Relationship Between Strategy & Organizational Structure

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Perhaps the saying "where you stand depends on where you sit" accurately describes the way a business goes about crafting a commercial strategy, implementing it and ensuring that personnel are on board with the plan. To make sure the commercial outline is a success, the firm pays attention to such items as profitability management and organizational structure.

Corporate Strategy

  • A business formulates an operating strategy to understand what goes on in its external environment and avoid potentially costly problems. For example, if the firm doesn't put into place effective compliance procedures, it may experience the wrath of regulators and could pay stiff penalties if industry watchdogs find instances of wrongdoing.

    A business strategy is a plan of action aimed at reaching specific goals and staying in good stead with clients and vendors. The blueprint also enables a firm to leverage technology to improve its overall operations, financial performance and manufacturing productivity.

Organizational Structure

  • Organizational structure is a loose term referring to the way a company thinks about hierarchy, assigns tasks to personnel and ensures its workforce works collaboratively to achieve a common goal. The goal is to avoid task overlap and workforce confusion, especially when it comes to laying a strong foundation for long-term productivity.

    Task overlap, a situation in which two or more employees perform the same task in different departments, costs a company money. This creates confusion, inefficiencies and lack of accountability -- because no employee ultimately has a clear responsibility over who does what, where and when.

Significance

  • Corporate managers formulate a strategy to meet various operating goals. They may do so to improve the firm's chances of prosperity, avoid brand dilution, outflank rivals and spur invested capital. This is all the cash that stakeholders -- such as shareholders, bondholders and other financiers -- have poured into the business. A commercial outline is also central in the way the business specifies and reaches its economic targets.

    Brand dilution comes from the overuse of corporate brands and logos; it usually touches on the way customers perceive the firm and how loyal they're willing to be. Organizational structure enables a company to set itself up for success, with an emphasis on the occupational tools needed to make personnel satisfied and productive.

Connection

  • Companies design an adequate organizational structure and draw up an effective strategy to figure out the best way to enter new markets, remain competitive in existing ones and allocate resources to promising initiatives along the way. For example, a business may present a detailed cross-sector strategy to simultaneously tap into multiple markets and set sound policies to make sure rank-and-file personnel are on the same page.

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