wk 6 discussion

Linking Organizational Strategy and Organizational Structure In the field of management, the concept of strategic alignment between the organization and its strategic consistency is an area of discussion that is often overemphasized.  In sum, a company’s strategy should align with its operating environment (Ajagbe et al., 2016).  There is, in fact,  a mutual relationship between structure and strategy, and whichever comes first will influence the other (Kavale, 2012).  Forces in the environment require changes in the firm if it is to remain competitive, so appropriate structural changes must be in place to match the firm’s strategy to manage these disruptive forces (Ajagbe et al., 2016). This is described as strategic alignment and is thereafter followed by matching which involves the simultaneous matching of organizational capability, strategy and structure (Ajagbe et al., 2016).  Matching and alignment are key management processes that firms must undertake when managing strategic decisions; the appropriate configuration of strategic, structure, environment and organizational capability illustrates strategic fitness (Ajagbe et al., 2016). To that end, a proper match between strategy and stricture will result in high performance for the organization (Ajagbe et al., 2016). On the other hand, incompatibility between structure and strategy will result in organizational inefficiency and an unwanted performance for the organization (Ajagbe et al., 2016; Kavale, 2012).    Organizational Strategy Organizational strategy deals with the large-scale action plans and initiatives taken by management on behalf of stakeholders to accomplish long-term goals (Kavale, 2012). It also involves the allocation and utilization of resources to enhance the performance of their companies within a challenging environment (Kavale, 2012). In sum, organizational strategy provides long-term direction and scope for an organization, which gives it competitive advantage as it configures resources and competencies within a challenging environment to meet ever changing market demands and to fulfill stakeholder expectations (Ajagbe et al., 2016; Kavale, 2012). Companies itemize their organizational strategies with a strategy statement possessing three main themes that cover the relevant goals of the organization, the organization’s outlined mission, vision and objectives, the scope of its activities and any particular advantages or capabilities that the organization possesses to achieve its short-term and long term goals (Ajagbe et al., 2016).  To reinforce the connection between organizational strategy and structure, the manager needs to finalize the company’s overall strategy and once this is known, the planning shifts to strategy implementation (Ajagbe et al., 2016). Strategy implementation transforms the overall strategy and its policies into concrete action in real life activity (Ajagbe et al., 2016).  Strategy implementation has two main components, namely structure and managerial skills (Ajagbe et al., 2016).  Organizational Structure

Structure, on the other hand, provides the framework by which organizations operate, by formally specifying the roles and responsibilities between corporate and business units (Ajagbe et al., 2016;   Inamdar, 2012).    Structure is often described by contingency-based empirical research in terms of centralization/decentralization, standardization, formalization and configuration ( Inamdar, 2012). For instance, the centralization/decentralization construct represents a type of structure that indicates the extent to which headquarters delegates decision-making   power and various activities to its subsidiaries or business units (Inamdar, 2012).     The extent of this delegation sets the level of autonomy, authority and accountability of the business units along with a specification of the relative geographic dispersion of the different business units (Ajagbe et al., 2016;  Inamdar, 2012).  In sum, organizational structure contributes to the clarity of authority and relationships as they relate to communication and coordination patterns within the organization (Ajagbe et al., 2016). Thus,  the function of organizational structure is to facilitate the performance of the firm though the implementation of the overall strategy  (Ajagbe et al., 2016). In order for the company to manage its overall strategy well, alignment with a good structure is necessary (Ajagbe et al., 2016). It has been said that if an organization changes its strategy, it must change its structure to support the new strategic direction (Kavale, 2012).   Controls and Incentive Systems To see if a firm achieved the goals it set out in its strategy statement, the focus of evaluation and control of strategic management involves a) the measurement of outputs, specifically by comparing the company’s actual results to expected performance using predetermined standards, and b) taking corrective   action to correct deviations from standards to ensure that the organization conforms to plans (Ajagbe et al., 2016).   Corrective action can take the form of altering the firm’s long term direction, raising or lowering performance targets, or modifying strategies and execution (Ajagbe et al., 2016;  Inamdar, 2012). Incentives, on the other hand, are some of these devices that are tied to performance metrics and are used to motivate and reward managerial behavior (Hill, 2023).   Precedence Issues: Strategy vs. Structure However,  the question of which precedes the other and which follows is more often up for debate.  The contingency-based approach which studies the systematic relationship between organizational variables such as environment, strategy, structure and management control systems posits that there is no universal set of strategic choices that is optimal for all businesses, even in the same industry ( Inamdar, 2012).  Instead, businesses are inundated with multiple organizational configurations

However, when structural conditions are unattractive such as when the industry is characterized by cutthroat competition, excess supply and low profit margins, and existing players are well-entrenched into their positions,   a reconstructionist approach would likely produce better returns regardless of the organization’s resources and capabilities (Kim & Mauborgne, 2009). In this situation, the organization should build a strategy that reshapes industry boundaries and pursue new opportunities highlighting innovation (Kim & Mauborgne, 2009). Alternatively, even when an industry is attractive but existing   players are well-entrenched and the organization also does not have the resources and capabilities to outperform competition, a reconstructionist approach is the better strategic choice (Kim & Mauborgne, 2009). Taking on a reconstructionist approach demands that the organization build a strategy that creates a new market space for itself (Kim & Mauborgne, 2009). When structural   conditions, resources and capabilities also do not distinctively favor either approach, inevitably the right strategy will depend on the organization’s mindset such that a firm with an innovative bent will be more successful adopting a reconstructionist approach (Kim & Mauborgne, 2009). Firms predisposed towards defending their current strategic positions and an unwillingness to venture outside familiar territory should remain with a structuralist approach (Kim & Mauborgne, 2009). There is also a prevailing view by senior management that it is no longer practical to continually restructure organizations when expanding vast resources in order to align with changing strategies and environmental market conditions  ( Inamdar, 2012).   In lieu of costly structural reorganizations,   some managers recommend choosing an organization structure with lower reconfiguration costs, and then re-design the management control systems so that structure aligns with strategy  ( Inamdar, 2012).     References Ajagbe, M., Bih, J., Olujobi, J., & Udo, E. (2016). Which precedes the other? Organizational Strategy or Organizational Structure.  International Journal of Economics and Business Management, 2 (6),  50-66. Hill, C. (2023).  International Business: Competing in the Global Marketplace  (14 th  ed.). McGraw Hill. Inamdar, S. (2012).   Alignment of strategy with structure using control systems.   Strategic Management Review,   6 (1).   https://doi.org/10.4128/1930- 4560-6.1.1 Kavale, S. (2012).   The connection between strategy and structure.   International Journal of Business and Commerce, 1 (6), 60-70.   Kim, W. & Mauborgne, R. (September 2009).   How strategy shapes structure.   Harvard Business Review. https://hbr.org/2009/09/how-strategy-shapes-structure