Multi Business Organization Strategies
The readings in this unit covered the multi business organization strategy and organization design, the mixed-model approach, and how organizational design approaches translate into added value for both stakeholders and customers. In this paper, the three topics will be discussed in summary.
Multi Business Organizations
Multi business organizations have various strategies, including standard portfolio strategies, conglomerates, as well as organizations for diversification. The chapter discussed the strategy models: the single business, related diversification, conglomerate, and mixed model. Corporate strategy has evolved over the years, with conclusions made that a company’s structure depends on its portfolio structure (Galbraith, 2014). When a company executes a single business strategy, it also adopts a structure that is functional, as is the case with BMW. When a company diversifies its business to new areas related to its main business, it tends to organize its product divisions and lines, as is the case with Kellogg. Further, when a business adopts a model of holding, the company adopts the structure as well, which is dependent on its portfolio, as is the case with Berkshire Hathaway (Galbraith, 2014).
Similarly, different practices and patterns are associated with managerial positions. Managers who work in companies that pursue unrelated diversification strategies tend to have careers limited to their specific divisions (Hill et al., 2014). On the other hand, the careers of managers in dimensionalized companies span the entire company. Further, managers in holding companies are paid higher bonuses based on the performance of their respective divisions. This leads to competition rather than cooperation. Managers in companies that are dimensionalized receive lower bonuses than the former because the bonuses are based on the entire company’s performance (Hill et al., 2014).
Different strategies result in different structures. Businesses in a holding firm are different and do not allow for careers that are companywide. Business in diversified companies allows for cross-pollination as well as best practice sharing between the different divisions. Hence, different strategies also result in different human resource practices (Hill et al., 2014).
The diversification portfolio can range from a single business to a single-profit center and lastly to a conglomerate with several centers for profit (Nilsson et al., 2011). An example is Novartis, which appears as a single business unit, but instead, it is structured into different business units, Eye Care Pharmaceuticals, and Lenses. Ethical Pharmaceuticals, Generic Pharmaceuticals, and Over the Counter (OTC) Pharmaceuticals (Osterwalder & Pigneur, 2010). On the other hand, some businesses appear to have multiple businesses while the product targets the same end. For example, Procter & Gamble participates in many industries, including pharmaceuticals, cosmetics, detergent, paper, and soap, yet all these are targeted as consumer products that are purchased repeatedly, at prices that are low and sold to multiple merchants, which are all managed through the brand management system (Osterewalder et al., 2010). Hence, the business units are the same model of business for individual product lines. The more diversity business has, the lesser the chances and lesser payoff for coordinated working and the less the chances of synergy creation or value addition across its portfolio (Nilsson et al., 2011).
In corporate structures, the line of operations consists of the manufacturing or production function, sales and marketing, engineering or development function, and purchasing function. The staff function often comprises the finance, legal, and HR functions. The leadership is centralized and cross-functional (Nilsson et al., 2011). The divisional model is adopted when there is product diversification with movement to a business that is close to the core business. Decisions, in this case, are made at the divisional level, and these are reported to the general manager of the division and finally to the corporate functional leadership, which forms an organizational matrix (Baker & Martin, 2011).
The Mixed Model
The mixed portfolio model includes a collection of divisions that are similar into a sector, cluster, or group (Osterwalder et al., 2010). When all the divisions within a group follow a similar singular model of business, it is deemed to be a pure structure, as is the case with Hewlett Packard. In such a scenario, the divisions’ similarities and differences are maximized. Each group has its own portfolio strategy, resulting in portfolio strategy cooperation.
The corporate center often exercises the finances of the company only while the groups exercise strategic and financial control (Baker & Martin, 2011). An example of strategic control by a group is witnessed by AlliedSignal/Honeywell, which contracted Xerox to implement Six Sigma into its business model. Further, in the pure mixed model, the salary and compensation policies are in line with the specific group industries’ competitive practices (Baker & Martin, 2011). Bonuses are in three categories: corporate bonuses based on corporate performance, group bonuses awarded to group managers, and divisional bonuses awarded to the divisions.
This approach involves the management attempting to add value to their organization’s portfolio to avoid creating conglomerates (Zeghal & Maaloul, 2010). IBM, for example, combines its products, services, and software from diverse businesses into customer segments-integrated solutions. Disney spreads its intellectual property to its constituent businesses. Companies create value through financial and capital acumen, government leverage on both relational and international fronts (partnering, selling, buying), sharing tangible resources, sharing intangible resources such as knowledge and expertise, and brand banking capability as well as intellectual property solutions leveraging (Zeghal et al., 2010).
To get the best value addition, corporate centers ought to combine the different practices (Zeghal et al., 2010). Mobilizing talent is one of the main practices that can result in multiple benefits as it allows companies to transfer technology, develop talent and expertise, and build networks and relations.
In conclusion, the chapter looked into the different portfolios of businesses and how these affect the business structure. The reward system has been shown to be diverse depending on the structure of the individual businesses. Lastly, value addition was discussed, which concluded that merging different strategies and mobilizing talent are the key methods of increasing the value of a business portfolio.
Baker, H. K., & Martin, G. S. (2011). Capital structure and corporate financing decisions: theory, evidence, and practice(Vol. 15). John Wiley & Sons.
Galbraith, J. R. (2014). Designing organizations. Jossey-Bass & Pfeiffer Imprints, Wiley.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Nilsson, F., Olve, N. G., & Parment, A. (2011). Controlling for competitiveness: Strategy formulation and implementation through management control. Copenhagen Business School Press DK.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.
Zeghal, D., & Maaloul, A. (2010). Analysing value added as an indicator of intellectual capital and its consequences on company performance. Journal of Intellectual capital, 11(1), 39-60.
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U04a1 Reading Reflection Paper 4
Note: Complete this unit’s first discussion before you start working on this assignment.
The unit readings cover the strategy and organization design of multi-business organizations, the mixed-model approach, and how approaches to organization design translate into added value for customers and stakeholders. Your reflective paper assignment asks you to show your understanding of what you have read and to add your own thoughts and experiences. Completing this assignment will help you activate your new knowledge of organization design.
Reflect on the unit readings. Demonstrate that you remember, understand, and can apply the readings to real-world examples.
Your paper should meet the following requirements:
- Written communication: Written communication should be free of errors that detract from the overall message.
- APA format: Resources and citations should be in current APA format. Be sure to include title and reference pages.
- Length: 3 typed pages, double-spaced pages, not including the title and reference pages.
- Font and font size: Times New Roman, 12 point.
Reading Reflection Paper 4 Scoring Guide
Due Date: End of Unit 4.
Percentage of Course Grade: 2%.
|Explain multi-business strategies in relation to organization design.
|Does not list multi-business strategies in relation to organization design.||Lists multi-business strategies in relation to organization design.||Explains multi-business strategies in relation to organization design.||Explains multi-business strategies in relation to organization design, including references to personal experience and knowledge or scholarly research.|
|Describe how to add value from an organization design perspective.
|Does not describe the meaning of added value.||Describes the meaning ofadded value, but omits tie to an organization design perspective.||Describes how to add value from an organization design perspective.||Explains how to add value from an organization design perspective.|
|Apply organization design concepts to a real-world example.
|Does not describe examples of organizations.||Describes examples of organizations without application to organization design.||Applies organization design concepts to a real-world example.||Applies organization design concepts to a real-world example, with examples and explanations from personal experience and knowledge or scholarly research.|
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