Firms strategy and structure

Essay text:

In addition to this problems that may arise will increase business costs ? prevention is better than cure ? Does not suit entrepreneurial firms and firms which are in an uncertain and unstable environments therefore these firms have adopted an organic approach ? Functional departmentalisation Functional Structure ? Functionally specialised firms sub-divide their activities into departments which undertakes a specific function e.g. Marketing, Finance, Production etc. ? Head of departments reports to a chief co-ordinator who is responsible for the continuous reconciliation of sub-goals set for each department ? Can achieve economies of specialisation and scale and reduce number of communication levels between members of the firm allowing for greater interaction, therefore effective decision making to facilitate an appropriate strategy ? As the corporation grows the need for supervisors increases, increasing the levels of hierarchy leading to a loss in control as messages are not passed down the hierarchy efficiently ? Top management lose the ability to act promptly upon all relevant information having an adverse effect on strategic decision making ? If the firms growth enlarges the number of activities it undertakes, each of the functional departments may continue heterogeneous activities even if additional departments are created increasing costs unnecessarily ? Redundant communication levels are retained within functional departments and channels between them are inefficiently used impacting on strategic decision making and implementation ? reduces the ability to attain synergy between departments which is the main goal with regards to strategy implementation ? Problems occur when a firm implements a strategy to diversify or expand geographically which can be solved by a multi-divisional structure ? relate to Chandler who believes that the structure is always changing as the situation changes Alfred Chandler ? Companies whose success brought them to prominence in the national market for their principal product followed the lead of early railroad and communication companies adopting a functional structure ? However continued expansion of companies in geographic or product space made their functional departments too heterogeneous for maximal effectiveness and the multi-divisional form was adopted ? Chandler was supported by Leonard Wrigley who showed that strategy and structure are aligned as Chandlers work suggested ? Concentrated on the degree of diversification of the company and the relation between its diversified activities and its basic business ? Unrelated-product firms diversifying activities carry it primarily into technologies and markets that are not shared with its basic business ? Related product firms exhibit one of many linkages to the basic business e...