CHAPTER 8 Characteristics of Strategic Controls
STRUCTURAL DYNAMICS AND CONTROL 1. It helps firm understand what it intends to do. Product Diversification
STRATEGIES 2. They are subjective criteria The manufacturing of new products of the integration of new
3. It examines what fits to be done technology in the production of goods needs new structure and
STRUCTURAL ALIGNMENT OF ORGANIZATION 4. It demands effective communication at the same time developed new strategies to make the product
5. It verifies the sharing of appropriate strategies survive in the market competitiveness.
Organizational structure provides the framework within which strategies
are used and provide the necessary mechanism for its effective Characteristics of Effective Financial Controls Business Diversification
implementation and control. 1. Financial controls are effective indicators of performance The development of a new business organization that is
2. They are objective criterial that measure performance consistent with the corporate expansion program to other
In the organizational set up, the top executives of the firm have the final
3. It evaluates present performance against previous record business ventures needs a more elaborate structure that will help
responsibility for ensuring the matching of its strategies with the
4. It is the indicators in safeguarding the corporate assets deliver the desired profit and return on investments.
appropriate organizational structure and the changes that would be
5. It ensures that transactions are properly authorized.
necessary when needed.
6. It provides reliable information in the use of financial resources. Based on the above growth patterns three major organizational structures
Structural stability is the capacity of the firm to consistently and were used to implement strategies.
The structural effectiveness is determined how strategic and financial
predictably manage its ongoing activities and its daily routine without
controls interplay in the achievement of the desired profit objectives. 1. Simple Structures
effect to its direction of profitable operation.
The owner-manager makes all major decisions and supervises all
The Interdependence Of Structure and Strategy operations from production to marketing od products or services.
Structural flexibility on the other hand is the capacity of the firm to
explore opportunities in the future and shape the strategy for competitive
There exists a reciprocal relationship between strategy and structure. The simple structure in the view of management professionals is the
advantage that will generate successful operation.
Strategic formulation is the plan of actions while strategic implementation development of line organization with simple direct line of supervision and
is the extent by which the firm operates based on plans and goals. control through the direct line relationship between the owner or manager.
Effective strategic leadership
- presupposes the ability to select the most appropriate strategies and
In the development of firm's structure, top executives must see to it that A. The line organizational structure
match it with the appropriate organizational structure that would deliver the
there exists a reciprocal matching of the structure and the strategy that
firm to its target objectives.
provides the stability to use current competetive advantage.
To align with objectives, firm should have:
PATTERNS OF RELATIONSHIP BETWEEN STRATEGY AND
• Strong relationship of strategies
STRUCTURE
• Organizational Structures
• Effective Control System
Most firms started in simple structure as operation starts small especially
when it starts sole proprietorship.
What should a Firm do during their expansion?
A. Increase in sales volume
• The firm must modify the structure to fit the changes with new strategies.
as the firms increase its sales volume, they need new people to
• Top management must act proactively in changing the structure and its handle marketing and distribution of its products then later on
corresponding strategies develop its own advertising agency to handle its promotional
activities.
• Changes in structure and strategies must be made before the firm
experience performance decline Here are Several strategies to increase sales volume
1. Market Research
THE IMPORTANCE OF ORGANIZATIONAL CONTROL 2. Procing strategy
3. Sales and Marketing
Organizational controls are important aspects of structure. It guides the
use of strategy and indicates performance standards. It compares actual B. Geographical Distribution
Advantages
results from the projected outcome. Geographical Distribution of products and services needs new
breed of managers and executives who will handle the Ease of operation and control as few layers in decision making.
It is difficult to achieve competitive advantage without effective control provincial and regional activities to cope with the increasing Few lines in the structure that facilitate communication.
measures that provide clear insights regarding behavioral strategies that demand of the market. The structure contributes to low cost operational dynamics
enhance organizational performance.
Vertical and Horizontal Integration Disadvantages
Effective strategic controls help the firm understand what it takes to be This growth factor develops a higher caliber of executives who
successful. Lacks system of specialization
are trusted by the management in their strategies for corporate
growth. Limited opportunities for learning and growth.
B. The line and staff organizational structure Advantages
Effective communication and coordination
Effective sharing of knowledge and information
Allows functional specialization that allows innovation
Disadvantages
May have negative effect on communication
Needs close coordination among units
Few formal rules and regulations
3. The Growth of Multi-Divisional Structure
Most diversified corporations continue to grow and succeed not only in the
local operations but also internationally
Advantage
Services of staff assistant that develop better research and
development strategies.
Greater horizontal and vertical communication.
Disadvantages
More executives to pay
Jealousy among executive may exist.
Over confidence creates lesser control of operation.
2. Functional structure - corporate growth and expansion are Advantages
investable as the compny expands in wider operation in market
growth and product differentiation strategy or at times
Accurate monitoring of business performance
expansion in other business operations. Simplified operational and problem control
Each unit operates as a separate center
Disadvantages
Over expansion may create vacuum in the organizational ladder
Needs trusted and committed executives
Higher caliber of top executives often is difficult to find
Divisional Functional Structure Strategy and structure influence each other. While strategy has stronger
influence in the competitive advantage of the firm tends to change the
structure when operations dictates for either expansion or contraction.
Divisional Product or Regional Structure Increasing importance in the development of structure is the matching of
strategy with the operational needs of the organization.
