Organizational Theory


Question Description

1200 words total. 3 APA cited references and reference list. NO PLAGIARISM PLEASE!!!

1. In a narrative format, discuss the key facts and critical issues presented in the case.

2. Kerrie has been charged with reducing operating expenses. Explain her solution to this problem. Be specific and discuss both positive and negative factors.

3. There is a clear violation of Fayol's unity of direction principle in this case. What is it, and how does Kerrie attempt to overcome it?

4. There are several examples of self-interest in Kerrie's organization. How would Mary Parker Follett suggest these issues be resolved?


5. Explain why Miles and Snow developed these four strategists: prospectors, defenders, analyzers, and reactors. Which one appears to you to be the most reliable?

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Organizational Strategy & Performance 2 Chapter Outline: 2-1 The Strategic Managment Process V I C K E R S , 2-2 Theories of Strategy 2-3 Strategy at the Corporate Level 2-4 Strategy at the Business Level T E A R D R A 2-5 Strategy at the Functional Level Summary Review Questions Glossary Endnotes 1 1 9 1 T S Key Terms business-level strategy business unit competitive advantage contingency theory core competencies corporate profile corporate restructuring corporate-level strategy differentiation strategy distinctive competence divestment downsizing external growth first-mover advantages focus functional strategies generic strategies growth strategy industrial organization (IO) industry intended strategy internal growth liquidation low-cost strategy low-cost–differentiation realized strategy related diversification retrenchment strategy stability strategy strategic alliances strategic group strategic mgmt. process strategy synergy turnaround Organizations are most likely to succeed when their activities are integrated toward a common purpose. But this does not occur automatically; it requires substantial forethought and planning. In other words, it requires a strategy. This chapter discusses the strategic planning process, as well as strategic alternatives available for each organization. Although the concepts presented herein have been developed with profit-seeking firms in mind, they can be equally applicable to public and private not-for-profit organizations that must compete in some way with other organizations or agencies. The concept of an organizational strategy encapsulates the notion of planning for success. Specifically, a strategy refers to top management’s plans to develop and sustain competitive advantage so that the organization’sVmission is fulfilled. A strategy provides direction for the organization and can beIidentified by examining a pattern of decisions made by an organization’s top managers. C It is most likely to be effective when it is compatible with the organization’s K structure and culture, concepts that will be developed later in the text. Although strategy is discussed E before structure and culture, all three dimensions are tightly intertwined. strategy top management’s plans to attain outcomes consistent with the organization’s mission and goals R A successful strategy is marked by four key distinctions. S First, it does not simply emerge, but rather is developed after top managers systematically evaluate both , the organization’s resources and external factors that can affect performance. Second, it is long-term and future-oriented—usually several years to a decade or longer—but built on knowledge about the past and present.TThird, it is distinctively E situations that occur opportunistic, always seeking to take advantage of favorable A choices. “Win-win” outside the organization. Finally, strategic thinking involves strategic decisions are often possible, but most involve some R degree of trade-off between alternatives, at least in the short run. D 2-1 The Strategic Management Process R A Ideally, a strategy is developed as part of a conscious 1 activity led by an organization’s top managers. The strategic management 1 process also includes top management’s analysis of the environment in which the organization operates 9 prior to formulating a strategy, as well as the plan for implementation and control 11 of the strategy. This process can be summarized in six steps: T 1. External Analysis: Analyze the opportunities and threats or constraints that S exist in the organization’s external environment. 2. Internal Analysis: Analyze the organization’s strengths and weaknesses in its internal environment. 3. Mission and Direction: Reassess the organization’s mission and its goals in light of the external and internal analyses. strategic management process the continuous process of determining the mission and goals of an organization within the context of its external environment and its internal strengths and weaknesses; formulating and implementing strategies; and exerting strategic control to ensure that the organization’s strategies are successful in attaining its goals Organizational Theory 2-2 4. Strategy Formulation: Formulate strategies that build and sustain competitive advantage by matching the organization’s strengths and weaknesses with the environment’s opportunities and threats. Consider the fit between the strategy and other organizational dimensions, such as the structure and the prevailing culture. 5. Strategy Implementation: Implement the strategies that have been developed. Make adjustments to the organizational structure, if feasible and relevant. 6. Strategic Control: Evaluate organizational effectiveness and engage in strategic control activities when the strategies are not V producing the desired outcomes. I C complexities in the Although this process is simple and straightforward, environment complicate the process, especially betweenKthe time a strategy is formulated and the time it is actually implemented. Henry E Mintzberg introduced two terms to help clarify the shift that often occurs during this period. An intended R strategy reflects what management originally planned and may be realized just S as it was proposed , but the intended strategy and the realized strategy, what , original strategy may management actually implements usually differ.2 Hence, the be realized with desirable or undesirable results, or it may be modified as changes in the firm or the environment become known. T intended strategy the original strategy top management plans and intends to implement realized strategy the strategy top management actually implements E The gap between the intended and realized strategies usually results from unforeseen A that was not available environmental or organizational events, better information when the strategy was formulated, an improvement in topR management’s ability to assess its environment, or strategic responses from competitors. As such, this gap D can be minimized if top managers assimilate and process information about the R organization’s environment more effectively. It is not uncommon for such a gap to A exist, creating the need for constant strategic action if a firm is to stay on course. Instead of resisting modest strategic changes when new information is discovered, 1 to make such changes managers should search for new information and be willing 1 when necessary. A thorough discussion of each step of the strategic management process is beyond the scope of this text. However, many of the concepts presented in the text relate to one or more of these phases. The remainder of this chapter is concerned primarily with the theories that influence the process and the content of corporate and competitive strategies available to organizations. 9 1 T S Organizational Theory 2-3 2-2 Theories of Strategy The strategic management process has been influenced by a number of theories and perspectives, three of which are summarized in the table 2-1 and discussed below. V I C K Industrial organization (IO) economics, a branch of microeconomics, emphasizes E the influence of the industry environment upon the organization. IO emphasizes that an organization must adapt to influences exertedRby its industry— the S collection of competitors that offer similar products or services—to survive and prosper. Following this logic, organizational performance, is primarily determined by the structure of the industry in which it competes. Industries with “favorable structures” offer the greatest opportunity for high organizational performance. T E “five forces” model, IO logic can be seen in Michael Porter’s frequently cited discussed in greater detail in the following chapter. Porter’s A model identifies five structural elements that influence industry profitability: Existing rivalry, threat of R substitutes, threat of new entrants, bargaining power of buyers, and bargaining D power of suppliers.3 These factors collectively determine the potential for profits in R a particular industry. It assumes that organizations are likely to perform well when A they operate in industries with attractive structures. The concept of adaptation is central to the IO perspective. In essence, an 1 organization’s performance and ultimate survival depend on its ability to adapt 1 to external forces rather than attempt to influence or control them. Strategies, 9 resources, and competencies are assumed to be fairly similar among competitors within a given industry. If one organization deviates from 1 the industry norm and implements a new, successful strategy, others will rapidly T mimic the higherperforming organization by purchasing the resources, competencies, or management S talent that have made the leading firm so profitable. Hence, strategic managers should seek to understand the nature of the industry and formulate strategies that feed off the industry’s characteristics.4 In contrast to the IO perspective, resource-based theory views performance primarily as a function of an organization’s ability to acquire and utilize its resources.5 Although environmental opportunities and threats are important, an industrial organization (IO) a view based in microecomonic theory that states that a firm’s profitability is most closely associated with industry structure industry a group of competitors that produces similar products or services resource-based theory a view that states that a firm’s performance is tied to the resources it acquires and utilizes. Organizational Theory 2-4 organization’s unique resources comprise the key variables that allow it to develop a distinctive competence, distinguishing itself from its rivals, and creating competitive advantage. “Resources” include all of a firm’s tangible and intangible assets, such as capital, equipment, employees, knowledge, and information.6 In many respects, an organization’s resources define its capabilities, as an organization with strong research and development may also possess the capability to develop successful new products. Ultimately, this can create value and lead to greater performance. distinctive competence unique resources, skills, and capabilities that enable an organization to distinguish itself from its competitors and create a competitive advantage All resources are not equally valuable. If resources are to be used for sustainable competitive advantage—a organization’s ability to enjoy strategic benefits and Vtime—those resources outperform the industry norm over an extended period of I not easily imitated, must be valuable, rare (i.e., not easily obtained by rivals), 7 and without strategically relevant substitutes. In other words, C the most desirable resources on ones that utilized by an organization in a wayKthat competitors cannot easily match. Valuable resources contribute significantly to the organization’s E effectiveness and efficiency, rare resources are possessed by only a few competitors, R and imperfectly imitable resources cannot be fully duplicated by rivals. S Contingency theory emphasizes the interaction between the organization , and its environment. Within this perspective, the fit between organization and environment is the central concern. In other words, a strategy is most likely to be successful when it is consistent with the organization’s T mission, its competitive E environment, and its resources. In effect, contingency theory represents a middle A as the joint outcome ground perspective that views organizational performance of environmental forces and the firm’s strategic actions.R On the one hand, firms can become proactive by choosing to operate in environments D where opportunities 8 and threats match the firms’ strengths and weaknesses. On the other hand, should R the industry environment change in a way that is unfavorable to the firm, its top A managers should consider leaving that industry and reallocating its resources to other, more favorable industries. contingency theory a perspective that suggests that the most profitable firms are likely to be the ones that develop the best fit with their environments 1 Contingency theory is applied when a strategy is formulated. Strategic managers 1 consider internal resources in light of external opportunities and threats and 9 an effective strategy develop strategies that reflect a fit between the two. Hence, is not merely a “good idea,” but one that capitalizes on 1the particular resources controlled by an organization and the environment in which T it operates. In other words, an effective strategy “fits” the organization. S As has been demonstrated, each of these three perspectives has merit and has been incorporated into the strategic management process. The industrial organization view is prominent within the industry analysis phase, resource-based theory applies directly to the internal analysis phase, and contingency theory is seen in the strategy formulation phase. Hence, multiple perspectives are critical to a holistic understanding of an organization’s strategy and its relationship with performance.9 Organizational Theory 2-5 2-3 Strategy at the Corporate Level The complex notion of organizational strategy can be examined from three perspectives: firm (also called corporate), business (also called competitive), and functional. The corporate strategy reflects the broad strategic approach top management formulates for the organization. The business-level strategy outlines the competitive pattern for a business unit, an organizational entity with its own mission, set of competitors, and industry. Top managers craft competitive strategies for each business (unit) to attain and sustain competitive advantage, a state whereby its successful strategies cannot be easily duplicated by its competitors.10 Functional strategies are created at each functional level (i.e., marketing, finance, V production, etc.) to support the business and corporate strategies. I There are two steps involved in developing the corporateCstrategy. The first step is to assess the markets or industries in which the firm operates. At the corporate K level, top management defines the corporate profile by identifying the specific E industry(s) in which the organization will operate. Three basic profiles are possible: operate in a single industry, operate in multiple related R industries, or operate in S multiple, unrelated industries. , An organization that operates in a single industry can benefit from the specialized knowledge that it develops from concentrating its efforts on one business area. This knowledge can help the firm improve productT or service quality and become more efficient in its operations. McDonald’s, E for instance, constantly changes its product line, while maintaining a low per-unit A cost of operations by concentrating exclusively on fast food. Wal-Mart benefitsRfrom expertise derived from concentration in the retailing industry. Although involved in other businesses D as well, Anheuser Busch limits its scope of operations primarily to brewing, from R which it derives more than 80 percent of its revenues and profits.11 Firms operating A in business cycles, in a single industry are more susceptible to sharp downturns however. 1 An organization may operate in multiple related industries to reduce the uncertainty 1 An organization may and risk associated with operating in a single industry. diversify by developing a new line of business, or an 9 organization with large, successful businesses may acquire smaller competitors 1 with complementary product or service lines, a process known as related diversification. In some T instances, however, a smaller firm may acquire a larger one, S as was the case when Kmart acquired Sears in 2004. Size, of course, can be defined in a number of ways, including total revenues, number of employees or locations, or the physical size of facilities. The key to successful related diversification is the development of synergy among the related business units. Synergy occurs when the two previously separate organizations join to generate higher effectiveness and efficiency than would have corporate-level strategy the broad strategy that top managment formulates for the overall organization business-level stragegy a strategy formulated for a business unit that identifies how it will compete with other businesses within its industry business unit an organizational entity with its own unique mission, set of competitors, and industry competitive advantage a state whereby a business unit’s successful strategies cannot be easily duplicated by its competitors functional strategies strategies created at functional levels (e.g., marketing, finance, production, etc.) to support the business and corporate strategies corporate profile identification of the industry(ies) in which a firm operates related diversification a process whereby an organization acquires one or more businesses not related to its core domain synergy when the combination of two organizations results in higher efficiency and effectiveness that would otherwise be achieved by the two organizations separately Organizational Theory 2-6 been generated by them separately. When there are similarities in product or service lines, relationships in the distribution channels, or complementary managerial or technical expertise across business units, synergy is most likely to result. An organization may choose to operate in unrelated industries because its managers wish to reduce risk by spreading resources across several markets, thereby pursuing unrelated diversification by acquiring businesses not related to its core domain. Unlike related diversification, unrelated diversification is not about synergy. Unrelated diversification is pursued primarily to reduce risks that are associated with the organization that operates in only one area of business. Unrelated diversification, however, can make it more difficult for managers to stay Vindustries. In addition, abreast of market and technological changes in the various they may unknowingly shift attention away from theI organization’s primary business in favor of less critical ones. C unrelated diversification process whereby an organization acquires businesses unrelated to its core domain K is associated with The second step involved in developing the corporate strategy the extent to which an organization seeks to increase itsEsize. Simply stated, an organization may attempt to increase its size significantly,Rremain about the same size, or become smaller. These three possibilities are S seen in three corporate strategies—growth, stability, and retrenchment (i.e., become smaller)—each of , which is discussed in greater detail. T E The growth strategy seeks to significantly increase a A organization’s revenues or market share. Growth may be attained in a variety ofR ways. Internal growth is accomplished when a firm increases revenues, production capacity, and its D workforce, and can occur by growing a business or creating new ones. External R growth is accomplished when an organization merges with or acquires another A firm. Mergers are generally undertaken to share or transfer resources and/or 2-3a Growth Strategies improve competitiveness by combining resources. 1 The attractiveness of merging with or acquiring another organization may seem 1 intuitively obvious: Two organizations join forces into a single one that possesses all the strengths of the individual firms. The key to 9 successful mergers and 1 Some companies like acquisitions is often found in the ability to develop synergy. G.E. are well known for their ability to acquire other companies T and integrate them effectively. Opportunities for synergy ar ...
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Tutor Answer

School: University of Maryland



Snow and Miles
Student’s Name
Institutional Affiliation




Snow and Miles
Snow and Miles categorized four business-level Strategies that are prospector, analyzer,
reactor, and the defender. According to Miles and Snow, companies’ that implement the
prospector strategy take risks, invest in innovations and seek new business and market
opportunities which help them grow. These companies typically experiment with potential
responses to ecological trends that are emerging (Shoham & Lev, 2015). Therefore, the
organizations are mainly responsible for uncertainty and change to which the competitors have to
respond to. In that environment, creativity is more critical as compared to efficiency.
On the other hand, defenders are very different from prospectors in that they see the
environment to be certain and stable. Defenders seek to control and stability in their operations to
obtain the highest efficiency possible. Defenders are successful mostly when they are in a stable
environment or a declining industry (Anwar & Hasnu, 2016). The Analyzer strategy stresses
flexibility and stability in their attempt to capitalize on the best of the defender and the
prospector strategies. Firms that use the analyzer strategy seek to uphold the surviving businesses
to be more innovative in new entities. Lastly, companies that use the reactor strategy have no
definite strategy structure association. Organizations that have failed mostly due to the use of
reactor strategies since reactors respond to ecological opportunities and threats in ad hoc fashion.
The best business level strategy is the defender strategy as it stresses efficiency in the
entire organization. Companies that implement the defender strategy want to safeguard the
market they dominate from new market entrants. Due to the narrow focus, the companies are
rarely required to initiate significant changes in their structures, technology or operation methods
(Shoham & Lev, 2015). The strategy is bound to succeed as it devotes its attention to the
enhancement of the operations that exist.

Anwar, J., & Hasnu, S. A. F. (2016). Business strategy and firm performance: a multi-industry
analysis. Journal of Strategy and Management, 9(3), 361-382.
Shoham, A., & Lev, S. (2015). The Miles and Snow strategic typology and its performance
implications. In Global Perspectives in Marketing for the 21st Century (pp. 214-220).
Springer, Cham.



Organizational T...

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