Question: Explain why firms experience evolutionary cycles in which there is a fight between strategy and structure, punctuated with periods in which strategy and structure are reshaped.

Expert answer

Firms experience evolutionary cycles in which there is a fight between strategy and structure, punctuated with periods in which strategy and structure are reshaped. This is because firms need to continuously adapt their strategies and structures to stay ahead of competition and survive in the long term. Global firms that have experienced this pattern include General Motors, Nokia, and Sony.

General Motors, for example, has experienced several evolutions in its strategy and structure over the years. In the early 1900s, GM was focused on mass production of vehicles using the assembly line method. This allowed GM to achieve economies of scale and become the largest automaker in the world. However, by the late 1960s, GM’s market share began to decline as foreign competitors started to enter the US market with more fuel-efficient and stylish cars. In response, GM began to change its strategy, introducing smaller, more fuel-efficient cars. It also restructured its operations, making decisions at a central level and giving more autonomy to its divisions.

Nokia is another example of a global firm that has undergone strategic and structural changes in response to evolving markets. In the early 2000s, Nokia was the world’s leading manufacturer of mobile phones. However, with the advent of the smartphone, Nokia’s market share began to decline as customers started to switch to other brands such as Apple and Samsung. In response, Nokia changed its strategy, shifting its focus to smartphones. It also restructured its organization, making decisions at a more decentralized level.

Sony is another global firm that has experienced evolutionary changes. In the early 2000s, Sony was a leading manufacturer of consumer electronics such as televisions and Walkman players. However, with the rise of digital technology, Sony’s products became outdated and its market share began to decline. In response, Sony changed its strategy, focusing on developing new products such as the PlayStation and the Xperia smartphone. It also restructured its organization, making decisions at a more centralized level.

All of these examples illustrate how firms need to continuously adapt their strategies and structures in order to stay ahead of competition and survive in the long term. Global firms that have experienced this pattern include General Motors, Nokia, and Sony.

When it comes to strategy, there are a few common types of approaches that firms take. The first is a focus on cost leadership, which involves becoming the low-cost producer in an industry. The second is a focus on differentiation, which involves creating unique products or services that offer superior value to customers. The third is a focus on niche markets, which involves targeting specific segments of the market with specialized products or services. And finally, the fourth is a focus on growth, which involves expanding into new markets or launching new products and services.

When it comes to structure, there are also a few common types of approaches that firms take. The first is functional structure, which organizes the firm around different functions such as marketing, finance, and operations. The second is divisional structure, which organizes the firm around different divisions or business units. The third is holding company structure, which is a type of conglomerate where the firm owns a portfolio of companies. And finally, the fourth is virtual structure, which is a type of organization that relies heavily on technology and outsourcing.

All of these types of strategy and structure have their own advantages and disadvantages. For example, cost leadership can help a firm become more efficient and lower its costs, but it can also make the firm less flexible and responsive to change. Differentiation can help a firm create unique products or services that offer superior value to customers, but it can also make the firm more vulnerable to changes in customer preferences. Niche markets can help a firm focus its resources on a specific segment of the market, but it can also make the firm less diversified and more exposed to risks in that particular market. And finally, growth can help a firm expand into new markets or launch new products and services, but it can also make the firm more complex and difficult to manage.

The key takeaway is that there is no one “right” way for a firm to be organized. The best approach depends on the specific situation that the firm is facing. Firms need to continuously adapt their strategies and structures in order to stay ahead of competition and survive in the long term. Global firms that have experienced this pattern include General Motors, Nokia, and Sony.