Organization Design and Competitive Strategy: An Application to the Case of Divisionalization

Abstract

In this chapter, the author outlines the link between organization design and competitive strategy, focusing on rivalry. A firm’s organization design choices can affect its competitive advantage as well as the strategic decisions of its rivals. Therefore, organization design can influence the nature and intensity of competitive interactions between firms. To illustrate this effect, the author focuses on the literature on divisionalization and offers a set of propositions as examples. Taken together, the author makes three main observations: (1) a firm’s competitive position and objectives are reflected in its organizational choices; (2) heterogeneity in competitive position and objectives lead to heterogeneity in organization design choices across firms; and (3) organization design and competitive strategy are interdependent processes. The author concludes by discussing the implications for strategy and management research and pointing out some opportunities for future research.