Relationship Between Strategy And Structure 2a6p6e

Q1. What is the relationship between strategy and structure? Strategy primarily refers to the roap laid out by an organization. The principal objective of strategy is to ensure that an organization achieves the set targets in order to sustain and grow in an increasingly competitive world. On the other hand, a structure is the manner in which the internal resources of a company get connected with each other. More specifically, structure is concerned with different groups that can be formed within an organization. For example, an organization having a functional structure will operate through the different functions such as Marketing, Finance, and Manufacturing. Strategy is the main driver that decides the structure an organization. Also, in case the structure of a company is not synchronized with its strategy, then the company may not be able to achieve the set targets. For example, a company with a diversified product portfolio and has a functional structure (organized as per various functions such as Marketing, Finance and Operations) will not be able to compete effectively in each of the product categories. As a result, the company may start losing the market share of its products. Evidently, structure plays a critical role in the accomplishment of an organization’s overall strategy. Another notable aspect is that both strategy and structure need to be continuously inter-linked in order to achieve desired results. Coca-Cola, for example, operates on a multi-divisional (M-form) structure wherein the company has structured its global business according to different regions in the world. More specifically, Coca-Cola has five main geographic operating segments that operate as Strategic Business Units (SBUs). The SBUs report to a parent company based at the corporate headquarters. Since Coca-Cola operates through an SBU model, it has adopted a related-linked strategy. Coca-Cola offers related products in the global market. Some of the products are same, while some are different but related. For example, Coca-Cola (a carbonated drink) is a global product of the company, whereas; Lilt is a local product that serves the markets in Great Britain and Ireland. Coca-Cola’s other products are part of its overall product offering i.e. soft drinks. Under soft drinks, the company caters to segments such as sports and health. Therefore, a related-linked strategy best serves the goals of the company, as it has a relateddiversified business. The strategy helps the company to provide enough space to each SBU for decision-making.

Coca-cola’s structure is in line with its overall strategy, which is enumerated below:

1. Accelerate carbonated soft drinks growth, led by Coca-Cola 2. Broaden the family of products, wherever appropriate e.g. bottled water, tea, coffee, juices, energy drinks

3. Grow system profitability & capability together with the bottlers 4. Creatively serve customers (e.g. retailers) to build their businesses 5. Invest intelligently in market growth 6. Drive efficiency & cost effectiveness by using technology and 7. Large scale production to control costs 8. Enabling our people to achieve extraordinary results everyday It is evident from above that Coca-Cola intends to achieve holistic and sustainable growth. The company has operations across the world and intends to be profitable in each of the region. As a result, it becomes imperative for the company to provide adequate autonomy to each of SBU operating in different geographic regions. Providing autonomy is critical because a fairly autonomous SBU will be able to take independent decisions to compete in the local environment. A non-autonomous or semi-autonomous SBU will not be efficient, as it will need the approval of the Parent to execute a strategy. This may become counter-productive in a fast-paced and competitive environment. Also the Parent company, based in another part of the world, may not be fit to take a decision regarding its competitive strategy in another country. Since each country or region has its own unique needs and requirements, decisions by the Parent company may not be in sync with the requirements of the other country. Coca-Cola also understands that a flexible structure will provide enough opportunities to its employees to work in a team. In addition, a flexible structure encourages greater sharing of best practices among different specialist teams operating in the company. Greater collaboration will help Coca-Cola to foster creativity and innovation, thereby enabling its employees to realize their maximum potential.

Therefore, an M-form structure is best suited for Coca-Cola. Attributes of Multi-divisional Structures Structural

Cooperative

SBU

Competitive

Related-

Mixed related Or unrelated

Unrelated

Characteristics Type of Strategy

Constrained

Degree of

Centralized at the

Centralized in

Decentralized to

Centralization

Corporate Office

SBUs

Division

Use of Integrating

Extensive Synergies

Moderate

Nonexistent

Synergies

Synergies

Divisional

Subjective /

Strategic and

Financial Criteria

Performance

Strategic Criteria

Financial Criteria

Divisional Incentive

Corporate

Corporation,

Divisional

Compensation

Performance

Division & SBU

Performance

Mechanisms

Appraisal

The business strategy must focus on how to move and disseminate information and it must not only accommodate communications, it must create the environment that fosters shared ideas, brainstorming sessions, and documentation distribution. There is a greater need for true leadership that identifies individual talent and facilitates learning and growth. The company grows as quickly as talent and learning and individuals must be “free” to expand and to create – without fear of budget restraints, but with respect to project deadlines and also to resources.

Q2: What is the correlation between Culture of an organization and its structure? Organizational structure is a formal system wherein employees, with well defined roles and responsibilities, communicate with other such /employees for the achievement of common objectives. The structure of an organization is tangible and physical, which means that it is visible to internal as well as external stakeholders of a company. An organization’s structure is based on the overall strategy, which drives the policies and procedures of an organization. Consequently, the policies decide the behaviour of managers and other associates within a company. An organization’s structure also helps in understanding the existing hierarchical levels and Span of Control. On the other hand, the culture of an organization is based on shared values, norms and individual group & behaviour. More specifically, the culture of an organization is more informal in nature and is based on collective ideas & values shared by the employees. The ways in which various tasks are performed at different levels also defines the culture of an organization. Structure and culture in organisations exist in close alignment. Structure is one of the determinants of culture; conversely, culture has been shown to have an influence on the organisational structure and operational systems in an organisation. Both are mechanisms for the coordination of organisations: structure as an integrating mechanism for organisational activities, and culture as an integrating mechanism concerned with behaviour and values within organisations. Organisations and individuals need an understanding of these mechanisms in order to manage uncertainty in the face of ever-changing markets and business conditions. An effective alignment of structure and culture provides a means of getting people to work together to reach strategic goals and achieve an organisation’s vision. Together they provide a focus to enable organisations and individuals to reduce uncertainty, variability and ambiguity, so providing a framework for acting in a consistent manner. Structure and culture have overlapping functions; however one mechanism is not necessarily a substitute for the other. While structure helps an organization in defining objectives, the culture helps in achieving those objectives in viable manner. Therefore, culture is also critical in the

achievement of the defined objectives. More specifically, culture is a function of behaviour and relationships patterns. Coca-Cola gives high priority to its culture, which is evident from its emphasis on team work and employee empowerment. Team work is critical because it helps in greater collaboration and results in the creation of original ideas. On the other hand, enabling employees to contribute towards the growth of the company helps them to feel part of the overall team and motivates them to perform better. Culture also depends on channels of communication, as open communication channels help in fostering relationships over a longer term. As a result, an organization will be able to realize invisible benefits of long-term relationships with its stakeholders.