Discussion – Strategy and Structure

Discussion – Strategy and Structure

Business strategy and structure are two different but related concepts. The interaction between the two is what determines how successful an organization will be. The business strategy is the plan that an organization executes to achieve its goals and objectives (Galbraith, 2002). On the other hand, the structure is the formal layout of the organization affecting information sharing and decision-making for the business. These two elements are crucial for a business. Even those organizations that have not clearly defined their strategy and structure usually have them in one way or another. This essay discusses the relationship between strategy and structure and how the former shapes the latter.

How Strategy Shapes Structure

            Having a strategy helps a business to define how they want their organization to be structured. One of the first steps that a business takes after developing its strategy is determining the conditions under which it must work in order to achieve that strategy. This process usually involves a lot of components such as analyzing the competition and evaluating the market (Teece, 2010). Most importantly, the organization must determine its internal set-up that will help in the achievement of the strategy. This is where the business develops an internal structure.

When a business has a clear focus on what it wants to achieve, its management can proceed to create the structure that will help to achieve this. They can start to focus on how to allocate responsibilities and decide the best methods to make decisions to optimize performance, thus, creating the structure (Teece, 2010). For example, a business whose strategy is to send a product to the whole country may need to develop a functional business structure. In a functional structure, the employees are grouped in a hierarchy, but according to their specializations. This enables employees to utilize their skills to the maximum in their respective functional areas. For such a business, this structure enables them to create a branched system where each branch in the country is functioning effectively.

A business structure is not just the chart of the organization. It involves the people, the type of culture developed, the processes, the decision-making, and numerous other elements that affect the operation of the organization. Thus, the structure supports the strategy. A business that changes its strategy may also need to change its structure.

Why an Organization may choose different forms of Structure

            As established above, the structure of an organization is meant to support a business’s strategy. A business with a more advanced strategy or a large-sized business may need to develop more than one structure (Galbraith, 2002). Some business strategies require that an organization be divided into several business units. Each unit may have a different structure. For example, an organization may have a matrix structure that combines the characteristics of the hierarchal structure and functional structure. This helps such a business to succeed as a whole with the help of the success of the various units it has developed.

Conclusion

            In conclusion, understanding business strategy and structure is important for the running of a successful organization. This essay demonstrates that the two are related and dependent on each other. An organization develops a strategy and later determines the best structure to support that strategy. The successful combination of these elements helps an organization achieve its goals and objectives.

References

Galbraith, J. R. (2002). Designing organizations: Strategy, Structure and Process and the Business Unit and Enterprise Levels.

Teece, D. J. (2010). Business models, business strategy, and innovation. Long range planning, 43(2-3), 172-194.

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Based on the library research you did for the second assignment in this unit as well as your unit readings, write a 1-2 page paper, if 1 page no less than 3 paragraphs about your understanding of how strategy determines structure and why an organization may choose different forms of structure.