These notes are incomplete without our videos. Study from these notes at your own risk.
We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Chapter 7
Organisation and Strategic Leadership
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 1
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Basics
An organisational Structure defines how activities such as
● Task allocation
● Coordination
● Supervision
Are directed towards the achievement of organisational aims
A competitive advantage is created when there is a proper match between strategy and structure.
effective strategic leaders seek to develop an organizational structure and accompanying controls that are superior
to those of their competitors.
Changes in strategy often require changes in the way an organization is structured for two major reasons:
1. Structure largely dictates how objectives and policies will be established.
○ If an organisation is structured geographically objectives and policies will be established accordingly
2. Structure dictates how resources will be allocated.
○ If an organization’s structure is based on customer groups, then resources will be allocated in that
manner. Similarly, if an organization’s structure is set up along functional business lines, then
resources are allocated by functional areas.
Structure undeniably can and does influence strategy.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 2
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Simple Structure
● Simple organizational structure is most appropriate for companies that follow
○ a single-business strategy and
○ offer a line of products
○ in a single geographic market.
● Appropriate for companies implementing
○ focused cost leadership or
○ focused differentiation strategies.
● A simple structure is an organizational form in which
○ the owner-manager makes all major decisions directly and
○ monitors all activities,
○ while the company’s staff merely serves as an executor.
● Some key features/Characteristics
○ Little specialization of tasks,
○ few rules,
○ little formalization,
○ unsophisticated information systems and
○ direct involvement of owner-manager in all phases of day-to-day operations
● In the simple structure,
○ communication is frequent and direct,
○ and new products tend to be introduced to the market quickly,
○ which can result in a competitive advantage.
● However, if they are successful, small companies grow larger.
● As a result of this growth, the company outgrows the simple structure.
● To coordinate more complex organizational functions, companies should abandon the simple structure in
favour of the functional structure.
● The functional structure is used by larger companies and by companies with low levels of diversification.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 3
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Functional Structure
● The functional structure consists of a chief executive officer or a managing director and limited corporate
staff with functional line managers in dominant functions such as production, accounting, marketing, R&D,
engineering, and human resources.
● A functional structure groups tasks and activities by business function.
● Functional structure is widely used because of its simplicity and low cost.
● Disadvantages of a functional structure are that it forces accountability to the top, minimizes career
development opportunities, etc.
● Most large companies abandoned the functional structure in favor of decentralization and improved
accountability. (Difficult to add new products)
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 4
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Divisional Structure
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 5
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Multidivisional Structure
Multidivisional (M-form) structure is composed of operating divisions where each division represents a separate
business to which the top corporate officer delegates responsibility for day-to-day operations and business unit
strategy to division managers.
By such delegation, the corporate office is responsible for formulating and implementing overall corporate strategy
and manages divisions through strategic and financial controls.
Multidivisional or M-form structure was developed in the 1920s, in response to coordination- and control-related
problems in large firms.
Functional departments often had difficulty dealing with distinct product lines and markets, especially in
coordinating conflicting priorities among the products. Costs were not allocated to individual products, so it was not
possible to assess an individual product’s profit contribution. Loss of control meant that optimal allocation of firm
resources between products was difficult (if not impossible). Top managers became over-involved in solving
short-run problems (such as coordination, communications, conflict resolution) and neglected long-term strategic
issues.
Multidivisional structure calls for:
● Creating separate divisions, each representing a distinct business
● Each division would house its functional hierarchy;
● Division managers would be given responsibility for managing day-to-day operations;
● A small corporate office that would determine the long-term strategic direction of the firm and exercise
overall financial control over the semi-autonomous divisions.
This would enable the firm to more accurately monitor the performance of individual businesses, simplifying
control problems, facilitate comparisons between divisions, improving the allocation of resources and stimulate
managers of poorly performing divisions to seek ways to improve performance.
An increase in diversification strains corporate officers’ abilities to understand the operations of all of its business
units and divisions are then managed by financial controls, which enable corporate officers to manage the cash flow
of the divisions through budgets and an emphasis on profits from distinct businesses.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 6
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Hourglass Structure
● Hourglass Structure In the recent years information technology and communications have significantly
altered the functioning of organizations.
● The role played by middle management is diminishing as the tasks performed by them are increasingly
being replaced by the technological tools.
● Hourglass organization structure consists of three layers with constricted middle layer. The structure has a
short and narrow middle-management level.
● Information technology links the top and bottom levels in the organization taking away many tasks that are
performed by the middle level managers.
● Contrary to traditional middle level managers who are often specialist, the managers in the hourglass
structure are generalists and perform wide variety of tasks. They would be handling cross-functional issues
emanating such as those from marketing, finance or production
● Hourglass structure has obvious benefit
○ of reduced costs.
○ It also helps in enhancing responsiveness by simplifying decision making.
○ Decision making authority is shifted close to the source of information so that it is faster.
● However, with the reduced size of middle management
○ the promotion opportunities for the lower levels diminish significantly.
○ Continuity at same level may bring monotony and lack of interest and it becomes difficult to keep the
motivation levels high. Organizations try to overcome these problems by assigning challenging tasks,
transferring laterally and having a system of proper rewards for performance.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 7
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
SBU Structure
● The concept is relevant to multi-product, multi-business enterprises.
● An SBU is a grouping of related businesses.
● As per this concept, a multi-business enterprise groups its multitude of businesses into a few distinct
business units in a scientific way.
● The purpose is to provide effective strategic planning treatment to each one of its products/businesses.
The three most important characteristics of a SBU are:
● It is a single business or a collection of related businesses which offer scope for independent planning and
which might feasibly stand alone from the rest of the organization.
● It has its own set of competitors.
● It has a manager who has responsibility for strategic planning and profit performance, and who has control
of profit-influencing factors.
A strategic business unit (SBU) structure consists of at least three levels, with a corporate headquarters at the top,
SBU groups at the second level, and divisions grouped by relatedness within each SBU at the third level.
Importance of SBU / Advantages of SBU Structure
● Establishing coordination between divisions having common strategic interests.
● Facilitates strategic management and control on large and diverse organizations.
● Fixes accountabilities at the level of distinct business units.
● Helps allocate corporate resources to areas with greatest growth opportunities.
● Makes the task of strategic review by top executives more objective and more effective.
● Allows strategic planning to be done at the most relevant level within the total enterprise.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 8
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Matrix Structure
● A matrix structure is the most complex of all designs.
● It depends upon both vertical and horizontal flows of authority and communication (hence the term matrix).
○ In, functional and divisional there is only vertical flows of authority and communication.
● In matrix structure functional and product forms are combined simultaneously at the same level of the
organisation.
● Employee has two superior a product manager and a functional manager.
● People from functional units are often assigned to products & projects.
● It is widely used many industries like construction, healthcare, research & defense.
○ Can be used where many projects are running at a time and people are required for limited time
period
For development of matrix structure Davis and Lawrence, have proposed three distinct phases:
1. Cross-functional task forces
➢ Temporary cross-functional task forces are initially used when a new product line is being
introduced. A project manager is in charge as the key horizontal link.
2. Product/brand management
➢ If the cross-functional task forces become more permanent, the project manager becomes a product
or brand manager and a second phase begins.
➢ In this arrangement, function is still the primary organizational structure, but product or brand
managers act as the integrators of semi permanent products or brands.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 9
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
3. Mature matrix
➢ The third and final phase of matrix development involves a true dual-authority structure.
➢ Both the functional and product structures are permanent.
➢ All employees are connected to both a vertical functional superior and a horizontal product manager.
Functional and product managers have equal authority and must work well together to resolve
disagreements over resources and priorities.
However, the matrix structure is not very popular because of difficulties in implementation and trouble in managing.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 10
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Network Structure
● A newer and somewhat more radical (Advanced – entirely Different from existing one) organizational
design, the network structure is an example of
○ what could be termed a "non-structure"
○ by its elimination of in house business functions.
● Many activities are outsourced.
● A corporation organized in this manner is often called a virtual organization.
● It is composed of a series of project groups or collaborations.
● The network structure becomes most useful when the environment of a firm is unstable and is expected to
remain so.Under such conditions, there is usually a strong need for innovation and quick response.
● In this type of structure instead of having salaried employees, organisation may contract with people for a
specific project or length of time.
● Companies like Nike; Reebok uses the network structure in their operations functions by subcontracting
manufacturing to other companies at low cost.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 11
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Strategic Leadership
● Strategic leadership
○ sets the firms direction by developing and communicating vision of future,
○ formulate strategies in the light of internal and external environment,
○ brings about changes required to implement strategies and inspire the staff to contribute to strategy
execution.
Leadership word is used to address
● The group of people leading the organisation
● The activity of leading
Leadership role for good strategy execution
Leaders/ Managers have five leadership roles to play in pushing for good strategy execution
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 12
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 13
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 14
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Responsibilities of Strategic Leader
What do you mean by strategic leadership? What are two approaches to leadership
style?
Strategic leadership is the
● ability of influencing others
● to voluntarily make decisions
● that enhance prospects for the organization’s long-term success
● while maintaining short-term financial stability.
It includes
● determining the firm's strategic direction,
● aligning the firm's strategy with its culture,
● communicating high ethical standards, and
● Initiating changes in the firm's strategy, when necessary.
Strategic leadership sets the firm's direction by developing and communicating a vision of future and inspires
organization members to move in that direction.
Unlike strategic leadership, managerial leadership is generally concerned with the short-term, day-to-day activities.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 15
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Approaches to leadership
Transformational Leadership
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 16
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 17
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these
notes at your own risk. We keep on updating our books, notes and
videos. You should always study from updated notes with our videos.
Many concepts are there which are missing in these notes, some are
obsolete. We have discussed everything in our video classes.
www.neerajaroraclasses.com
These notes are incomplete without our videos. Study from these
notes at your own risk. We keep on updating our books, notes and
videos. You should always study from updated notes with our videos.
Many concepts are there which are missing in these notes, some are
obsolete. We have discussed everything in our video classes.
www.neerajaroraclasses.com
These notes are incomplete without our videos. Study from these
notes at your own risk. We keep on updating our books, notes and
videos. You should always study from updated notes with our videos.
Many concepts are there which are missing in these notes, some are
obsolete. We have discussed everything in our video classes.
www.neerajaroraclasses.com
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our video
classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given. Always study from
ICAI Study Material. Due credits to ICAI for topics and structure of Study Material.
Last note for Intrapreneur
The intrapreneur believe in change and do not fear failure. they Discover new ideas, look for such opportunities
that can benefit the whole organisation and take risks, promote innovation to improve the performance and
profitability of the organisation.
the job of an intrapreneur is extremely challenging.
they get recognition and reward for the success achieved by them.
It has now become a trend that large corporations appoint intrapreneur within the organisation, to bring
operational excellence and gain competitive edge in the market
To get the best out of these notes visit www.neerajaroraclasses.com Chapter 7 | 18
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
