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114 corporate structure
diversification strategy, currently operating hotels,
restaurants, travel agencies and marketing consultant
agencies. The latter strategy, conglomerate
diversification is the diversification of a firm into
businesses that are very much unrelated to its
current operation. This type of strategy allows a
firm to acquire businesses mainly for its profit
potential. ITT, parent company of Sheraton, is a
conglomerate following this type of strategy.
A firm chooses a corporate strategy depending
upon its mission and the goals and objectives its
management wish to accomplish. Every corporate
strategy has its costs and benefits, but the main
purpose for implementing a corporate strategy is to
gain a greater return on investment for its
stakeholders. This can be achieved through the
co-alignment principle, which involves finding the
perfect corporate strategy, environmental and
corporate structure fit.
See also: culture, corporate
Further reading
Olsen, M.D., Tse, E. and West, J.J. �1999) Strategic
Management in the Hospitality Industry, 2nd edn,
New York: Van Nostrand Reinhold. �Deals with
the concept of strategic management and
strategies undergone at both domestic and
international levels.)
ELIZA CHING-YICK TSE, HONG KONG
corporate structure
Corporate structures are the arrangement among
people in an organisation in order to get the work
done. They are the fundamental building blocks or
construction of the organisation. They provide
firms with an orderly system. Corporate structures
define the lines of authority as well as provide
channels for communication among the ranks in
the corporation. They let the persons in the firm
know how information will be travelled throughout
the organisation. Corporate structures determine
locus of control and responsibility at every level of
the business.
Aspects of corporate structure include the size of
the organisation, span of control and the type of
hierarchy �flat or tall). The size of an organisation
generally refers to the number of employees. As an
organisation expands and grows in size, more levels
of management are added to the firm. This results
in a structure that is more formalised, complex and
decentralised. Span of control determines how
many levels of management an organisation will
have. Another aspect of structure is the type of
hierarchy an organisation will be directed under.
An organisation has a tall hierarchy if it has many
levels of management, while one with a flat
hierarchy has few levels.
Organizations, both in tourism and other
industries, can also be differentiated by the
dimensions of structure in terms of formalisation,
complexity and centralisation. Formalisation refers
to the degree of how rules, procedures,
policies and employee handbooks are used in an
organisation. Complexity involves the division of
labour based on the degree of knowledge and
expertise in a company. Centralisation deals with
the authority of decision making involving
resource allocation. A firm which has solely the
chief executive officer or just the top management
making decisions �such as the general
manager of a hotel) is said to be highly
centralised. On the other hand, the authority is
delegated in a decentralised firm where a wider
span of managers or even employees are involved
in making decisions at every level of the
company.
The dimensions of structure can influence the
different types of structure an organisation will
select to achieve its mission and objectives. There
are five structural types. The first is a simple or
entrepreneurial structure that occurs when the
owner or manager makes all the important
decisions involving the day to day operations. All
the employees report to this individual. Most `mom
and pop' or entrepreneurial tourism properties
comprise of a simple structure. In the second type,
a simple structure gives way to a functional
structure. This is a result of a firm having to
increasingly rely on expertise in the functional
areas of management. Third, a divisional structure
occurs in organisations that expand not only in size
but also in their product/service offering as well as
serving different regional markets. Fourth, if a
company chooses to diversify its portfolio of