Business Strategy


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Pages : 323; Paperback;
210 X 275 mm approx.

Pages : 321; Paperback;
210 X 275 mm approx


Textbook Price: Rs. 750 ;
Workbook Price: Rs. 700;
Available only in INDIA

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Business Strategy Textbook | Workbook

Detail Table of Contents

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<< Chapter 10

Strategy and Structure : Chapter 11

SUMMARY: Organization structure refers to the role-responsibility relationships of different employees in an organization along with their pre-defined interaction patterns. It facilitates the flow of information both vertically and horizontally in an organization. The structural dimensions of organization design are – formalization, specialization, hierarchy of authority, centralization, professionalism, and personnel ratios. Some of the contextual dimensions of organization design are – organization size; the technology it uses; and the environment in which it operates. An organization should be structured in such a way as to go beyond maximizing performance levels and effectiveness of operations. It should encourage participation and innovation throughout the organization. The various types of organization structures include – functional, divisional, matrix, horizontal, and hybrid structures.

A responsibility structure is a collection of responsibility centers. A responsibility center is a function, division, or unit of an organization under a specified authority with a specified responsibility. Responsibility accounting can be defined as a system of management accounting under which accountability is determined according to the responsibility allotted to various levels of management. In an organizational setting, it is necessary that the performance measurement systems are designed to be fair. Two major aspects to be considered are controllability and goal congruence. The controllability principle says that each manager should be assessed and rewarded only for those factors that are under his/her control. Goal congruence is achieved when managers (and employees), while working toward their best self-interest as perceived by themselves, take decisions that are successful in attaining the overall goals of the organization. This happens when their individual objectives are aligned with the organizational goals. Transfer pricing is a tool used in responsibility accounting to assign monetary values to transactions taking place between two or more responsibility centers. According to the nature of monetary inputs and outputs, responsibility centers can be classified into four types. They are cost centers, revenue centers, profit centers, and investment centers. Cost centers are further divided into standard cost centers and discretionary expense centers.

The structure must be closely aligned with the needs/demands of the strategy. The organization has to classify the activities in the value chain as strategy-critical or not. Among the value chain activities, the strategy-critical activities have to be executed exceedingly well or in closely coordinated fashion for the organization to deliver on the capabilities needed for strategic success. Aligning the internal structure of the organization to its strategy involves three steps: choosing one of the various forms of organization structure, modifying it as needed, and supplementing it with mechanisms for communication and coordination.

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