Organizational structure and control ( case rm 12 ) and eva krakatau steel

1. BUSINESS STRATEGY AND ENTERPRISE
C H A P T E R 11
ORGANIZATIONAL STRUCTURE AND CONTROL ( CASE RM 12 ) AND EVA KRAKATAU STEEL
CHRISTIAN HAMONANGAN
NIM: 29113025
PROGRAM MAGISTER ADMINISTRATION BUSINESS
SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2014

2. Chapter 11
Organizational Structure and Control
Organizational Structure and Controls
Organizational Structure (OS)
 Specifies firm’s formal reporting relationships, procedures, controls, authority & decision-making processes
 Effective use of firm’s strategies facilitated when structure is properly aligned
o Structural stability: Capacity firm requires to consistently and predictably manage its daily work routines
o Structural flexibility: Opportunity to explore competitive advantages firm will need to be successful in the future
Organizational Controls
 Purposes of Organizational Controls:
 Guide the use of strategy.
 Indicate how to compare actual results with expected results.
 Suggest corrective actions to take when the difference between actual and expected results is unacceptable.
 Two Types of Organizational Controls
 Strategic controls
 Financial controls
Relationships between Strategy and Structure
Strategy and structure have a reciprocal relationship:
 Structure flows from or follows the selection of the firm’s strategy
 Once in place, structure can influence current strategic actions as well as choices about future strategies.

3. Evolutionary Patterns of Structure and Organizational Structure
• All organizations require some form of organizational structure to implement and manage their strategies
• Firms frequently alter their structure as they grow in size and complexity
• Three basic structure types:
 Simple structure
 Functional structure
 Multidivisional structure
(M-form)
Three basic structure types :
 Simple
o Owner-manager makes all major decisions and monitors all activities, staff acts as extension of manager's supervisory authority
o Few rules, limited task specialization, unsophisticated technology system
o As firm grows more complex, need to add layers and controls
 Functional
o CEO and a limited corporate staff make all decisions, with functional line managers in dominant organizational areas
o Allows functional specialization resulting in active knowledge sharing in each functional area
o Can negatively affect communication and coordination among those representing different organizational functions
o When changing from a simple to functional structure need to focus on value- destroying bureaucratic procedures
 Multidivisional (M-form) structure
o Each division represents a separate business or profit center in which corporate officers delegate responsibilities for day-to-day operations and business-unit strategies to division managers
o Enables corporate officers to more accurately monitor the performance of each business, simplifies the problem of control

4. o Facilitates comparisons between divisions: improves resource allocation process
o Stimulates managers of poorly performing
Matches between business-level strategies and functional structure
 Cost leadership and the functional structure
o Simple reporting relationships
o Few decision-making and authority layers
o Centralized corporate staff
o Strong operational focus on process improvements
o Low-cost culture
o Centralized staff decision-making authority
o Jobs specialization
o Highly formalized rules and procedures
 Differentiation and functional structure
o Complex and flexible reporting relationships
o Cross-functional product development teams
o Strong focus on marketing and product R&D
o Development-oriented culture
o Decentralized decision making
o Broad job descriptions
o Informal rules and procedures
 Integrated cost leadership/differentiation strategy
o These firms may sell products that create value because of relatively low price and reasonable sources of differentiation
o Difficult to implement, but frequently used in the global economy
o Challenge due to primary/support activities
o Need to successfully combine specialization, formalization and centralization

5. RM 12
The Multiunit Enterprise
Multiunit Enterprise has become norm in the several industries and employ four level of field manages with carefully defined responsibilities. There are several challenges of multiunit enterprises:
 Multiunit enterprise find it hard to maintain consistency, because they are agglomerations of hundred, thousands of branches, service centers, hotels, restaurant, and stores, They must focus on aligning priorities, plans and practices across highly dispersed field organization.
 Multiunit organization must ensure some degree of customization even as they pursue standardization. They must respond to the distinctive features of local and regional markets to achieve best results.
 The sharp division of responsibilities between corporate headquarters and the field organization causes many problems.
 Multiunit enterprises often struggle to get the best out of field managers who are hard to classify.
There are four levels from bottom to top: store managers, district managers, regional vice presidents, and division presidents or senior vice presidents.
 Store managers must ensure coordination and integration activities at a single sire.
 District managers must ensure the consistent execution, improving performance, and developing bench strength in all their stores. District manager also known as “connectors” because they bring the issue to the attention of senior executives.
 Regional vice presidents must ensure coordination and integration of product offerings and competitive positioning across their market areas.
 Division presidents and senior vice presidents must ensure coordination and integration of staff and line department between headquarters and their field organizations.
When companies launch new programs, division presidents and senior vice presidents must share the corporate vision with the field. In to implement multiunit enterprise:
a. Distribute the roles and responsibilities to each 4 level of managers. This creates a multilayered net that prevents problems from slipping through.

6. b. Integration is a way to guaranteeing consistency, by share the information and update the activities together with at all level will create a customization with standardization.
c. District manager need to balance monitoring with coaching is important to store managers and staffs to improve performance and ensure they can implement the strategy very well
d. Regional vice presidents have to reinforcing corporate priorities and recognizing patterns and regional differences.
e. Divisional heads need to come to the field/store so they can see directly and encourage the staff and managers, share the vision and recognize the needs of corporate and develop close relationship with them.
The practical implications of this study is we can know that the low to top managers has its own responsibilities to implementing the strategy and the low to middle manager has key role as people who ran their store, summarized its performance, and connected it back to Headquarter and to other parts of the company. They connect people to each other, and translate high level directives into low level action. With the structures, four levels of managers are able to integrate with one another sharing information, diagnosing issues, coordinating efforts, identifying needed new initiatives. When that happens it strengthens the leadership performance of all levels and gaining a market power.

7. EVA Krakatau Steel
ROIC menunjukan peningkatan dari tahun 2006 sampai ke tahun 2016. Spread antara ROIC tahun 2006 dan 2016 adalah sebesar 41.24%. Nilai ROIC terendah ( tahun 2006 ) dengan nilai -2.64% dan peningkatan signifikan ( tahun 2008 ), yaitu sebesar 14.5%. Dari hasil perhitungan (ROA-WACC) x invested capital diperoleh bahwa nilai EVA pada tahun 2006 sangat rendah, bahkan mencapai angka negatif Rp 1.41.901( value perusahaan masih tetap dalam angka positif dengan nominal Rp 6.225.205 ), dikarenakan jumlah invested capital yang cukup besar, sehingga dapat menutup dan menjaga value perusahaan. Nilai EVA dari tahun ke tahun mengalami peningkatan, namun value perusahaan mengalami naik turun karena jumlah invested capital yang sempat berkurang di tahun 2008, 2010 dan 2011
Dalam kurun waktu 10 tahun, PT Krakatau Steel memiliki peningkatan EVA yang sangat baik. EVA perusahaan yang semakin membaik didukung dengan invested capital yang besar meningkatkan Value perusahaan di mata shareholders dan stakeholders. Kemampuan perusahaan dalam meningkatkan cukup baik sehingga mampu meyakinkan investor untuk menanamkan sahamnya.
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5.000.000
10.000.000
15.000.000
Invested Capital
Invested Capital
(5.000.000)
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5.000.000
10.000.000
15.000.000
20.000.000
2006
2008
2010
2012
2014
2016
Jumlah
Tahun
Perbandingan EVA dan Value Perusahaan
EVA
Value