organizational structure for differentiation focus strategy

Organizational Structure for Differentiation Focus Strategy KACSÓ Szilárd Csaba

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TABLE OF CONTENTS

Abbreviations ................................................................................................................. 3

Introduction .................................................................................................................... 4

Chapter 1 Differentiation Focus Strategy ...................................................................... 6

1.1 About Strategy ...................................................................................................... 6

1.1.1 Definition ...................................................................................................... 6

1.1.2 Importance .................................................................................................... 7

1.2 Generic Competitive Strategies ............................................................................ 9

1.2.1 Focus Strategies ............................................................................................ 9

Chapter 2 Oragnizational Structures ............................................................................ 12

2.1 About Organizational Structures ........................................................................ 12

2.1.1 Definition .................................................................................................... 12

2.1.2 Importance .................................................................................................. 12

2.2 Organizational Structure Types .......................................................................... 13

2.2.1 Entrepreneurial Structure ............................................................................ 13

2.2.2 Functional Structure .................................................................................... 14

2.2.3 Divisional Structure (Product Structure) .................................................... 15

2.2.4 Matrix Structure .......................................................................................... 16

2.2.5 Project-based Structure (Team Structure) ................................................... 18

2.3 Choosing Organizational Structure for Differentiation Focus Strategy ............. 19

Chapter 3 Case Study: Organizational Structure in AIESEC Cluj-Napoca ................. 21

3.1 About AIESEC ................................................................................................... 21

3.1.1 What is AIESEC? ....................................................................................... 21

3.1.2 AIESEC in numbers (in 2011) .................................................................... 23

3.1.3 Vision .......................................................................................................... 23

3.1.4 Values ......................................................................................................... 24


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3.1.5 Product ........................................................................................................ 25

3.2 About AIESEC Cluj Napoca .............................................................................. 29

3.2.1 Objectives ................................................................................................... 29

3.2.2 Business Model ........................................................................................... 30

3.3 Strategies ............................................................................................................ 33

3.3.1 Global Strategy ........................................................................................... 33

3.3.2 Local Strategy ............................................................................................. 35

3.4 Organizational Structure .................................................................................... 39

Conclusion ................................................................................................................... 45

Bibliography ................................................................................................................ 47

ANNEXES ................................................................................................................... 49


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ABBREVIATIONS

DBA = Doctor of Business Administration

R&D = Research and Development

TN = trainee nominee

LCP = local committee president

VP = vice-president

ICX = incoming exchange

OGX = outgoing exchange

ER = external relations

TM = talent management

HR = human resource

GIP = Global Internship Program

GCDP = Global Community Development Program

TL = Team Leader


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INTRODUCTION

Strategic management theories are available to everyone. Since the creation of generic

strategies of Michael Porter, there were several companies that put his theories in

practice. Some of them had success and some of them failed.

There are companies that operate without following a certain or clear strategy and

they are (or were) doing well, because there was a high demand for what they were

offering and there was a low supply and weak competition.

With the technological advances and globalization, information businesses and their

offerings (commodities, products, services or experiences) became available to

everyone. We are experiencing the globalization of markets, transforming the world

into one single market with the help of the internet and social media. This increases

competition and makes it harder for companies to gain a competitive advantage and

maintain it sustainably.

Another important change happening is regarding the complexity of organizations.

Operations, competencies and activities tend to be more complex and people need to

specialize even more in their jobs, and they need interaction in order to meet

customers‘ needs. This is more accentuated because of the increasing competition on

global markets and the need to attract and maintain customers even in economic

crisis.

This raises a series of questions. What to do now? What strategies to adopt? How to

construct and maintain a sustainable competitive advantage in our fast changing

environment? And more importantly, how to organize our operations, processes and

activities in order to deliver our activities of creating value in the most efficient way?


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In the following pages I will examine and present Michael Porter‘s focus

differentiations strategy.

In chapter 2 I will present different models of organizational structures. Their

functioning rules and the way they suit for different types of organizations.

In chapter 3 I will present a case study about AIESEC. I will demonstrate how a

project based organizational structure can work and drive growth in an NGO using

focus differentiation strategy. The methods, models used and implemented by

AIESEC are coming from the corporate sector, through the knowledge of partner

companies and the experience of 63 years of its existence. This demonstrates a project

based structure can work for the corporate sector as well when using focus

differentiation strategy.

My purpose with this work is to raise awareness on the changing rules in our economy

and on the need of outside the box thinking in implementing organizational structures

that give power to our members in the organization and drive our focus differentiation

strategies. My motive is to present new concepts in organizational structure re-

engineering and to provide a proof that a project based organizational structure can

well suit for focus differentiation strategy implementation.

To present you this, I used a qualitative analysis. I started researching on different

organizational structure models, and then I started analyzing each option available.

After that I researched the concepts about project based organizational structure and

its relation to focus differentiation strategy. In the end I presented a good case practice

from the non-governmental sector, regarding its change from a matrix structure to a

project based structure and how this helped it in driving performance through a focus

differentiation strategy.


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CHAPTER 1 DIFFERENTIATION FOCUS STRATEGY

1.1 ABOUT STRATEGY

In order to discuss differentiation focus strategy and organizational structures for this

strategy, we have to have a common understanding on the meaning of ―strategy‖,

―strategic management‖ and ―business level strategy‖.

1.1.1 Definition

Oxford English Dictionary defines strategy as ―a plan of action designed to achieve a

particular goal. The word is of military origin, deriving from the Greek word

στρατηγός (stratēgos), which roughly translates as general‖1. Michael Porter defines

strategy as ―the creation of a unique and valuable position, involving a different set of

activities‖2.

Strategic management is the conduct of drafting, implementing and evaluating cross-

functional decisions that will enable an organization to achieve its long-term

objectives3. Another approach is the process of managing in a way that is consistent

with the corporate strategy or in such a way as to capitalize on the opportunities that

present themselves4.

Strategies can be formulated at three different levels:

Corporate level: these strategies describe and formulate actions taken by the

firm (or corporation) in order to gain a competitive advantage by selecting and

managing different businesses that operate and compete in different markets

with different products and/or services (or staging experiences);

1 Oxford English Dictionary (2 ed.), Oxford, England: Oxford University Press, 1989

2 Michael Porter, What is Strategy, Harvard Business Review November-December, 1996

3 David F., Strategic Management, Columbus: Merrill Publishing Company, 1989

4 http://www.hainescentre.com/strategic-management, accessed at 06.04.2010


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Business level: these are actions taken by the firm in order to gain competitive

advantage in a specific market, with delivering products and/or services (or

staging experiences) based on its core competencies

Functional level: these are specific actions taken by each functional

area/department in the firm

Business-level strategy is an integrated and coordinated set of commitments and

actions the firm uses to gain a competitive advantage by exploiting core competencies

in specific product markets5.

1.1.2 Importance

Now that we understand the terms, we may discuss the importance of strategies at

different levels in the organization.

Corporate level strategies are essential for a firm (usually large corporation that

operates on different markets with different businesses) to decide where to invest, on

which markets to operate, in which type of businesses, what to produce or deliver, etc.

Practically at this level has to decide where to invest its resources in order to gain

competitive advantage and maximize the return on investment. These decisions (as all

types of decisions) require trade-offs, since we have limited resources. This is why a

corporate level strategy is so important in making critical, long term decisions that

will affect the performance of the firm on the long term. ―Alfred Sloan, former

President of General Motors, defined the fundamental strategic problem as positioning

the firm in those markets in which maximum profits could be earned. In his great

biography, Sloan laid down the classical profit-oriented goal of strategy‖6:

5 Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for advantage (2 ed.), Newgen-

Austin, 2008 6 Richard Wittington, What is strategy, and does it matter? (2 ed.), London, Cengage Learning, 2001


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―The strategic aim of business is to earn a return on capital, and if in any particular

case the return in the long run is not satisfactory, the deficiency should be corrected or

the activity abandoned‖7.

After a firm decides its corporate level strategies, it has to define the strategies for

each business it own. This is called the business level strategy. It is essential for every

management to know where the business is heading, how it will gain competitive

advantage on the market and how it will assure a constant grow for the business.

Business level strategies are intended to create differences between the firm‘s position

relative to those of its rivals. ―Firms have long attempted to build competitive

advantage through an infinite number of strategies. Competitive strategies are

designed to help firms deploy their value chains and other strengths to build

competitive advantage. Thus, in practice, each company formulates its specific

competitive strategy according to its own analysis of internal strengths and

weaknesses, the value it can provide, the competitive environment, and the needs of

its customers‖8.

After a firm has its business level strategy, it is very important to transform that

strategy in every action. This makes critical to define functional level strategies that

make sure that the business level strategy is followed by every functional area in the

business. These functional level strategies have to support business level strategies, so

it is essential that each functional level goes to the ―same direction‖. More than that,

―strategic fit among many activities is fundamental not only to competitive advantage

but also to the sustainability of that advantage. It is harder for a rival to match an array

of interlocked activities than it is merely to imitate a particular sales-force approach,

match a process technology, or replicate a set of product features. Positions built on

systems of activities are far more sustainable than those built on individual

activities‖9.

7 Alfred Sloan, My years with General Motors, New York, Doubleday, 1963

8 Jeff Bordes, Strategic Management assignment - building and sustaining competitive advantage,

Atlantic International University, Honolulu, 2009 9 Michael Porter, What is Strategy, Harvard Business Review November-December, 1996


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1.2 GENERIC COMPETITIVE STRATEGIES

Firms choose business level strategies to establish and defend their desired strategic

position against rivals10

. According to Michael Porter, there are four potentially

successful generic strategic approaches to outperforming other firms in an industry11

:

Overall cost leadership;

Differentiation;

Focus;

Integrated cost leadership/differentiation;

These strategies are called generic, because they can be used in any business and in

any industry. Each business level strategy helps the firm to establish and exploit a

competitive advantage within a particular competitive scope12

.

1.2.1 Focus Strategies

The third generic strategy is focus strategy. Focus strategies are used to help a firm

focus on a specific niche within an industry. Both differentiation and cost leadership

strategies target a wide range market, strive to get a high market share, but focus

strategies aim at specific and typically small niche of the market. These niches could

be selected considering different criteria: a particular buyer group, a narrow segment

of a given product line, a geographic or regional market, or a niche with distinctive,

special tastes and preference. ―The basic idea behind a focus strategy is to specialize

the firm‘s activities in ways that other broader-line (low-cost or differentiation) firms

cannot perform as well. Superior values, and thus higher profitability, are generated

when other broader-line firms cannot specialize or conduct their activities as well as a

focused firm. If a niche or segment has characteristics that are distinctive and lasting,

10

Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for Advantage (2 ed.), Newgen-

Austin, 2008 11

Michael Porter, Competitive strategy, The Free Press, New York, 1980 12

Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for Advantage (2 ed.), Newgen-

Austin, 2008


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then a firm can develop its own set of barriers to entry in much the same way that

large established firms do in broader markets‖13

.

The focus strategy has two variants: cost focus and differentiation focus. In cost focus

strategy, a firm seeks a cost advantage in its niche market segment, while in

differentiation focus a firm seeks differentiation in its niche market segment. In both

cases, the focus strategy is based on differences between a firms niche market

segment and other segments in the whole industry where is activating. The target

segments must either have buyers with specific needs or the production and delivery

system must be different from that of the other industry segments. Cost focus strategy

exploits differences in cost behavior in some segments of the market, while

differentiation focus exploits the special needs of buyers in certain market segments.

Such differences imply that the segments are poorly served and their needs are not

satisfied by broadly targeted competitors who serve them at the same time as they

serve others. The focuser thus can achieve competitive advantage by dedicating itself

to the segments exclusively. The essence of focus is the exploitation of a narrow

target‘s differences from the balance of the industry14

.

As is stated above, this strategy rests on the premise that focusing on a niche market.

A firm is able to serve its narrow strategic market more efficiently or more effectively

than its competitors who are competing for a wider range of the market. In this way, a

firm may differentiate itself by meeting the needs (more specific needs) of a particular

segment of the market, or by having lower costs by serving a niche market, or by

both. Even though the focus strategy does not achieve low cost or differentiation from

the perspective of the market as a whole, it does achieve one or both of these positions

vis-à-vis its narrow market target15

.

13

Jeff Bordes, Strategic Management assignment - building and sustaining competitive advantage,

Atlantic International University, Honolulu, 2009 14

Michael Porter, Competitive advantage, The Free Press, New York, 1985 15

Michael Porter, Competitive Strategy, The Free Press, New York, 1980


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A focuser can take advantage of the incapability of its competitors to serve very

specific needs of niche segments. Competitors may underperform in meeting the

needs of a particular segment in the market, which opens the possibility for a

differentiation focus strategy. On the other hand, if a competitor is overperforming in

meeting the needs of a specific segment (they deliver things that are not essential for a

specific niche segment), a cost focus strategy can assure the satisfaction of that

specific niche with lower costs.

―Focus may also be used to select targets least vulnerable to substitutes or where

competitors are the weakest‖16

.

―If a firm can achieve sustainable cost leadership (cost focus) or differentiation

(differentiation focus) in its segment and the segment is structurally attractive, then

the focuser will be an above-average performer in the industry. Segment structural

attractiveness is a necessary condition because some segments in an industry are

much less profitable than others‖17

.

Generally in an industry there are very different customers and segments that require

different products and services and different delivery and after-sales systems and

services. This makes the focus strategies a very viable and opportune one for most

industries.

16

Michael Porter, Competitive Strategy, The Free Press, New York, 1980 17

Michael Porter, Competitive advantage, The Free Press, New York, 1985


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CHAPTER 2 ORAGNIZATIONAL STRUCTURES

2.1 ABOUT ORGANIZATIONAL STRUCTURES

2.1.1 Definition

Organizational structure is the allocation of responsibilities, tasks and coordination

responsibilities for the aim of organizing work and achieving objectives.

Organizational structure can be defined as ―the framework, typically hierarchical,

within which an organization arranges its lines of authority and communications, and

allocates rights and duties. Organizational structure determines the manner and extent

to which roles, power, and responsibilities are delegated, controlled, and coordinated,

and how information flows between levels of management18

.

2.1.2 Importance

The organizational structure has to serve the objectives and the strategies of the

company. It can help the implementation of a strategy and bring results, or it can be a

barrier for strategy implementation and performance. It is very important to have a

structure that minimizes confusion and defines who is responsible for which task.

―Poor organizational design and structure results in a bewildering morass of

contradictions: confusion within roles, a lack of co-ordination among functions,

failure to share ideas, and slow decision-making bring managers unnecessary

complexity, stress, and conflict. Often those at the top of an organization are oblivious

to these problems or, worse, pass them off as or challenges to overcome or

opportunities to develop‖19

.

The organizational structure also influences how an organization can make decisions,

react to changes in the external environment or drive innovation. Our main goal is to

18

http://www.businessdictionary.com/definition/organizational-structure.html 19

Corkindale, The Importance of Organizational Design and Structure, Harvard Business Review

February, 2011

http://www.businessdictionary.com/definition/organizational-structure.html


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implement a structure that can help our organization to maintain its competitive

advantage (and performance) in the most efficient way.

―To survive and thrive, you need to create a work environment that fosters initiative,

collaboration, and learning. How? By maximizing three core horizontal processes:

frontline entrepreneurship, competence building across internal boundaries, and

renewal of ideas and strategies‖20

.

2.2 ORGANIZATIONAL STRUCTURE TYPES

2.2.1 Entrepreneurial Structure

Entrepreneurial structures are

most common for small firms

and organizations, usually at the

beginning of their life cycle.

They are characterized by a small number of employees, where the owner makes all

major decisions and monitors activities for the whole organization. Employees are

usually responsible for specific tasks and they report directly to the

entrepreneur/business owner. This structure is totally centralized. Communication is

done by one to one conversations.

This type of structure is useful for new organizations, because enables the owner to

control growth at an efficient way. It enables the organization to deliver services and

products at lower costs and to be flexible (to make changes and to make quick

decisions).

20

Sumantra Ghoshal, Christopher A. Bartlett, Changing the Role of Top Management: Beyond

Structure to Processes, Harvard Business Review January, 1995


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2.2.2 Functional Structure

Functional structure indicates a more hierarchic organization, where there is a general

manager or CEO on the top, than there are functional managers or directors (ex: Sales,

Marketing, Production, Finance, HR) who report to the general manager. Then in each

functional department there are employees who are responsible for different tasks and

they report to the functional manager. In bigger organizations, in functional

departments there are different teams with managers (middle managers) who are

responsible for different processes in their specific functional department, and they

have staff responsible for specific tasks of the process or area of responsibility and

they report to the middle manager.

In this way, functional departments perform specific tasks related to their area of

expertise. Coordination and decision making is centralized in the functional structure,

which makes it efficient to plan and produce standardized products or services.

Furthermore, employees can become specialists in what they do and become efficient

in their specific area of expertise. Because of this way of organization, there could be

communication problems between functional managers and slow down the

organization and make it inflexible.

This way of organizing is best suited for mid-sized and large organizations who

deliver standardized products or services at a large volume and low cost.


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2.2.3 Divisional Structure (Product Structure)

In this structure, each division has a functional structure. In this way, each division

contains all the necessary functions and resources to perform activities. Divisions can

be organized based on products or services (ex: a manufacturing company can

organize divisions for each of their main category products – scanners, printers,

laptops, TVs, etc), or based on the geographical presence (ex: Europe, North America,

South America, Middle East, etc).

This way of organizing is suitable for large international organizations, who want to

deliver rapid growth in different industries, markets or regions. It allows each division

to have all the necessary resources and staff to drive performance on their own

division.

On the other side, there is the risk of lack of communication between divisions, there

is a huge inefficiency in resources (because each division has its own HR, sales,

marketing, finance, production, etc, functional department), and a great inflexibility

because of the barriers of communication and decision making process.


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2.2.4 Matrix Structure

Matrix structure groups employees both by function and product. In this way, we can

combine the advantages from both structures. On one hand, there are functional

departments with specialists on different areas and processes, but we also have

different teams that have a manager and have employees allocated from different

functional departments to work for that team. Usually managers are product managers

that work on different development projects or are delivering a personalized product

or service to a customer (or groups of customers). In this way, we have functional

departments that maintain ongoing processes (such as accounting or branding, or

sometimes sales), while we also have project teams where the team exists until they

deliver the project.

Project managers report directly to a functional manager or to the general manager.

Specialists from functional areas are allocated (or selected) into the project team, and

they will be accountable to the project manager for their work in the project and to the

functional manager also.


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This form of organizational structure can ensure efficiency in the organization

because key resources and competencies are shared between projects and functional

areas, and also because there is a share of authority and responsibility. In this way, it

is much easier to innovate, to adapt to new trends of the market and meet customers‘

needs for customization.

On the other hand, there can be conflicts generated in the organization and teams

because of double accountability (project manager and functional manager), and also

lack of continuity or knowledge management (because of constant change of teams

and projects).

It is also very important in this type of organization to constantly develop project

managers that are capable of driving performance. ―While top managers universally

recognize their responsibility for developing and allocating a company‘s scarce assets

and resources, their focus on finance and technology often overshadows the task of

developing the scarcest resource of all—capable managers. But if there is one key to

regaining control of companies that operate in fast-changing environments, it is the

ability of top management to turn the perceptions, capabilities, and relationships of

individual managers into the building blocks of the organization.‖21

This type of organizational structure is best suited for companies that offer

personalized services and products, or that drive constant innovation (because of their

differentiation or focus differentiation strategy) and want to do this in an efficient

way. This structure can also be suited for companies who offer a large scale of

different products and services.

21

Christopher A. Bartlett, Sumantra Ghoshal, Matrix Management: Not a Structure, a Frame of Mind,

Harvard Business Review, July, 1990


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2.2.5 Project-based Structure (Team Structure)

Project-based structure can be seen as a strong or project matrix organization. In this

type of organizational structure there is a general manager or CEO, and also vice

presidents or functional managers, but activities and results are driven by project

teams. Almost every activity and operation of the organization is driven and brought

by project teams who have specific goals. Functional managers (or VPs) make sure

that there are employees with functional knowledge, who can perform in project

teams.

In this structure type, project managers have a great autonomy in terms of making

decisions and delivering results. Usually they control everything from the selection of

the team, task allocation and delegation, to the performance management. Functional

managers usually approve some decisions (mostly decisions regarding budgets and

other resource allocations and decisions that affect other projects or the entire

organization). Employees can take part in more than one team (if their geographic

presence and responsibilities allow it). Project managers are assigned (or selected) by

functional managers, who are responsible in front of the CEO for the main

deliverables (and objectives) of a specific project. The focus of the team members is

to complete the project and deliver the objectives of the projects, rather than tasks.

In some cases, we can have only the CEO and some senior project managers that

coordinate other project managers. In this case, we have to make sure that our HR (or

Talent Management) processes are well in place (or outsourced) in order to make sure


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that we always have the necessary talents with the necessary competencies in the

organization.

Team structures can take a form of a functional organization (with functional

managers reporting to the project manager and staff reporting to the functional

managers in the project), but only if the project is big and complex. Usually this

organizational form is used by companies and organizations that use focus

differentiation strategy and are required to innovate constantly and deliver customized

products and services to a niche market.

Because teams are constantly changing, there are very diversified networks of

relationships that employees form across functions. ―These informal networks can cut

through formal reporting procedures to jump start stalled initiatives and meet

extraordinary deadlines‖22

.

2.3 CHOOSING ORGANIZATIONAL STRUCTURE FOR

DIFFERENTIATION FOCUS STRATEGY

Choosing the model of organizational structure is a really important strategic decision.

We have to take into consideration the size of the company, number of products and

services provided, the business and marketing strategy that we have and also future

plans. Organizational structure decisions should be made for medium or long term

because it takes time to adapt processes, procedures and also our employee‘s

behaviors and the organizational culture for certain structures.

The mantra in deciding for an organizational structure should be ―structure services

strategy‖. So first of all, we have to make clear what our current and future strategy is,

and then decide on the structure. ―It seems obvious that organizations should be

designed to advance business strategies. But many times strategies evolve and change

22

David Krackhardt, Jeffrey R. Hanson, Informal Networks: The Company Behind the Chart, Harvard

Business Review, July, 1993


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while seasoned managers clutch tightly to their old ways of structuring their units and

organizing their teams‖23

. We can have two approaches to this decision making:

1. Make different models (brainstorm) and then start analyzing them, establish

criteria and weight for each criteria and rate each of them (or just simply use

pros and cons)

2. Map all the processes of the organization and decide how can they be grouped

in the most efficient way (considering also accountability and communication

between people and teams)

After we make a decision, we should start testing it. If we have a large organization,

we can test the new structure only with a smaller group of people and see how it

works and what the feedback of your employees is.

23

Ron Ashkenas, Solving the Rubik's Cube of Organizational Structure, Harvard Business Review,

March, 2011


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CHAPTER 3 CASE STUDY: ORGANIZATIONAL STRUCTURE

IN AIESEC CLUJ-NAPOCA

3.1 ABOUT AIESEC

3.1.1 What is AIESEC?

AIESEC (originally ―association internationale des étudiants en sciences économiques

et commerciales‖, but now it is a proper name) is the world‘s largest student-run

organization. It is a global, non-political, independent, not-for-profit organization run

by students and recent graduates of institutions of higher education. Its members are

interested in world issues, leadership and management. AIESEC does not discriminate

on the basis of race, color, gender, sexual orientation, creed, religion, national, ethnic

or social origin.

AIESEC‘s innovative development process consists of unmatched leadership

experiences, international opportunities and a global learning environment.

Global – AIESEC has a global scope and is represented in all continents of the world.

One of the most valuable and unique aspects that our organization has is its global

network. AIESEC should make the best use of this global network to enhance the

understanding between cultures by running activities that foster participation and co-

operation among different countries in the network. Without any doubt our exchange

programs create the best conditions for this.

Non-political - AIESEC does not have a pre-defined or officially accepted political

tendency or subscription.

Independent - AIESEC is not a subsidiary or dependent entity of any other bodies in

its work, sustainability or decisions.


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Not-for-profit - AIESEC is not an organization that exists to generate profit for

shareholders. The bottom-line for AIESEC is not money but people that are

developing themselves as leaders. It is important of course to have enough resources

and be sustainable to ensure we are having the desired impact in society and invest in

further improvements for the organization. However, we are guided by the ways to

generate more impact and have maximum financial sustainability rather than to

simply generate more money.

Run by students and recent graduates of institutions of higher education – Students of

higher education students and recent graduates manage and run all the activities of the

organization. The members of AIESEC are current (includes the ones who have given

a break to their studies to dedicate themselves to AIESEC work) or recently graduated

students of institutions of higher education.

Its members are interested in world issues, leadership and management – Today

AIESEC has expanded its reach to a wide range of student backgrounds. Our

membership base has expanded to university students that are interested in more than

just economics.

AIESEC does not discriminate on the basis of race, color, gender, sexual orientation,

creed, religion, national, ethnic or social origin - AIESEC is an organization that

enjoys and lives diversity, and will not reject participation or contact with people for

any of the reasons mentioned above.

Its international platform enables young people to discover and develop their potential

to provide leadership for a positive impact in society.


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AIESEC provides its members with an integrated development experience comprised

of leadership opportunities, international internships and participation in a global

learning environment.

3.1.2 AIESEC in numbers (in 2011)

Global network run by more than 60 000 students and recent graduates

Active in 1 700 universities across 110 countries and territories

24 700 leadership opportunities annually

18 000 global internships annually in business, technical, education and

development sectors

Has more than 4000 partners/sponsors globally

Organizes 470 conferences annually

Has more than 1 million alumni

Has 63 years of existence

3.1.3 Vision

―Peace and Fulfillment of Humankind‘s Potential‖. In today‘s context, ‗peace‘ should

not be interpreted necessarily as absence of a major war. ‗Peace‘ symbolizes a world

that does not have conflicts that arise from cultural, religious, or other aspects of

differences in humanity.

AIESEC envisions a world where its inhabitants are working together for common

goals to ensure prosperity for all. AIESEC wishes to see the world as a community

where its people respect, enjoy, and understand each other. Through ―Fulfillment of

Humankind‘s potential‖ AIESEC expresses its aim to develop individuals who have

the knowledge, skills and determination to develop their communities.


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AIESEC‘s aim is to offer as many opportunities as possible for young people to

develop their potential; people who are responsible, entrepreneurial, culturally

sensitive and thirsty for learning more! Furthermore, AIESEC wants young people to

learn and contribute to the learning of others so that it helps the development of their

communities.

3.1.4 Values

―Activating Leadership‖: we lead by example and inspire leadership through our

activities. We take full responsibility for developing the leadership potential of our

members.

―Demonstrating Integrity‖: we are consistent and transparent in our decisions and

actions. We fulfill our commitments and conduct ourselves in a way that is true to our

ideals.

―Living Diversity‖: we seek to learn from the different ways of life and opinions

represented in our multicultural environment. We respect and actively encourage the

contribution of every individual.

―Enjoying Participation‖: we create a dynamic environment created by active and

enthusiastic participation of individuals. We enjoy being involved in AIESEC.

―Striving for Excellence‖: we aim to deliver the highest quality performance in

everything we do. Through creativity and innovation we seek to continuously

improve.

―Acting Sustainably‖: we act in a way that is sustainable for our organization and

society. Our decisions take into account the needs of future generations.


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The shareholders of AIESEC are:

Members

Enablers: mentors, TN takers, learning and content partners

Supporters: sponsors (financial and in-kind), boards (advisory and

governance), support groups, university, government

Impact: the community, alumni

3.1.5 Product

AIESEC Experience is the core product of AIESEC. Different facets of AIESEC

Experience are sold to different stakeholders who customize their own experience.

In order to make this experience

more qualitative, the concept of learning environment was created. This learning

environment has 6 elements through which every member can learn about a specific

issue or functional area. These elements are:

The AIESEC Experience


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There are the five principles which should guide people through the AIESEC

Experience. Everybody who joins should have them in mind before joining AIESEC

and also during the actual AIESEC experience:

1. Take an active role in your learning and the learning of others

What – you are in charge of your own learning and also to help others learn

Why is it important to the outcome of the Learning Process?

o Our education system teaches us to be passive towards learning (take

what is given)

o The world is dynamic and one must always be proactively learning

o It is the only way people will be really committed to the process

Where this principle shows up in the process

o Become more involved with organization prior to going on the

traineeship and you help out with one of the functional areas

o People are informed before entering of what it takes to do an exchange

and then have time to get needed skills and resources

o Encouraging reflection on goals and persional vision

Individual discovery

and reflection

Mentoring

Learning Circles

T

Team Experiences

Conferences and

Seminars

Virtual Spaces; forums,

blogs, resource sharing


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o Joining a learning network

2. Challenge your worldview

What – All new information is interpreted through the worldview of the

person, including emotions, attitudes, values, passed experiences, and as a

result, motivation and action. It affects a lot how and to what we direct our

attention and action in different situations. We want to create situations that

broaden and challenge how a person thinks and helps them to see the

connection between these elements, their actions, and results.

Why is it important to the outcome of Learning Process?

o It is not sufficient to be aware of the problems of the world to achieve

change, you must also understand the causes and possible solutions and

this requires thinking about and understanding many different points of

view. It requires skills, confidence and ―shaking‖ experiences to build

a worldview oriented towards positive changes.

Where does this principle show up in the process?

o Certain experiences, such as doing an exchange, have the intensity to

―shake up‖ the worldview. Other experiences include:

Having a positive impact on a person

Experiences of failure and success

Forming and exchange ideas with people from different

backgrounds

Intense teamwork experience

3. Meta-cognition and personal reflection skills

What is it? – refers to the capacity to recognize and evaluate your own

thoughts, values, emotions, motives, goals and actions.

Why is it important to the process?


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o These skills allow someone to really take advantage of the AIESEC

experience, since it allows them to analize their actions and those of

others.

o Facilitates the creation and completion of goals

o Facilitates the creation of values and the will to follow them

Where does this principle show up in the process?

o Giving space to reflect on what one has learned or wants to learn

o Giving space to share visions and learning experiences with others

o Through the role of a mentor

4. Increasing Practical and Theoretical Knowledge

What is it? – the opportunity to gain professional and personal skills and to

apply them

Why is it important to the outcome of the learning process?

o With more skills, one increases the capacity to have an impact in the

world

o Fills a flaw in our education system in which most students to know

have the opportunity to gain practical experience

o Learning increases when there is an opportunity to apply and put into

practice what you have learned in theory

Where does this principle show up in the learning process?

o Experience working as a member in the area of public-speaking, sales,

planning, marketing, team management, leadership, budgeting, etc.

o During the traineeship

o On a theoretical level during conferences or learning activities

5. Creating a network of contacts


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What is it – a group of like-minded people who are interested in seeing you make

the change you want to see in the world

Why is it important to the outcome of the AIESEC Learning Process?

o Because it helps to have contacts and support from all of the world

when trying to change it

Where does this principle show up in the AIESEC Learning Process?

o Through running the exchange program and attending conferences you

are put into contact with people from all over the world

o The ability to be in contact with people of similar interest through

learning networks

3.2 ABOUT AIESEC CLUJ NAPOCA

AIESEC Cluj Napoca was established as an initiative of 5 students in 1994. It was

recognized as a legal entity in 1997. Since then it developed, reaching more than 150

members in present, offering more than 70 leadership and 90 international

opportunities a year.

AIESEC Cluj Napoca has its own set of values also (SIGPE DACIM):

Sharing Development

Inspiring Action

Getting Connected

Performing Intelligence

Exploring the Mind

3.2.1 Objectives

AIESEC measures its performance by the following organizational objectives:

Number of experiences in Team Member Program (TMP)

Number of experiences in Team Leader Program (TLP)


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Number of experiences in Global Community Development Program (GCDP)

Number of experiences in Global Internship Program (GIP)

The Executive Board (the top management) established objectives for their 1 year

term (from 01.04.2011 to 31.03.2012):

Objective Name Number - Target

International Experiences 197

GIP - outgoing 52

GCDP - outgoing 47

GIP – incoming 20

GCDP – incoming 78

TLP 70

Nr of Members 200

Financial Reserve 4000 euro

3.2.2 Business Model

AIESEC has a business model, for each of its main 4 programs, which describe the

rationale of how the organization creates, delivers, and captures value. These business

canvases describe this value generation process for each program, and for each

stakeholder.


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3.3 STRATEGIES

3.3.1 Global Strategy

In order to achieve its goals, AIESEC

adopted Product Leadership Strategy

(focus differentiation strategy). This

strategy usually implies: strong innovation

and marketing, to operate on dynamic

markets, focus on development,

innovation and design, high margins,

educating the market and risk taking.

For AIESEC, product leadership means the following:


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The visual representation of the strategy (how is going the organization to achieve its

vision), is presented in the strategy map:

The logical flow of all these is that through product leadership, AIESEC will grow

and attract more customers to consume the AIESEC Experience, more companies and

students will join the organization, who will experience different stages of the

AIESEC Experience.

In ―Engagement‖ phase students get knowledge about the organization, about its

vision, values and how it works and also get some preparation on soft skills.

At the ―Team Member Program‖ they participate actively in projects, so they take

some responsibilities. At this stage they can try themselves and develop on personal


35 | P a g e

and professional sides, which contribute to the ―fulfillment of humankind‘s potential‖

part of the vision.

Then they have the possibility to take a ―Leadership‖ opportunity and to become

Project Managers or Executive Board members (top management). At this stage they

will learn about leadership, management and will have the possibility to coordinate

different teams which have specific task and objectives. They can try themselves on

how to be a leader and develop their leadership skills, which also contributes to the

―fulfillment of humankind‘s potential‖ part of the vision.

Another option is to participate in the international program (Global Community

Development – volunteering, or Global Internship – professional internship) and go

abroad to do an internship. This will take participants away from their comfort zone,

and offer them multicultural experiences, the possibility to learn about other cultures

and civilizations, to live cultural shocks and also to gain professional experience. This

stage contributes to ―peace‖ because participants become more tolerant towards

different cultures, religions or ways of thinking, and to ―fulfillment on humankind‘s

potential‖ through their professional experience.

After completing all the stages, members will become change agents, who will make a

positive impact in society, contributing to the vision of the organization.

3.3.2 Local Strategy

Because every Local Committee has the freedom to adapt this general global strategy,

in the case of AIESEC Cluj-Napoca we can talk about a focus differentiation strategy.

One aspect of this strategy is that AIESEC Cluj Napoca needs to be always sure about

its product portfolio and the value that products offer. This implies constant evolution

and development of the portfolio and training its members on marketing and sales.


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Because of its focus differentiation strategy, AIESEC is aware that the product

(experience) it offers is not desired by everyone.

Another important aspect is the brand. AIESEC needs to have an extremely strong

and reputed brand which transmits the core of AIESEC and the quality of experiences

that offers. This is very important because a strong brand attract talented people and

other organizations towards consuming the AIESEC experience.

In order to support the implementation of strategy,

AIESEC structured its activities in subsystems.

The AIESEC sub-systems model outlines the core

activity & process structure of the organization.

Each of the sub-system is separate but they are all

interdependent on each other.

The heart of the organization is the vision, nature, role, core-work and values, which

form the organizational identity. The identity gives the organization reason to exist

and defines the unique role that it is playing – ―creating impact on society through

development of Change Agents‖. The strategy puts the vision into practice.

AIESEC Experience is a unique leadership development experience, which enables

the development of individuals into Change Agents. It is the core-work, the core

deliverable of the organization and defines what happens in the sub-systems.

The 5 sub-systems of AIESEC create a logical internal system, which is the

mechanism to deliver core-work – The AIESEC Experience. All the 5 sub-systems are

required for AIESEC to be able to respond to the needs of our environment and create

more & more of AIESEC Experiences.


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Exchange Management System:

Promotion (Messages & Campaign)

Market Research & Segmentation (& external input)

Product Development

Delivery Process

Marketing/Selling

Internship Preparation

Reception

Adaptation & Integration

Customer Relationship Management (AIESEC involvement & on-going

support during the internship)

Quality Measurement

Re-integration

People System:

Recruitment & Marketing Messages/Campaign

HR planning & allocation (AIESEC‘s Talent Management System)

Selection Criteria & System

Defined Induction Process

Competency Model – defined profile for each position

Member Education Cycle (training & education)

Individual Goal Setting

Capturing personal learning/experience

Member Performance Appraisal

Mentoring

Individual Reward & Recognition

Alumni – H4TF Opportunities

Transition Tools & Systems

Structure System:

Compendium

Membership Criteria (Local Committee/Members)


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Organizational Structure (Local Committee/National Committee/Support

Bodies etc.)

Role & responsibilities of different bodies

Governance – accountability to external bodies

Organizational Planning & Review (Goal setting & planning for the entire

organization – all the different sub-systems)

System of review & assessment (all kinds of performance, health & strategic

indicators)

Organizational Reward & Recognition

Conference Cycle (fitting the Member Education Cycle & the Planning

Process)

Legal Administration

Expansion of the AIESEC network

Information System:

IS Infrastructure

Online Collaboration & Networking

Communication

Membership Management

Business Intelligence (for business management & review)

Aiding individual experience

Education & competence development (e-learning aspect)

Exchange Management

Relationship Management

External Interfaces

Knowledge Management

Help Desk – user support & education

Revenue Generation

Financial System:

Budgeting & Review

Cash Flow Management

Book-keeping

Diversification of Revenue


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Financial Reporting Structure – Audits (internal & external)

Fund-raising

ER products

ER Principles – sharing companies, territories

Financial Reserves Management

Restricted Funds Management

Investments Management

Infrastructure

You can also find the destination statement of AIESEC Cluj-Napoca in annex number

2.

Considering all, we can state that AIESEC differentiates itself from other student

organizations through having good systems, tools, processes and structures

implemented in the organization, which makes it more alike to a corporation, rather

than a student organization. More than that, what differentiates AIESEC from its

competitors is the experience that it offers: leadership experience, international

professional and personal experiences and a global learning environment, all in one

place. The AIESEC experience offers a complex frame for development, making

contacts, and gaining professional experience on different functional areas, all in one

with enjoyment of participation.

3.4 ORGANIZATIONAL STRUCTURE

The organizational structure was a matrix structure, where there were different

functional departments, and also a lot of projects, through which most of the results

were delivered. Through 2011 there was an organizational structural change, starting

from autumn, where the matrix structure was changed into a completely project based

one, where there is the executive board (EB), with vice-presidents responsible for

different areas (operations) and project managers and teams who delivered every

single activity through projects.


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Top management: LCP (Local Committee President), Vice-President Talent

Management (HR), Vice-President Finance, Vice-President Corporate Development

(Sales), Vice-President Non-Corporate Development (responsible for bringing

international volunteers to NGOs through the GCDP program), Vice-President

International Internships (responsible for sending students and recent graduates

abroad through the GIP and GCDP program), Vice-President Alumni Development,

Vice-President Communication.

The executive board functions have the following roles:

Local Committee President: managing and developing the executive board

team, organization management, external representation, performance

management, defining direction and core strategies

VP Finance: resource management (financial, consumables), defining rules

and framework for the usage of resources, diversification of income sources,

legal management

VP Talent Management: defining framework for managing HR in the

organization (internal systems and rules), tracking HR and their education and

development, developing performance management system, talent planning,

Project

Manager 1

Project

Manager 2

Project

Manager 3

Project

Manager 4

Organizing

Committee 1

Organizing

Committee 2

Organizing

Committee 3

Organizing

Committee 4


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R&R system, managing internal programs (team member, team leader),

recruitment and selection

VP Corporate Development: managing incoming Global Internship Program,

product development for the corporate sector, revenue generation from the

corporate sector, attracting development partners for know-how, managing

partnerships

VP Non-Corporate Development: managing incoming Global Community

Development Program, product development for the non-corporate sector

(NGOs, schools, etc), revenue generation from the non-corporate sector,

managing partnerships, social projects development

VP International Internships: managing outgoing Global Internship Program

and Global Community Development Program, product development for the

students and recent graduates sector, revenue generation, managing

partnerships

VP Alumni Development: product development for Alumni, revenue

generation from Alumni, account management with Alumni, managing Life-

Long Connection Phase

VP Communication: account management with the media, managing media

partnerships, aligning communication messages, managing communication

channels, brand management

The Accountability system works as follows:


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The vice-presidents are accountable in front of the president for the specific goals on

their areas. The project managers and team leaders (for initiatives in a specific area)

are accountable in front of the vice-president who selected them. They are held

accountable for the specific objectives of their project/initiative. Then team members

are accountable in front of the project manager/team leader for their specific

objectives and tasks.

In order to have more members engaged in the development of new product and

project development, and to have specialists in each functional area that can become

project managers (or team leaders) or deliver the projects, there was mapped a

category for specialists. Specialists are not part of the structure (as a position in the

organization), they are more like an accreditation for people who have more

experience in a specific area or process:

In order to ensure that operations are happening and the organization is constantly

driving innovation, a new product development cycle and process was put in place.

This was critical, since all operations and activities are happening in projects, so it is

important that projects are developed and put in place really quick. The project

development flow happens as follows:


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The Executive Board (EB) takes all major decisions in the organization and at the

strategic level. For different decisions regarding achieving specific objectives, or

solving different problems, they engage members (specialists) who have experience in

a specific area and have project management experience.

A vice-president who has a problem or a specific goal for which he/she wants to find

and initiative or a project, establishes a task force. The vice-president also invites

experienced members into this task force from areas that can have a contribution in

making that specific decision. The task force meets and discusses possible solutions.

Than the VP selects the best suitable solution (initiative or project), usually discussing

also with the executive board, or at least other vice-presidents (if it is an initiative or

project that requires support from other vice-presidents also).


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After selecting the initiative or project, the project manager position is launched and a

project manager is selected. Usually people who participated in the task force are

applying for the project manager positions. After that, the project manager selects

members into the project team, who will implement the project and will be

accountable for the objectives of the project.

In order to be able to manage all the projects in the organization, a project planning,

management and evaluation tool was developed which is used by every team online

(in google docs).

As a result of the new organizational structure and working method, there was a

growth on the realization of organizational objectives. Overall results growth was

%48 compared to the same period on the previous term. Retention rate (calculated 6

month after the recruitment) and engagement of members also increased from %82 to

%97 compared to the last term.

These results war brought by the increased engagement and activity of members, and

also from the simplified accountability brought by the new organizational structure

(compared to the past matrix structure where there was double accountability of

project managers).


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CONCLUSION

Today we are facing a lot of challenges. From environmental, through social, to

economic challenges. These challenges force us to be creative, to generate solutions

and to change things.

Classical organizational structures are outdated for most of the organizations. For

focus differentiation strategy it is critical to be able to be flexible and innovative in

order to maintain our competitive advantages. To drive innovation and to be able to

adapt to changes in the market and to our customers‘ needs, we have to implement

organizational structures that support innovation, collaboration and fast decision

making in our organizations.

The study case demonstrated that a project based structure for a focus differentiation

strategy can work. It can work in an NGO that is constantly changing, evaluating and

growing for 63 years now. You may think that managing an NGO is different from

managing a business, and it is much easier. The fact is, that every single concept and

model that is adopted and used in AIESEC, came from the corporate sector. Partners

of AIESEC helped the development and implementation of those business models,

strategies and organizational structures.

It makes no difference where we implement organizational structures. It can be any

kind of organization. The difference between AIESEC and companies is that

companies are working for different kind of objectives and they use different

motivators.

AIESEC measures its performance in number of members, number of leadership

positions and experiences that are realized, number of international experiences that it


46 | P a g e

provides. AIESEC uses mostly non-financial motivators, because it is a voluntary

work.

Companies usually measure their performance in number of clients, number of

products or services sold or experiences staged, return on investment and profits that

were generated. Companies can use all kinds of non-financial motivators and financial

motivators as well.

I am not saying that functional structures, matrix structures or divisional structures

can‘t work. There are examples where companies have success. But I truly believe

that we have to start thinking strategically, on the long term. We have to maintain our

competitive advantages, and for this reason, organizational structure is a key factor

that can drive performance and efficiency in doing so.


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BIBLIOGRAPHY

Books

Alfred Sloan, My years with General Motors, New York, Doubleday, 1963

David F., Strategic Management, Columbus: Merrill Publishing Company,

1989

Michael Porter, Competitive Advantage, The Free Press, New York, 1985

Michael Porter, Competitive Strategy, The Free Press, New York, 1980

Oxford English Dictionary (2 ed.), Oxford, England: Oxford University Press,

1989

Richard Wittington, What is strategy, and does it matter? (2 ed.), London,

Cengage Learning, 2001

Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for

Advantage (2 ed.), Newgen-Austin, 2008

Tom Peters, Re-Imagine! Business Excellence in a Disruptive Age, Dorling

Kindersley Limited, London, 2004

Ron Ashkenas, Solving the Rubik's Cube of Organizational Structure, Harvard

Business Review, March, 2011

Articles and other studies

Jeff Bordes, Strategic Management assignment - building and sustaining

competitive advantage, Atlantic International University, Honolulu, 2009

Michael Porter, What is Strategy, Harvard Business Review November-

December, 1996

Sumantra Ghoshal, Christopher A. Bartlett, Changing the Role of Top

Management: Beyond Structure to Processes, Harvard Business Review

January, 1995

David Krackhardt, Jeffrey R. Hanson, Informal Networks: The Company

Behind the Chart, Harvard Business Review, July, 1993

Christopher A. Bartlett, Sumantra Ghoshal, Matrix Management: Not a

Structure, a Frame of Mind, Harvard Business Review, July, 1990


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Corkindale, The Importance of Organizational Design and Structure, Harvard

Business Review February, 2011

Videos

Jacek Utko designs to save newspapers

(http://www.ted.com/talks/jacek_utko_asks_can_design_save_the_newspaper.

html)

Jay Walker's library of human imagination

(http://www.ted.com/talks/jay_walker_s_library_of_human_imagination.html)

Malcolm Gladwell on spaghetti sauce

(http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce.html)

Seth Godin on standing out

(http://www.ted.com/talks/seth_godin_on_sliced_bread.html)

Seth Godin on the tribes we lead

(http://www.ted.com/talks/seth_godin_on_the_tribes_we_lead.html)

Simon Sinek: How great leaders inspire action

(http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.ht

ml)

Sir Ken Robinson: Bring on the learning revolution!

(http://www.ted.com/talks/sir_ken_robinson_bring_on_the_revolution.html)

Viktor Frankl: Why to believe in others

(http://www.ted.com/talks/lang/eng/viktor_frankl_youth_in_search_of_meani

ng.html)

Internet

http://www.hainescentre.com/strategic-management, accessed at 16.05.2012

http://www.quantifiedmarketing.com/ , accessed at 18.05.2012

Online dictionaries and encyclopedias:

http://www.wikiquote.org/

http://www.wikipedia.org/


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ANNEXES

Annex number 1

The exchange flow and duration in AIESEC

Action

Optimistic

case

Pesimistic case

1 AIESEC contacts the company

The company agrees to participate in the

program and fills in a form and makes the job

description for the trainee.

START

2

AIESEC selects possible candidates from its

international database, based on the criteria

established by the company.

3 weeks 8 weeks

3

AIESEC presents 2-3 candidates for the

company (CV, other information), based on the

profile provided by them.

The company selects an intern after finishing

the selection process (usually interview).

1 week 4 weeks

4

AIESEC deals with legal issues (preparing and

sending documentation for visa). After arrival,

the trainee signs a collaboration contract with

the company.

- The company assures all living costs for the

trainee

- The company pays all administrative costs for

AIESEC

6 weeks 12 weeks

STARTING the internship

Total 10 weeks 24 weeks


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Annex number 2

Destinations statement of AIESEC Cluj-Napoca

organizational structure for differentiation focus strategy

Documents