For this assignment, the Group will analyze VIPShop Holdings Limited current
condition. You will use the text chapters 10 and 11 as your framework
for the analysis, and will incorporate information from external sources
including the company and other credible sites. Your Group deliverable will be presented in APA format, will include
appropriate topical headings to organize and segment the paper, with
correctly formatted citations and references. This deliverable is due
at 11:59 PM CT Sunday, at the end of Week 7.Minimally the report will include the following: Organizational StructureBook info: Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2016). Strategic Management: Concepts and Cases: Competitiveness and Globalization. 12th Edition.Chapter 11: Organizational Structure and Controls
347
use to implement separate business-level, corporate-level, international, and cooperative
strategies. We present a series of figures to highlight the different structures firms match
with different strategies. Across time and based on their experiences, organizations, espe-
cially large and complex ones, customize these general structures to meet their unique
needs. Typically, firms try to form a structure that is complex enough to facilitate use of
their strategies but simple enough for all parties to understand and use.
11-1 Organizational Structure and Controls
Research shows that organizational structure and the controls that are a part of the struc-
ture affect firm performance. In particular, evidence suggests that performance declines
when the firm’s strategy is not matched with the most appropriate structure and controls.
Even though mismatches between strategy and structure do occur, research indicates that
managers try to act rationally when forming or changing their firm’s structure.”
In Chapter 2’s Opening Case, we talked about problems McDonald’s is encounter-
ing when trying to cope effectively with changes that are taking place in the external
environment. As we noted then, the firm is changing its menu to better accommodate
some consumers’ preferences for healthier food. Additionally though and more broadly,
changes are being made to McDonald’s organizational structure with the expectation
that doing so will lead to enhanced firm performance. Defined comprehensively below,
organizational structure essentially specifies the work that must be completed so the firm
can implement its strategy.
McDonald’s leaders, including new CEO Steve Easterbrook, believe that changes being
made to the firm’s structure will increase its efficiency (that is, its daily operations will
improve) and its effectiveness (that is, it will better serve customers’ needs). We discuss
changes that have been made to McDonald’s organizational structure in the Strategic Focus.
I
11-1a Organizational Structure
Organizational structure specifies the firm’s formal reporting relationships, procedures,
controls, and authority and decision-making processes.” A firm’s structure determines
and specifies the decisions that are to be made and the work that is to be completed by
everyone within an organization as a result of those decisions. Organizational routines
serve as processes that are used to complete the work required by individual strategies.”
Developing an organizational structure that effectively supports the firm’s strategy is
difficult, especially because of the uncertainty (or unpredictable variation) about cause-
effect relationships in the global economy’s rapidly changing competitive environments.”
When a structure’s elements (e.g., reporting relationships, procedures, etc.) are properly
aligned with one another, the structure increases the likelihood that the firm will operate
in ways that allow it to better understand the challenging cause/effect relationships it
encounters when competing against its rivals. Thus, helping the firm effectively cope with
environmental uncertainty is an important contribution organizational structure makes
to a firm as it seeks to successfully implement its strategy or strategies as a means of
outperforming competitors.”
Appropriately designed organizational structures provide the stability a firm needs
to successfully implement its strategies and maintain its current competitive advantages
while simultaneously providing the flexibility to develop advantages it will need in the
future.” More specifically, structural stability provides the capacity the firm requires to
consistently and predictably manage its daily work routines,” while structural flexibility
makes it possible for the firm to identify opportunities and then allocate resources to
pursue them as a way of being prepared to succeed in the future. Thus, an effectively
Organizational structure
specifies the firm’s formal
reporting relationships
procedures, controls and
authority and decision
making processes
Chapter 11: Organizational Structure and Controls
349
customers and that those operating units within each segment
will have the flexibility they need to innovate in ways that will
create value for customers and, in turn for the entire corporation
McDonalds seset to change structure Cat costs, boost franchises, Bees, www
reuters.com May Cho, 2015, McDonalds to simplify structure focus on cus
tomens Spoon www.spokesman.com May A Gaspano 2015, McDonald’s
to speed ranchising cut costs. Weil Setournal Online www.com May
A Gascom 2015, McDonald’s new chief plots Counterattack Wall Street Journal
Drine, www.wsj.com, Marcy 1. A Gascar 2015, McDonalds shareholder group
als for changes to board of directors, Wall Soutournal Online www.com
February 13: None 2015 McDonald’s plans huge shakeup as CEO admit
performance has been pood The Guardian, www.theguardian.com
Sources: 2015. McDonald’s announces initial steps in umaround plan induding
worldwide business restructuring and financial updates McDonald’s Home Page
www.mcdonalds.com, May 2015 McDonald’s challenges Make it simple but
add choices. New York Times Online, www.nytimes.com May Bertie 2015
flexible organizational structure allows the firm to exploit current competitive advantages
while developing new advantages that can be used in the future.” Alternatively, an inef-
fective structure that is inflexible may drive productive employees away because of frus-
tration and an inability to create value while completing their work. Losing productive
employees can result in a loss of knowledge within a firm. This is an especially damaging
outcome when a departing employee, who may accept employment with a competitor,
possesses a significant amount of tacit knowledge.
Modifications to the firm’s current strategy or selection of a new strategy call for
changes to its organizational structure. However, research shows that once in place, orga-
nizational inertia often inhibits efforts to change structure, even when the firm’s perfor-
mance suggests that it is time to do so. In his pioneering
work, Alfred Chandler found that organizations change
their structures when inefficiencies force them to do so.*
Chandler’s contributions to our understanding of organiza-
tional structure and its relationship to strategies and perfor-
mance are significant. Indeed, some believe that Chandler’s
emphasis on organizational structure so transformed the
field of business history that some call the period before
Chandler’s work was published ‘B.C., meaning ‘before
Chandler.
changes to its organizational structure. However, research shows that once in place, orga-
nizational inertia often inhibits efforts to change structure, even when the firm’s perfor-
mance suggests that it is time to do so. In his pioneering
work, Alfred Chandler found that organizations change
their structures when inefficiencies force them to do so.
Chandler’s contributions to our understanding of organiza-
tional structure and its relationship to strategies and perfor
mance are significant. Indeed, some believe that Chandler’s
emphasis on organizational structure so transformed the
field of business history that some call the period before
Chandler’s work was published “B.C. meaning before
Chandler.**
Firms seem to prefer the structural status quo and its
familiar working relationships until their performance
declines to the point where change is absolutely necessary.”
Moreover, top-level managers often hesitate to conclude
that the firm’s structure or its strategy are the problem
because doing so suggests that their previous choices were
not the best ones. Because of these inertial tendencies,
structural change is often induced instead by actions from
stakeholders (e.g., those from the capital market and cus-
tomers) who are no longer willing to tolerate the firm’s per-
formance. For example, this happened at large department
store operator J. C. Penney, as the former CEO, Myron
Ullman, replaced a relatively new CEO, Ron Johnson,
whose turnaround strategy failed. Additionally, some
believe that Penney has yet to recover from the effects of
the decisions Johnson made during his short 18-month Pictured here is Alfred Chandler, a scholar whose
tenure as the retailer’s CEO. Evidence shows that appro-
work enhanced our understanding of organiza-
priate timing of structural change happens when top-level
tional structure and strategy.
managers recognize that a current organizational structure
The New York Times
350
Part 3: Strategic Actions: Strategy Implementation
no longer provides the coordination and direction needed for the firm to successfully
implement its strategies. Interestingly, many organizational changes take place in eco-
nomic downturns because poor performance reveals organizational weaknesses. As we
discuss next, effective organizational controls help managers recognize when it is time
to adjust the firm’s structure.
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