The impacts of business strategy on organizational structure

Abstract

Purpose The purpose of this paper is to test Chandler’s dictum that “unless structure follows strategy, inefficiency results” (Chandler, 1962, p. 314) by assessing the continuing efforts to align structure with strategy in the automobile industry from the turn of the century through the 1980s. Design/methodology/approach The historical analysis utilized conceptual mediation and moderation methodologies wherein the impacts of strategy on structure were mediated by their impacts on coordination and control, and moderated by external conditions such as uncertainty, variability, interdependence and asset specificity. Findings The findings demonstrate that structure followed differing strategies at General Motors, Ford and Chrysler, and provide strong support for Chandler’s dictum. The findings demonstrate the difficulties of maintaining alignment of strategy and structure with changes in the external competitive environment, and the severe consequences of a misalignment of strategy and structure. The findings also demonstrate that structure alone is not sufficient to implement strategy effectively, and that firms must judiciously utilize both internal firm and external market coordinating and control mechanisms to optimize performance. Research limitations/implications Limitations include that this is a study of a single industry over an extended, but specific time period. Practical implications Generalization is limited by a study of a single industry, but there are numerous implications for organizational design and strategy implementation that are not industry-specific. Originality/value Chandler’s dictum is often cited, but this is one of very few studies that demonstrate the relationship between specific organizational designs and company strategies, and the consequences of misaligning strategy and structure.