It is hard to disagree that numerous concepts, factors, and processes should be taken into consideration when developing organizational goals and setting different strategies. Two of the most impactful analyses that should always be conducted before making significant managerial decisions are external and internal ones. Since a number of factors like changes in economy, politics, environment, technologies, and social matters can affect the objectives of a company, external analysis can help introduce certain changes to its value-adding support strategies. What is more, it is vital for a firm to be aware of the basic building blocks of its structure and be able to use their advantages and disadvantages when setting its goals, selecting methods and approaches, and trying to determine existing problems and weaknesses.
Value-Adding Support Strategies: External Environmental Analysis
To begin with, it is essential to define value-adding support strategies in order to then explain why external environmental analysis is crucial for this concept. Overall, as noticed by Ginter et al. (2018), “strategically relevant value-adding support activities include the organization’s culture, organizational structure, and strategic resources (financial resources, human resources, information systems resources, and strategic technologies resources)” (p. 494). The importance of these strategies cannot be overestimated, and various processes, including external analysis, play a great role in their development.
An adequate and effective strategy should always be responsive to the changing nature of external circumstances. External environmental analysis generally includes the focus on the “competitive structure, competitive position, dynamics, and history” of the company, as well as “macroeconomic, global, political, social, demographic, and technological” factors (CFI Team, 2022, para. 1). In case the listed concepts and processes are not considered when developing value-adding support strategies, the effectiveness of the latter becomes questionable. In other words, these strategies can barely meet the firm’s actual needs and allow for accomplishing its competitive, financial, and service delivery objectives (Voordt & Jensen, 2018). For example, an external analysis may show specific threats and opportunities of the organization and indicate that the competitive environment has changed, and the current methods are not efficient anymore. Without this information, value-adding support strategies can have a lower impact on the firm’s competitive advantage. As a result, an external analysis should always be conducted and taken into consideration when identifying the strategies.
Value-Adding Support Strategies: Role of Strategy Formulation
Another concept that plays an extremely important role in the development of value-adding support strategies is the formulation of the strategy. Generally, it is stated that these strategies are “the means for accomplishing the decisions made in strategy formulation” (Ginter et al., 2018, p. 496). Consequently, there is a strong inner connection between the two processes, and each of them should have a severe impact on the other for the firm to achieve success.
As evident from the name of the process, strategy formulation leads to a more specified and concise determination of the best and most promising strategy. Without this step, it is impossible or unlikely to make sure that the methods the firm uses are effective and can lead to the accomplishment of the objectives (Voordt & Jensen, 2018). When identifying value-adding support strategies, it is also essential to conduct an internal analysis, which provides a list of the company’s current strengths and weaknesses (Ginter et al., 2018). They, in turn, should be compared with the formulated strategy, and the firm becomes able to understand whether it needs to change or maintain its value-adding support strategies. As a result, strategy formulation allows for the better adaptation and maintenance of the “organization’s culture, organizational structure, and strategic resources,” which is one of the key purposes of the firm (Ginter et al., 2018, p. 494). Without proper identification of the company’s strategy, it will not be able to ensure that its value-adding support strategies are up-to-date, adequate, effective, and relevant.
Basic Building Blocks of Structure
As mentioned above, a specific number of basic building blocks of organizational structure exist. According to Ginter et al. (2018), they are functional structure, divisional structure, including service units or strategic business, and matrix structure (p. 507). In order to understand their role and then discuss their weaknesses and strengths, it is essential to explain each system in detail. First, functional structure is “based on the primary activities or processes required for producing the product/service of the organization” (Ginter et al., 2018, p. 507). Some departments this structure may include are information systems, finance, clinical operations, and marketing. This structure builds greater expertise and specialization within the processes and functions, which is its primary advantage. Other strengths are that it can “foster efficiency, particularly when tasks are routine and repetitive,” and centralize decision-making and control (Ginter et al., 2018, p. 507). At the same time, several disadvantages of the functional structure are that it can make coordination and horizontal communication challenging and limit general managers’ development.
Second, divisional structures can usually be met in firms that have grown through aggressive product or market development, vertical integration, or diversification. This structure is developed based on the company’s customers, geographic markets, and services and products and is generally used to break the company down into more focused and manageable units (Ginter et al., 2018). Similar to the previously discussed structure, this one also has its own limitations and advantages. For example, its problems are that it makes it quite challenging for a firm to maintain its consistent reputation and image, creates competition for resources, and duplicates functions and services (Ginter et al., 2018; Mosca et al., 2021). At the same time, the reasons why this structure is valuable are that it makes it possible to use different strategies among divisions, emphasizes enhanced local responsiveness, and provides opportunities for general managers’ development.
Finally, for companies with multiple projects or products based on shared functional experience, a matrix structure may be the most appropriate. Ginter et al. (2018) state that “the fundamental rationale underlying a matrix structure is to organize around problems to be solved rather than functions or products or geography” (p. 509). The three main advantages of this structure are that it allows for the development of various projects and products, promotes innovation, and encourages the rapid creation of services and products (Ginter et al., 2018). As for its disadvantages, they are the possibility of confusion, difficulties in management, and problems in coordination and communication.
To draw a conclusion, one may say that it is indeed required to take into consideration various aspects and processes of management and organization. In order to develop, maintain, or alter appropriate value-adding support strategies, it is of vital importance to conduct an external analysis and additionally consider strategy formulation. Further, it is also required to choose the most beneficial and fitting organizational structure and be aware of their advantages and disadvantages.
CFI Team. (2022). External analysis. Corporate Finance Institute. Web.
Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2018). Strategic management of health care organizations (8th ed.). Jossey-Bass.
Mosca, L., Gianecchini, M., & Campagnolo, D. (2021). Organizational life cycle models: A design perspective. Journal of Organization Design, 10(1), 3-18. Web.
Voordt, T. J. M. v. d., & Jensen, P. A. (2018). Measurement and benchmarking of workplace performance: Key issues in value adding management. Journal of Corporate Real Estate, 20(3), 177-195. Web.