers Costs vs Accomplishments
Engineered Cost Centers Actual Costs vs Standard Costs
Profit Centers Sales minus costs and expenses
Investment Centers Return on investments

b. Management Control Process

i. Determination of criteria or measures against which a unit’s
performance is measured.
ii. Measurement, reporting and review of performance in relation to
the above criteria.
iii. Rewarding of managers of key operating units based on
performance.

F. Politics and regulatory concerns.

1. Sources of Power

Legitimate Power Powers as defined by the positioned occupied by a person

Expert power Arises from expert knowledge
Referent power Results from personal characteristics of a person ie charisma
Reward power resources Power of a person to give or withhold
Punishment Power Comes from the capacity of a person to deprive a person of
something of value
Relationship Power Comes from a system of informal personal obligations which

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 has been built up between people.

2. Politics and Organizational Relationships

a. President and the board
b. Line and staff personnel
c. Departmental relationships
i. Marketing and Promotion
ii. Marketing and Accounting
c. Boss and subordinate relationship

External
a. Suppliers, customers, government

3. Regulatory Issues

Conclusion
The internal and external environment must be dealt with by the CEO in order to have an
effective strategy implementation. Issues are never ending. CEO has to be alert for any
changes. CEO must build a management team to help him anticipate, plan and deal with the
challenges.

II. Strategy and Organizational Structure : The Multidivisional Form

A. Multidivisional Form – decentralized organizational structure composed of different
operating divisions where each division represents a semi autonomous unit that
basically performs all the functions of a centralized unitary form
1. Suitable for Companies that offer different products and services or that offer
different products and services but in different geographical areasand to different
target markets.
2. Facilitates flow of information and the decision making process as each division is
given more autonomy to make the decisions
3. The role of the central headquarters is to develop strategies for the divisions and
come up with guiding policies.
Example : General Motors (Sloan)
a. Transformed divisions into semi autonomous units, mostly profit centers,
organized by either product, brand or geographical lines
b. The general office is composed of powerful general executives, advisory and
financial staff.
c. Main functions of the general office:
i. Monitor divisional performances
ii. Allocate resources among divisions
iii. Engage in strategic planning
d. M-Form relieved the corporate executives of the burden of day to day
operation
e. The Division Managers became more empowered.
f. Sloan – he squared the circle of imposing central, bureaucratic control over
operating divisions without destroying the initiative and creativity of the
people who ran them.

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 B. Advantages and Disadvantages
Advantages
1. Improves effectiveness of the Division managers are given more authority
company Can respond to operational problems immediately
Corporate executives have more time to plan
2. Provides higher level of The division managers will have to deliver because the
control to divisional managers corporate managers decide budget allocations and
giving them more incentives approve projects for expansion
to be more efficient and The division managers performance is determinant of
cooperative with other their future in terms of promotions and rewards
product divisions
3. Allows corporate managers to If both the corporate managers and division managers
identify which divisions were to perform their tasks, the M form structure
generate the highest rate of should result in synergy
return on invested capital
Disdvantages
1. Problems on balancing If no proper control, the division managers can abuse
between centralization and their authority and make decisions that are not
decentralization consistent with the goals of the company
2. Too much competition can be If too much competition, the managers may be
counter productive uncooperative or will not want to share to other
divisions
3. Raises problems in setting Divisions are profit center and may be charging high
transfer prices transfer prices to other divisions
4. May increase operating costs May require another management level that can result
to increase in costs and slow decision making process
5. Difficulty in monitoring More room to conceal the operating performance as
division manager’s divisions are headed by different managers.
performance

C. Levels of Diversification
a. Low levels of diversification
i. Single business
ii. Dominant business

b. Moderate to high levels

i. Related constrained – less than 70% of revenues comes from dominant
business. All businesses share product, technological, and distribution
linkages
ii. Related Linked – less than 70% from dominant business but only limited
links
c. Very high levels - no common links

D. Types of M Form
1. Cooperative
a. Horizontal integration is used to enhance cooperation among divisions

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 b. May need to share one or more corporate strengths; production, marketing
distribution channels, r and d. This can result in economies of scale
c. Applicable to related-constrained diversification strategies, products or target
markets
d. Integrating mechanisms; centralization of some org functions, constant
communication among division managers, sharing of competencies and
resources.
e. Success factors include effective communication, performance review of
managers should be based not only on division manager’s performance but also
his contribution to interdivisional cooperation
Example : P and G

2. Strategic Business Unit (SKU)

a. Distinct from parent unit but at the same time integral to overall performance
b. Little in common
c. Diversification strategy
d. Integrating mechanism;sharing of resources and competencies, constant
communication,
Example : General Electric

3. Competitive Type
a. Creates value through an efficient allocation of capital by restructuring,
acquiring and disposing of businesses.
b. Divisions are completely different from each other
c. Competes for resources
d. Advantages :
i. Creates flexibility
ii. Challenges status quo
iii. Motivates effort
e. HQ must come up with performance appraisal measures that are financial in
nature.
f. DM has more autonomy
g. No need for integrating mechanism
Example : Textron, Inc

Structural Cooperative(Related- SBU(related linked) Competitive (unrelated

Characteristics constrained ) diversification)
1.Centralization of Centralized at corporate Partially centralized (in Decentralized to
operations office SBUs) divisions
2.Use of integrating Extensive Moderate Non existence
mechanisms
3.Divisional Emphasizes subjective Mix of subj and obj Emphasizes objective
performance appraisal criteria criteria (ROI, financial
4. Divisional incentive Linked to overall Mixed linkage Linked to divisional
compensation company performance performance

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E. Importance of M Form
1. Flow of information
2. Degree of authority delegated to other managers
3. Speed of management decisions
4.