Executing Strategy-Organizational Design

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Chapter 9

Executing Strategy through Organizational Design

L E A R N I N G O B J E C T I V E S

After reading this chapter, you should be able to understand and articulate answers to the following

questions:

1. What are the basic building blocks of organizational structure?

2. What types of structures exist, and what are advantages and disadvantages of each?

3. What is control and why is it important?

4. What are the different forms of control and when should they be used?

5. What are the key legal forms of business, and what implications does the choice of a business form have

for organizational structure?

Can Oil Well Services Fuel Success for GE?

Chapter 9 from Mastering Strategic Management was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 license without attribution as requested

by the work’s original creator or licensee. © 2014, The Saylor Foundation.

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General Electric’s logo has changed little since its creation in the 1890s, but the company has grown to become the

sixth largest in the United States.

Image courtesy of The General Electric Company,

http://en.wikipedia.org/wiki/File:Early_General_Electric_logo_1899.png.

In February 2011, General Electric (GE) reached an agreement to acquire the well-support division of

John Wood Group PLC for $2.8 billion. This was GE’s third acquisition of a company that provides

services to oil wells in only five months. In October 2010, GE added the deepwater exploration capabilities

of Wellstream Holdings PLC for $1.3 billion. In December 2010, part and equipment maker Dresser was

acquired for $3 billion. By spending more than $7 billion on these acquisitions, GE executives made it

clear that they had big plans within the oil well services business.

While many executives would struggle to integrate three new companies into their firms, experts expected

GE’s leaders to smoothly execute the transitions. In describing the acquisition of John Wood Group PLC,

for example, one Wall Street analyst noted, “This is a nice bolt-on deal for GE.”[1] In other words, this

analyst believed that John Wood Group PLC could be seamlessly added to GE’s corporate empire. The

way that GE was organized fueled this belief.

GE’s organizational structure includes six divisions, each devoted to specific product categories: (1)

Energy (the most profitable division), (2) Capital (the largest division), (3) Home & Business Solutions,

(4) Healthcare, (5) Aviation, and (6) Transportation.