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Strategies for Organizational Design: Navigating Cost Leadership, Differentiation, and Focus

This overview discusses the structuring of organizational strategy and structure, focusing on cost leadership, differentiation, and focus strategies. Cost leadership emphasizes strong task specialization, centralization, and formalization for cost efficiency. In contrast, differentiation strategy benefits from a flat, decentralized organization allowing rapid response to market trends. The focus strategy adapts based on whether it targets low-cost or differentiation. Additionally, the evolution of organizational design is highlighted, moving from traditional top-down structures to modern decentralized, collaborative, and team-oriented frameworks for enhanced adaptability and innovation.

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Strategies for Organizational Design: Navigating Cost Leadership, Differentiation, and Focus

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  1. Structuring the Organization

  2. Strategy and Structure • Cost Leadership Strategy - requires strong specialization of tasks, centralization, and often formalization to foster a low-cost culture. • Differentiation Strategy - requires a relatively flat organization with decentralized decision making and little formalization to react quickly to capitalize on emerging trends in key markets. • Focus Strategy - depends upon whether it is a low cost or differentiation focus strategy.

  3. Changing Structural Characteristics of the Modern Corporation Old Organizational Design New Organizational Design One large corporation Mini-business units & cooperative relationships Vertical communication Horizontal communication Centralized top-down decision making Decentralized participative decision making Vertical integration Outsourcing & virtual organizations Work/quality teams Autonomous work teams Functional work teams Cross-functional work teams Minimal training Extensive training Specialized job design focused on individual Value-chain team-focused job design Source: Adapted from B. Macy and H. Izumi, “Organizational Change, Design, and Work Innovation: A Meta-Analysis of 131 North American Field Studies—1961–1991,” Research in Organizational Change and Development, Vol. 7, JAI Press (1993), p. 298. Reprinted with permission.

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