This web page has been designed as a reference
page for anyone taking part in MBA, Diploma or Marketing training programmes
and has been designed to help as a quick reference tool (not as a substitute
for study). If you use this site – please let me know how you used it by
sending me an e-mail. If you found it useful – please let others know too!
For contact with the author, e-mail: andy@mbaguru.com
To see the author’s artistic streak, goto: www.smokeycreative.com
Contents (click on section of interest)
1. SD Book 1 – Defining Purpose
1.1. Session 1 – Strategy Concepts
1.1.1. Strategy Definitions (Page 4)
1.2. Session 2 – Strategic Leadership And Planning
1.2.1. Strategic Management – Analysis / Choice /
Implementation (D Page 35)
1.2.3. Strategic Planning Process (D Page 39)
1.2.4. Gap Analysis (D Page 41)
1.2.5. External Environment Appraisal (PEST – See
2.1.1) (Page 42)
1.2.6. Internal Resource Appraisal (Page 43+44)
1.2.7. Strategic Choice (Page 46)
1.2.8. 5 P’s Of Strategy (Page 53)
1.2.9. Kotler’s Attack And Defence Strategies (D Pge
56+7)
1.3. Session 3 – Stakeholder Management
1.3.1. Stakeholders (& Mapping) (D Pg 68+9)
1.3.2. The Issue Lifecycle (D Pg 74+5)
1.3.3. Conflicts and values (3 types) (Page 78)
1.3.4. Pressure Groups (Page 84+)
1.4. Session 4 – Corporate And Business Strategies
1.4.1. Portfolio Analysis (BCG) (D Pg 98+9)
1.4.2. General Electric (GE) (D Pg 113+4)
1.4.3. Shell Directional Policy Matrix (DPM) (D Pg
120)
1.4.4. Arthur D Little Lifecycle Matrix (ADL) (D Pg
123)
2. SD Book 2 – Strategic Analysis
2.1. Session 5 – Environmental Analysis And Scenarios
2.1.1. PEST (Again - 1.2.5) (Pg 6-14)
2.1.4. Scenario Planning (8 Stage Process) (L Pg 19)
2.1.5. Risk Analysis (LD Pg 22+3)
2.2. Session 6 – Industry And Competitive Analysis
2.2.1. Industry Structure Mapping (D Pg 40)
2.2.2. Porter’s 5 Forces (D Pg 42)
2.2.3. Porter’s 5 Force Profit Pie (D Pg 43)
2.2.4. Strategic Group Analysis (Mapping) (Pg 60)
2.2.5. Competitor Analysis (D Pg 65)
2.3. Session 7 – Resource Analysis
2.3.1. Resource Analysis (D Pg 86)
2.3.2. Core Competencies (P88+9)
2.3.3. Distinctive Capabilities (L Pg 95-98)
2.3.4. Experience Curve (P 99 – 102)
2.3.5. Resourced Based Approach To Strategic
Analysis (D P108)
2.4. Session 8 – Competitive Dynamics
2.4.1. Chaos And Complex Theory (L P117-9)
2.4.2. Hyper-Competition (L P133)
2.4.3. 7S’s Of Competition (L P135)
2.5. Session 9 – Strategic Analysis In Different Contexts
2.5.1. Differences Between Public & Private Orgs
(T P152)
2.5.2. The Public / Private Continuum (T P 153)
2.5.3. Strategic Mgmt In Non-Profit Orgs (L P 157)
2.5.4. Service Firms Attention / Decisions /
Strategies (L P160)
2.5.5. SME Attentions / Decisions / Strategies (L
P163)
2.5.6. International Attentions / Decisions /
Strategies (L P168)
2.6. Session 10 – Technology And Strategy
2.6.1. Types Of Innovation – (L P179)
2.6.2. Revolutionary And Evolutionary Innovation (T
P185)
2.6.3. Technology Push And Market Pull Model (D
P186)
2.6.4. Technology As An Enabler Of Strategy (L P193)
2.6.5. Strategic Planning For Technology (L P198)
2.7. Session 11 – Pulling It All Together
2.7.1. Analysing Resources (Check List) (L P211-16)
2.7.2. Environmental Analysis (D P217)
3. SD Book 3 – Changing Direction
3.1. Session 12 – Development Strategies
3.1.1. Types Of Strategic Decision (L P 4)
3.1.2. Development Strategies (D P5)
3.1.3. Ansoff’s Growth Vector (P/M) (D P7)
3.1.4. Unrelated Diversification Strategy Failure
(Porter) (L P12)
3.1.5. Generic Strategies (Porter/Mathur/Ohmae) (L P
18)
3.1.6. Generic Strategies – Differentiation (Porter)
(P 21)
3.1.7. Generic Strategies – Cost (Porter) (P 24)
3.1.8. Generic Strategies – Focus (Porter) (P 26)
3.1.9. Choosing A Strategy (L P32)
3.1.10. Porter’s
Value Chain (D P34-8)
3.1.11. Porter’s
Cost Drivers (L P39)
3.1.12. Mathur’s
16 Generic Strategies (D P45)
3.1.13. Benefits
Of Mathur’s 16 Generic Strategies (L P48)
3.2. Session 13 – Strategies For Industry Stages
3.2.1. Characteristics Of Embryonic Industries (L
P62)
3.2.2. Characteristics Of GROWTH Industries (L P63)
3.2.3. Characteristics Of Mature Industries (L P64)
3.2.4. Characteristics Of Declining Industries (L
P65)
3.2.5. Strategies For Emerging Industries (P67+)
3.2.6. Strategies For Emerging Industries – Shaping
Industry Structure (P68)
3.2.7. Strategies For Emerging Industries –
Balancing Interests (P68)
3.2.8. Strategies For Emerging Industries – Changing
Role Of Supplier (P68)
3.2.9. Strategies For Emerging Industries – Shifting
Mobility Barriers (P68)
3.2.10. Strategies
For Emerging Industries – Timing Entry (P68)
3.2.11. Strategies
For Emerging Industries – Measuring Success (P68)
3.2.12. Strategies
For Emerging Industries – Changing Characts & Goals (D P69)
3.2.13. Strategies
For Growth (P79+)
3.2.14. Competitive
Strategies (P80)
3.2.15. Strategies
For Mature Industries (P81+)
3.2.16. Strategies
For Mature Industries – Cost Analysis (P81)
3.2.17. Strategies
For Mature Industries – Process Innovation (P82)
3.2.18. Strategies
For Mature Industries – Increase Scope Of Purchases(P82)
3.2.19. Strategies
For Mature Industries – Cost Curves (P82)
3.2.20. Strategies
For Mature Industries – International (P82)
3.2.21. Strategies
For Mature Industries – Defence Tactics (L P83)
3.2.22. Strategies
For Mature Industries – Avenues For Attacking Leaders (LD P85)
3.2.23. Strategies
For Mature Industries – Other Research (P87)
3.2.24. Strategies
For Mature Industries – Barriers To Success (L P88)
3.2.25. Strategies
For Declining Industries (L P90)
3.2.26. Strategies
For Declining Industries – Dominance (Up Investment) (P92)
3.2.27. Strategies
For Declining Industries – Hold Investment (P92)
3.2.28. Strategies
For Declining Industries – Shrink Selectively (P93)
3.2.29. Strategies
For Declining Industries – Milk Investment (P93)
3.2.30. Strategies
For Declining Industries – Divest Now (P94)
3.2.31. Strategies
For Declining Industries – End-Game Strategy Model (D P95)
3.3. Session 14 – Strategies For Organisational Stages
3.3.1. Organisational Lifecycles (5 Phases Of
Growth) (LD P108+9)
3.3.2. Greiner’s Observations (L P110)
3.3.3. The Organisational Eco-Cycle (DL 111+2)
3.3.4. Strategies And The Org. Lifecycle (L P113)
3.3.5. Complexity Theory (L P116)
3.4. Session 15 – Mergers, Acquisitions And Divestments
3.4.1. Only 50% Of Acquisitions Are Successful
(P121)
3.4.2. Definitions :- Take Over Acquisition (P122)
3.4.3. Definitions :- Merger (P123)
3.4.4. Definitions :- Divestment (P124)
3.4.5. Definitions :- Joint Venture (P125)
3.4.6. The Need For These Types Of Strategy –
Economies Of Scale (P126)
3.4.7. The Need For These Types Of Strategy – Growth
(P127)
3.4.8. The Need For These Types Of Strategy – Market
Entry (P127)
3.4.9. The Need For These Types Of Strategy –
Diversification (P127)
3.4.10. Potential
Areas Of Synergy (L P129)
3.4.11. Criteria
Against Which To Assess Targets (L 135)
3.4.12. Mergers
– Circumstances And Characteristics (L P136)
3.4.13. Criteria
For Evaluating Partners (L P141)
3.4.14. McKinsey’s
7S Model (D P146)
3.4.15. Spectrum
Of Divestment (L P148)
3.4.16. Types
Of Divestment (P149)
3.5. Session 16 – JV’s And Alliances
3.5.1. Decision Criteria (JV Or Alliance) (P157)
3.5.2. Evaluating JV Opportunities (L P160)
3.5.3. Implementing JV’s (L P165)
3.5.4. Extent Of Learning In Alliances (L P170)
3.6. Session 17 – Integration And Value Added Partnerships
3.6.1. Profitable Integration (P183)
3.6.2. Motives For Integration (L P184)
3.6.3. Disadvantages Of Integration (L P187)
3.6.4. Dynamic Networks (D P190)
3.6.5. Dynamic Network Characteristics (L P191)
3.6.6. Strategic Networks (P191)
3.6.7. Value Adding Partnerships (P192)
3.6.8. Why Alliances And Networks Are Important (L
P200)
3.6.9. Transaction Costs And External Relationships
(L 201)
3.6.10. Core
Skills = Types Of Advantage (L P202)
3.6.11. Integrated
Model Of Strategic Management (D P203)
4.1. Session 18 – Generating And Creating Strategic Options
4.1.1. Appropriate Time Horizon (L 6)
4.1.2. Generic Strategies:- Corporate (L 9)
4.1.3. Generic Strategies:- Business Unit (L 9)
4.1.4. Generic Strategies:- Functions (L 9)
4.1.5. Short-Listing Options (L 12)
4.2. Session 19 – Strategic Choice
4.2.1. Strategic Choice / Fit (D 20)
4.2.2. Criteria For Evaluation (L 22)
4.2.3. Criteria For Evaluation – Suitability (L 23)
4.2.4. Criteria For Evaluation - Research Evidence
(PIMS) (L 24)
4.2.5. Criteria For Evaluation - Cultural Fit (D 28)
4.2.6. Criteria For Evaluation - Feasibility (L 29)
4.2.7. Criteria For Evaluation - Acceptability (L
30)
4.3. Session 20 – The Balanced Scorecard
4.3.3. How Can The BS Be Put To Work (D 47)
4.3.4. 3 Maxims Of Implementation (L 48)
4.4. Session 21 – Review Of Financial Analysis Techniques
4.4.1. Management Level Ratios (D 58)
4.4.2. Pyramid Of Ratios (D 67)
4.4.3. Present Value Analysis (86)
4.5. Session 22 – Cash Flow Analysis
- READ MILLS BOOK
4.5.1. Cash Flow Drivers (L 110)
4.6. Session 23 – Strategic Value Analysis
- READ MILLS BOOK
4.7. Session 24 – The Cost Of Capital
4.7.1. Components Of COC (L 150)
4.7.3. Cost Of Equity (LC 150&1)
4.7.5. Weighted Average Cost Of Capital (C 156)
4.8. Session 25 – Value And Competitive Advantage
4.9. Session 26 – Strategic Value Analysis Conclusions
5. BT Book 1 – Change For The 21st
Century
5.1. Session 1 – Business Transformation
5.1.2. Strategic Change Model (D 13)
5.1.4. Various Changes Forced By Global Economy
(L16)
5.1.5. The 3 Necessary Conditions For Effective
Change (L 17)
5.1.6. Functional Strategy Features (L18)
5.1.7. Ingredients Of Successful Implementation (L
22&3)
5.2. Session 2 – Strategy And Structure
5.2.1. Factors For Structures Appropriateness (L 32)
5.2.2. 5 Phases Of Growth (Again!) (DL 34 & 5)
5.2.3. Useful Recommendation For Strategists (L 37)
5.2.4. Structures Environments And Strategies (T
38&9)
5.2.5. Miller’s 4 Categories Of Competitive Strategy
(L 40)
5.2.6. Strategy, Structure Configurations (TL 41)
5.2.7. The Multi-Divisional Structure (42)
5.2.9. International Structures And Strategy (D
58&9)
5.2.10. Future
Structures Of International Orgs. (L 61)
5.3. Session 3 – The 21stc Org: New Org. Designs For Value-Added
5.3.1. 2 Observations About Change (78)
5.3.2. Horizon Management (D 86)
5.3.3. 2 Points About Change (L 88)
5.4. Session 4 – Business Process Re-Engineering
5.4.1. BPR – Definition (P103)
5.4.3. The 3 C’s Of BPR (L 106)
5.4.4. 3 Processes To Focus BPR On (L 108)
5.4.5. What BPR Entails (L115)
5.4.6. What Not To Do With BPR (L 120)
5.4.7. Reasons for Resistance (L 121)
5.4.8. Overcoming Resistance (L 121)
5.4.9. Tensions In BPR – Excess Stress (L 123)
5.4.10. Tensions
In BPR – Trust And Redundancy (L122)
5.4.11. Tensions
In BPR – The Training Solution (L124)
5.5. Session 5 – TQM Programmes
5.5.1. What Is Quality? - 2 Strands To Quality
(L134)
5.5.3. Increasing Financial Performance Through
Quality (D 138)
5.5.4. Placing A Product In The Market (Old And New)
(D 139)
5.5.5. Deming’s 14 Principles Of QM (L 141)
5.5.6. The 5 Deadly Diseases (Restraints) (L 143)
5.5.7. Juran’s 3 Stage Process (L 145)
5.5.8. Crosby’s 14 Steps To Quality Improvement (L
148)
5.5.9. Factors Necessary For An Effective Q System
(D 152)
5.5.10. Implementation
Difficulties (L 157)
5.6. Session 6 – Turnarounds And Recovery Strategies
5.6.1. Causes Of Decline (L 171)
5.6.2. Feasibility Of Recovery (LD 180&1)
5.6.3. The 3 Profit Recovery Strategies (L
182&3)
5.6.4. Steps Towards Successful Recovery Strategy (T
186)
6. BT Bk 2 – Strategic Change: Mgng The Process
6.1. Session 7 – Perspectives On Change
6.1.1. Change Failure Rates (P3)
6.1.2. Excellence Culture (10)
6.1.3. Change Strategies And Conditions Of Use (D
13)
6.1.4. Limits On Ability To Manage Change- Limited
Cognitive Ability ((17)
6.1.5. Limits On Ability To Manage Change- Political
Processes ((17)
6.1.6. Overt, Covert And Contextual Power (18)
6.1.7. Putting Change Recipes In Context (D 23)
6.2. Session 8 – Strategic Organisational Diagnosis
6.2.1. Core Activities Of Change –(Table 3 Together)
(T 38)
6.2.2. 9 General Causes Of Decline (L 53)
6.2.3. 13 Ways Of Achieving Improvements (L54)
6.2.4. Summary Of Organisational Diagnosis (L 55)
6.3. Session 9 – Organisational Learning
6.3.1. Organisational Learning (Definition) (64)
6.3.2. 5 Disciplines Of The Learning Org. (L 67)
6.3.3. Change Eco-Cycle (L 68)
6.3.4. 9 Key Hallmarks For Creating A Learning
Culture (L 74)
6.4. Session 10 – Learning Styles
6.4.1. The Kolb Learning Cycle And Styles (D 87)
6.5. Session 11 – Who Makes Change?
6.5.1. Change Agent Activities (L 121)
6.5.2. Factors When Choosing A Change Agent (L 122)
6.5.3. Senior Exec As Change Agent (Lx2,123&4)
6.5.4. New Senior Exec As Change Agent (Lx2,125)
6.5.5. External Consultant As Change Agent (Lx2,126)
6.5.6. Line Manager As Change Agent (Lx2,127&8)
6.5.7. Project Mgmt Team As Change Agent
(Lx2,130&1)
6.6. Session 12 – Creating A Climate For Change
6.6.1. The Presence Of Risk (144)
6.6.2. Assessing Implementation Plans (4 Point Plan)
(L 145)
6.6.3. Unfreeze, Implement, Re-Freeze (L 147-9)
6.6.4. Resistance To Change (Fear And Commitment) (L
153)
6.6.5. Effective Communication (L 155)
6.6.6. Rebuilding Self-esteem (LD 158&9)
6.6.7. Summary – Managing Change Requires… (L 160)
6.7. Session 13 – Effective Leadership
6.7.1. Managing Or Leading (L 174)
6.7.2. Leader’s Characteristics (Bennis) (Lx2,175)
6.7.3. 3 Generic Skills (Hershey And Blanchard) (L
175)
6.7.4. 2 Leadership Grid (D 179)
6.7.5. Transactional Leadership – Definition (181)
6.7.6. Transformational Leadership – Definition
(181)
6.7.7. Empowerment – Definition (L 191)
6.8. Session 14 – Implementation
6.8.1. Checklist 1- Readiness For Change (L
203&4)
6.8.2. Checklist 1- Deal With Resistance To
Change (L 207)
6.8.3. Checklist 1- Clarify Effects Of Change (L
208)
6.8.4. Checklist 1- Identify Ownership (L 208)
6.8.5. Checklist 1- Top Mgmt Support (L 208)
6.8.6. Checklist 1-Acceptance (L 209)
6.8.7. Checklist 1- Build An Effective Team (L 209)
6.8.8. Checklist 2- Managing Change… (L 210)
6.8.9. Checklist 2- Clarify Plans (L210)
6.8.10. Checklist
2- Build New System And Practices (L210)
6.8.11. Checklist
2- Training And Support (L 210)
6.8.12. Checklist
2- Build Commitment (L 211)
6.8.13. Checklist
2- Provide Feedback (L 211)
6.8.14. Checklist
2- Manage Stress (L 211)
6.8.15. Tactics
For Improving Communication (L 214)
6.8.16. Networking
Can Help Mgrs (L216)
6.8.17. 5P
Model Of Managing Change (L 216)
“Strategy Is A Pattern In A Stream Of Actions” (Mintzberg And
Waters, 1985)
“Strategy, In Effect, Is Management’s Game Plan For Strengthening
The Organisation’s Position” (Thompson And Strickland 1996)
V - in this course equivalent to mission (Page
7)
Ø
Vision is often associated with an with
recognition that mission statements were too bland and failed to generate
excitement or convey leadership individual leader.
Ø
The term vision came into usage strength
M (Page
9)
Ø
Should contain a formulation of the firms objectives
that enables progress towards them to be measured
Ø
Should differentiate them form other orgs
Ø
Should define the business the company wants to
be in
Ø
Should be relevant to all stakeholders
Ø
Should be exciting and inspiring
O (Page
11-13)
Ø
Profitability (purists argue this is the only
true objective)
Ø
Number of objectives should be kept to a minimum
Ø
Private enterprises should have only 1 or 2
Ø
A minimum threshold should be set slightly above
the prevailing cost of capital
Ø
A satisfactory level of performance should be
set – based on:
Ø
Present and past performance
Ø
Competitor’s performance
Ø
The economy
Ø
Environmental trends
Ø
Risk should be considered (risky options should
have to meet higher targets)
S - Corporate (Page
16)
Ø
What is the purpose and direction of the firm?
Ø
What are appropriate corporate level objectives
for the firm?
Ø
which industries and markets should the firm
choose to compete in?
Ø
what corporate level capabilities and core
competencies should be developed?
Ø
How should it be structured?
Ø
How can synergies be developed between parts of
the org?
Ø
How can the org manage relations with stake
holders?
Ø
What policies and procedures should be
formulated?
S
- Business Unit (Page
17)
Ø
How should the SBU compete within the chosen
line of business?
Ø
How to organise and manage the units resources
best?
Ø
How can it best co-ordinate its activities with
other units and the firm as a whole?
S
- Functional (Page
18)
Ø
Strategic challenges here are specific to the
function – EG: Marketing would have the
7Ps
Stage |
Introduction |
Growth |
Maturity |
Decline |
|
|
|
|
|
Management
|
Entrepreneurial |
Professional |
Administrator |
Asset stripper |
Market
growth |
High |
High |
Low |
Low |
Share |
Low |
Low |
High |
Low |
Cash |
hungry |
hungry |
rich |
Fair |
Communication |
informal |
formal |
formal |
authoritarian |
Planning
terms |
Long |
long |
medium |
Short |
Minimum performance criteria are established by reference to
external factors, such as the cost of borrowing and average profitability of
the industry. Reducing objectives below
these levels is to invite disaster.
POLITICAL, ECONOMIC, SOCIAL, TECHNOLOGICAL, LEGAL, ENVIRONMENTAL,
DEMOGRAPHIC, etc.
Review internal resources in relation to the firms markets:
Grant identifies 5 types:
Ø
Financial
Ø
Physical
Ø
Human
Ø
Technological
Ø
Reputation
The essence of good strategy is to build on strengths and core
competencies to exploit opportunities and deflect threats
Plan
A deliberate process made in advance of a set of actions
Ploy
A specific manoeuvre intended to outwit an opponent
Pattern
A consistent theme in a stream of actions recognised after they
have happened, whether or not intended
Position
Matching an organisation with its environment
Perspective
The way in which, collectively, an organisation views the world
1)
Frontal: confronting dominant players head-on
(more often price based – and often subsidised by home market revenue)
2)
Flanking: entering niche or geographical area
where players are weak or not present
3)
Encirclement: encircling an opponents position
(covering all niche areas with an array of product styles)
4)
By-pass: Leap-frogging – choosing a different
battleground
5)
Guerrilla: attacking in small raids on
competitor’s territory. Designed to sap strength and wrong-foot them.
Example Stakeholder map( for telecoms organisation SCL):
Phase 1 – Pre-problem
The problem exists and is known, but recognition is restricted
Phase 2 – Alarmed discovery
Usually triggered off by an event – a disaster or a PR campaign –
the issue rapidly captures the publics interest. Awareness of the issue and calls for its resolution are now rife
Phase 3 – Realising the cost of significant progress
As the issue has usually been vastly over-simplified for the
publics consumption, a gradual realisation of the complexity of the problem is
bound to occur eventually – and with it comes a modification of the pure
(initial) emotions.
Phase 4 – Gradual decline of public interest
The market for news is competitive – newer, apparently more pressing
issues are bought to light.
Phase 5 – Post-problem phase
The issue has been resolved, or has been marginalised by other
issues. It is no longer of immediate
importance, but a collective memory exists which can be reactivated by a
recurrence.
1.
Conflicts of Interest
2.
Disputes Of Fact
Companies should seek the endorsement of organisation with high
levels of public confidence and media coverage.
5 distinct tactics can be adopted when being attacked by pressure
groups:
1.
Ignore
Here the skill is assessing which issues to realise are ascending
2.
Fight
When an issue is rapidly becoming more of a public awareness issue
and the company were sure of its ground
3.
Accommodate
When opposition is too strong (or the fight too damaging to
continue). Here the task is to build
negotiating strength by eliciting outside support prior to reaching a
compromise.
4.
Comply
When criticism is valid.
Here a swift response can save the day.
5.
Exit
Where the issue to said to be out of all proportion to the value
derived from the practice, it could be better to simply exit.
See mk 2 (below)
One way of using the model is to adopt the following six steps:-
1.
SWOT
analysis
2.
Score
external factors
3.
Weight
the scores
4.
Compare
internal factors (mkt share, mkt strength, manufacturing,
R&D, distribution, after sales, finance, image, product range, mgmt, labour
relations, workforce skills, age of plant)
5.
Plot
the results (mkt size, mkt growth rate, cyclicality of mkt, intensity of
competition, barriers to entry, margins, state of technology, social political
and economic environment)
6.
Allow
for future plans
Combines BCG and GE matrix.
Takes into account the product life cycle.
In effect the standard BCG is only recognised for volume
industries – and therefore can be placed in the bottom right quadrant of BCG
mkII.
Political
Ø
Allow /disallow mergers, etc
Ø
Restrictions of practices (eg: Cigarette advertising)
Ø
Privatisation of state enterprises
Economic
Ø
National income and standards of living
Ø
Structure of the economy
Ø
Recession and growth cycles
Ø
Trends such as inflation and economic growth
Ø
Government policy and involvement in the economy
Ø
Sources of national advantage
Ø
Global trading patterns
Ø
Exchange rates
Socio-Cultural
Ø
Demographic (see below)
Ø
Lifestyles
Ø
Income distribution
Ø
Values and attitudes towards work
Ø
Levels of education and business
Demographics
Ø
Population increases
Ø
Age distribution
Ø
Working percentages of population
Ø
Family structures
Ø
Religion
Technology
Ø
Allowing developing countries to grow much
faster than before
Ø
Increasing pace makes predictions more difficult
Ø
New uses of technology becoming more important
than new technological developments?
Ø
Quality increasing
Ø
Durability increasing
Ø
Costs reducing
Ø
Volumes increasing
Ø
Etc.
KSFs are answered by answering two key questions:
1.
What do customers want?
2.
What does the firm need to do to survive
competition?
Important questions:
Will the firms markets continue to grow?
When will these markets mature?
What new products will emerge?
What new technologies will have an impact (and when)?
What will be the pattern of economic growth?
What political developments might affect the business?
What socio-cultural trends represent opportunities for launch of
new ventures or threats to existing business?
How far ahead must the firm plan for?
How long can the firm sustain competitive advantages?
How long does it take the firm to acquire, develop or dispose of
major resources and core competencies?
How long does it take to develop new products or services?
Country risk monitor (suggested contents to analyse):
Domestic economy
Ø
Real GDP growth
Ø
Investment efficiency
Ø
Inflation
Ø
Money supply growth
Ø
Real domestic credit creation
Ø
Fiscal balance / GDP
External economy
Ø
Competitiveness
Ø
Trade balance
Ø
Exports
Ø
Imports
Ø
Current account balance
Exports / GDP
Debt
Ø
Total external debt
Ø
International reserves
Ø
External debt/exports
Ø
International reserves / imports
Other
Ø
Political risk
Ø
Unemployment rates (and trends)
Ø
Per capita GDP growth
With an industry structure map you can ask yourself:
Ø
Are there significant forces at work at various
points in the chain which are likely to cause major change in the industry
structure?
Ø
What are the probable reactions of the mgmt of
those affected parts?
Ø
Is the company well positioned to cope with
those changes? (Is it threatened?)
Ø
Are there opportunities for the company to adopt
a different position or change industry structure by acting as a catalyst at
other points in the chain?
Analysing industries by grouping the competitors’ by
strategies. Plot on a graph with price
on one axis and quality on the other. Other potential axis include:-
Ø
breadth of product range
Ø
geographical scope
Ø
distribution channels
Ø
degree of vertical integration
Ø
differentiation versus low cost production
Ø
innovation versus limitation
Core competence =
“the collective learning of an organisation, especially how to
co-ordinate diverse production skills and integrate multiple streams of
technology”.
A core competence must satisfy these 3 conditions:-
1.
It must provide access to a wide range of
markets
2.
It must make a significant contribution to the
perceived customer benefits of the end product
3.
It should be difficult for competitors to
imitate
John Kay – says there are 4 types:
1.
Architecture –
the network of contractual relationships within and around the firm
2.
Reputation –
difficult and expensive to create but can add significant value – closely
linked with brand
3.
Innovation –
difficult to sustain. (many new products fail, innovation is hard to manage,
innovators often find it hard to appropriate the rewards)
4.
Strategic
Assets – EG: landing rights at Heathrow for BA
To add value to the firm, a distinctive capability must be both:-
1.
Sustainable –
long lasting and difficult to emulate or substitute
2.
Appropriable –
the firm must be able to retain the added value created by the resource
Experience curves show the relationship between production costs
per unit and the accumulated volume of production
1.
Unit costs decrease with accumulated volume, all
other things being equal
2.
Unit cost reductions are greatest at the start
of the experience curve
3.
The slope varies from industry to industry and
within firms
4.
Unit cost reductions are faster in growing
markets
Key assumptions of chaos theory:-
Ø
Natural and human systems show behaviour
patterns which are the results of complex interactions between various
constituent elements
Ø
Complex systems show both linear and non-linear
relationships. Inputs may be related to
output in some directly proportional manner, or they may be related in some
more complex fashion.
Ø
Systems may have more than one equilibrium
point, and such equilibria may be stable or unstable.
The management implications of complexity:-
Complexity theory suggests that organisations respond best to
fundamental change if they are poised on the edge of chaos. To achieve this – top management must:-
Ø
Increase the channels of communication to
promote informal and spontaneous self-organisation
Ø
Not dictate objectives or agendas
Ø
Rotate people regularly
Ø
Avoid over-reliance on incumbent management team
Ø
Tolerate parallel developments, permit
experimentation and learn from failure
Ø
Avoid excessive fit – there needs to be
organisational slack
Ø
Reduce fear of change
The new industrial NON-EQUILIBRIUM era in which competitive
advantage is achieved by quick strikes aimed at disrupting the established
positions of market leaders.
Four driving forces contribute to the growth of hyper-competition:
1.
Fragmenting customer tastes and markets
2.
Rapid technological change
3.
Falling geographical and industry boundaries
(globalisation)
4.
Deep pockets amongst competitors (arising from
giant global conglomerates)
Area |
Business |
Government |
Goals |
Profit / revenues |
Re-election |
Mission |
Make money for stakeholders |
Do good for the public |
Income source |
Products / Services |
Taxation |
Measures of managerial success |
Successful products |
Satisfying elected politicians |
Driving forces |
Customers & Competition |
Interest groups |
Attitudes to risk |
Mistakes may be condoned |
Mistakes may be disastrous |
Decision making styles |
Often behind closed doors |
Democratic, open |
|
Private
Sector Firms |
Hybrid
Institutions |
Public
Sector Bodies |
Accountability |
To shareholders who vote
with their money |
Publicly accountable but
commercially run |
Accountable to elected
bodies and the public |
Purpose |
Offering goods or
services to maximise returns for shareholders |
Generating a surplus and
fulfilling its function within strict spending constraints |
Providing goods and
services to the public within allocated budgets |
Competitive
Position |
Operating in a
competitive market |
Dominant position with
new entrants eroding its monopoly |
Monopolistic |
Paramount
Goals |
Ø Financial
performance Ø Growth Ø Customer
satisfaction |
Ø Resolving
tensions between commercial and public pressures Ø Defending
its position |
Ø
More emphasis on “mission”
Ø
Creation of meaning / purpose an overriding goal
Ø
Rewards other than money, management of
volunteers
Ø
Competition for resources rather than customers
Ø
Emphasis on service rather than products
Ø
Diverse stakeholder interests
Ø
Flatter organisations, more informality
Ø
Greater needs for co-operation / alliances
Service firms pay attention to:
Ø
Empowerment of front-line staff through
devolving responsibilities, cross-training, and self-directed work teams
Ø
Information systems supporting front-line staff
Ø
Reward and recognition systems which emphasise
quality of customer service
Ø
Flexible systems of planning and work
Ø
Training and upgrading of skills
Ø
Flat forms or organisation with fewer levels
between top and bottom
Some unique problems: (SME
and family-owned enterprises)
Ø
Coping with rapid change and growth
Ø
Financial mgmt and planning
Ø
Building and maintaining skills and technical
capabilities
Ø
Absence of formal systems and structure
Ø
Finding and rewarding the right people
Ø
Fostering relationships with customers and
suppliers
Ø
Time mgmt and succession planning for the owner
Corporate strategy making in multinationals requires decisions
such as:
Ø
To which countries should the firm sell?
Ø
In which countries should it produce?
Ø
Should products be customised to local markets
or sold in similar forms everywhere?
Ø
How should the firm be organised and controlled?
Ø
Where should key business functions, like
marketing, R&D and finance, be located?
Ø
Where should the corporate headquarters be
located and which decisions should be made from there?
Ø
How can the firm operate as a good citizen in
many different cultures?
Product Innovation – New products or services (eg of “smart
product”: Xerox photocopiers that track their own condition and initiate
automated fault calls)
Process innovation – New operations and business processes (eg:
paperless office)
Managerial Innovation – new management practices and strategies
(eg: total re-design of the value chain to exploit a new technology)
Revolutionary |
Evolutionary |
Major product / process breakthrough |
Incremental product / process improvement |
Create or change an industry |
Maintain competitive position within an industry |
Typically originate outside the firms in an industry |
Typically originate within the firms in an industry |
Relatively Rare |
Relatively common |
Generated by and create opportunities for small entrepreneurial
firms to enter an industry |
Improve operations of established firms |
Questions to be asked re. Innovation:-
Ø
What are the risks?
Ø
How quickly can competitors copy it?
Ø
Can the firm do it alone or would JV’s need to
be created?
Ø
Is it likely that the industry would converge on
one standard technology?
Ø
Entry
into new businesses (spin-off ventures and business opportunities)
Ø
Changing
industry structures (technology helps reduce barriers to entering
new areas and reducing switching costs)
Ø
Changing
existing markets and creating new markets (virtual market
places are growing due to the power of computing and the net)
Ø
Changing
customer relationships (mass-customisation – serving the needs of the
single or few customers across the board)
Ø
Developing
synergies (sharing resources between SBUs)
Ø
Leveraging
core competencies (building on the back of existing capabilities)
Important Concerns:-
Ø
Benchmarking
of technology management against firms in the same industry, or world leaders
in a separate field
Ø
Identifying
and assessing core competencies in technology
Ø
Scanning
the environment for new technological developments
Ø
Construction
of a plan for the development and use of technology, prioritisation of
different projects and management of a portfolio of technological initiatives
Ø
Leadership
of the technological functions (visible support from high
levels of management)
Ø
Strategic
alignment of technology and business strategies
must be developed
OBJECTIVES
Does the org have explicit objectives?
Are objectives shared by all?
Is prioritisation of effort possible? (or are obj.s too
all-encompassing)
Are they simple and consistent?
Are they quantifiable?
Are they appropriate
STRATEGY
Does the org have a clearly defined strategy for achieving its
objectives?
Is it the outcome of those involved (or a concoction of the
board)?
Consistent with objectives?
Consistent with business environment?
Are the constituent parts sound (ie: no areas undermining others)?
Does it make best use of resources?
Does it have commitment for all levels of the org & key
stakeholders?
Is the risk consistent with the likely benefits?
LEADERSHIP
Right type of leader?
Do top management fulfil all roles required of them?
Style of management appropriate to the orgs. Situation?
Does top mgmt create a strong positive culture (by identifying key
value)?
STRUCTURE AND SYSTEMS
Structure consistent with the orgs environment?
Do the systems support the strategy?
HUMAN RESOURCES
Does the org have enough of the right people/skills?
Does it have adequate mechanisms for recruiting / training /
deploying, etc?
Do reward systems provide the right incentives?
MARKETING
Marketing orientated (geared up to meeting customer needs)?
Committed to produce quality products (meeting international
standards)?
Mtkg orientation set at the top and supported throughout the org?
Mktg operation systematic and professional?
FINANCE
Is the org profitable and making acceptable returns?
Are margins on sales satisfactory?
Is the org sound (or unable to pay creditors)?
Org properly funded to make the best use of debt and equity
funding?
Does the financial position support the strategy
PRODUCTION
Does the production process deliver optimum combination between
low cost and flexibility?
Plant fully utilised?
Modern plant – exploiting advances in automation?
Does the process meet legal requirements (government regulations)?
Big enough to exploit economies of scale?
R&D / Distributor / After Sales
Does the R&D strategy support the corporate strategy?
Are resources in R&D adequate?
Is R&D’s output commercially viable?
Does the org have access to distribution channels?
Does the org have bargaining power to ensure a good price for its
services?
Does the org have resources to support products after sale?
Ø
Compete on quality
Ø
Move into new foreign markets
Ø
Acquire a competitor
Ø
Compete on delivery times
Ø
Enter new market segment
Ø
Diversify into other businesses
Ø
Stop producing the product
Ø
Exit the market
Ø
Rationalise the product line
Ø
Increase the product line
Unrelated Diversification Strategies:
Ø
Fail to deliver superior firm performance
Ø
Pre-empted portfolio diversification decisions
by company shareholders
Ø
Distract mgmt from the task of building
competitive advantage
Porter |
Mathur |
Ohmae |
Differentiation |
Focused on how a firm
can differentiate its outputs in terms of: |
More
tactical, less theoretical approach: |
Low Cost |
The type of merchandise |
The type of product offered (old or new) |
Focus |
Support offered |
The way in which competitors are tackled (Wisely or head on) |
PORTER’s GENERIC STRATEGIES:
To achieve a competitive advantage through differentiation, a
company must:
Ø
Make its product or service unique in some way
Ø
Create extra value for the customer (through
that differentiation)
Ø
Be rewarded by the customer for that
differentiation
Ø
Ensure that costs of differentiation are lower
than the benefits achieved
To achieve low cost comp. adv. a company must:
Ø
Be able to produce the product or service at
lower average cost to competitors
Ø
Be able to produce a product which can be priced
comparably
Deciding to concentrate on a particular segment of the market
NB: Focus by itself is not
a winning strategy, it only becomes a winner when combined effectively with a
cost or differentiation advantage.
Strategic choice will depend on finding answers to the following
questions:
Ø
What source of cost advantage are possible in
the business?
Ø
What possibilities exist to differentiate
effectively?
Ø
What segments exist within which a focus
strategy can be sustained?
Ø
What are the firm’s capabilities?
Ø
What are the competitors’ capabilities,
strategies and likely future moves?
Ø
How is the industry structure changing and how
will this affect the firm’s ability to succeed with a generic strategy?
Two key ideas are implicit in the use of the value chain:
1.
The component parts of the chain should be
consistent with the generic strategy
2.
It should be used to determine which parts the
firm’s operations can add most value (and so should be kept in-house)
Ø
Economies of scale:
Ø
The learning Curve
Ø
Capacity utilisation (especially where fixed
costs are high)
Ø
Linkages (such as JIT)
Ø
Interrelationships (ways in which the SBUs can
club together to exploit economies)
Ø
Timing (ways in which costs savings can be had
by being a first timer or a follower)
Ø
Deliberate choices (eg: deliberately keeping the
product range small – Henry Ford)
Ø
Location (cheap labour / reduced transportation)
Ø
Institutional (Government regulatory measures
such as taxes and investment grants)
Ø
It focuses attention on how the customer buys
(ie: what attributes he values and will pay for)
Ø
It enables the firm to classify the various
options it can choose in order to differentiate
Ø
It gives an insight into what competencies and
skills a company must possess / develop in order to succeed with its chosen
strategy
Ø
IT is a useful framework when considering market
evolution and the possible consequences of changing a firm’s strategy
Ø
Strong in technological uncertainty (absence of
a dominant design)
Ø
Strategic uncertainty
Ø
High initial costs, but steep costy reduction
Ø
Many embryonic companies and spin-offs
Ø
First time, badly informed buyers
Ø
State interventions (subsidies)
Ø
Widening buyer group
Ø
Consumers will accept uneven quality
Ø
Products have technical and performance
differentiation
Ø
Reliability is key for complex products
Ø
Continuous competitive product improvement
Ø
Search for good quality
Ø
High advertising costs but lower percentage of
sales than in embryonic
Ø
Under capacity in manufacturing
Ø
Shift towards mass production and mass channels
Ø
Competition is through new entrants creating
many competitors
Ø
Mergers and take-overs are prevalent
Ø
Growth conceals risks
Ø
Major strategic thrust is to grow faster than
your competitors
Ø
Slowing growth means more competition for market
share
Ø
Firms increasingly selling to educated repeat
buyers
Ø
Competition often shifts towards emphasis on
costs and services
Ø
Problems in adding to industry capacity or
personnel
Ø
Manufacturing, research, marketing, selling and
distribution methods are often changing
Ø
New products and applications are harder to come
by
Ø
International competition increases
Ø
Industry profits begin to fall
Ø
Dealer’s profits fall but their power increases
Ø
Shifting consumer preferences
Ø
Technological obsolescence
..is the over-riding strategic issue of firms within emerging
industries. Through its choices, the
firm can try to set the rules of the game in:
Ø
product policy
Ø
marketing approach
Ø
pricing strategy
Balancing the firm’s narrow self-interest and the industry advocacy
Early exploitation of changes in supplier orientation can give the
firm strategic leverage
The firm must find new ways to defend itself (must not rely solely
on product variety and proprietary technology)
Early entry is appropriate when image among buyers is important,
experience effect is high and radical technological breakthrough is probable
Survival and Market share (not necessarily profitability)
Stages
of Emergence |
Beginning |
Middle |
End |
Dominant
characteristics |
Technological uncertainty |
Firms’ entries |
Shake-out |
Dominant
goals |
1. Survival 2. Technological
position 3. Market
share |
2 Market share 3 Technological position |
1 Survival 2 Market share 3 Profitability |
Superior return on investment is linked to: (work of Anderson and Ziethaml)
Ø
Lower levels of investment
Ø
Product R&D expenses
Ø
Sales force expenses
Ø
Product customisation
Ø
Higher levels of productivity
Ø
Value added product quality
Ø
Market share
For leaders:- Staying ahead of the field in offering unique
products and services or using size and experience to gain cost advantage. Key to a UK based consumer
Cost analysis becomes increasingly important to:-
Ø
Rationalise the product mix.
Ø
Price correctly – maturity requires increased
capability to measure costs on individual items and price accordingly.
Importance of process innovation increases in maturity, as does
the pay off for designing the product (facilitates lower production costs
manufacturing and control)
Increasing purchases by existing customers is more desirable than
seeking new customers
A firm that is not the overall cost leader can sometimes find new
cost curves that actually make it the cost leader in certain situations
(product or market variations from the norm)
A firm may compete more effectively in another market where the
industry is more favourably structured
Ø
Fill product or positioning gaps (could be by
acquisition)
Ø
Block channel access – exclusive agreement with
channels
Ø
Raise buyers switching costs – participate in
joint production development with them
Ø
Increase scale economies – technology,
advertising, etc.
Ø
Increase capital requirements – offering finance
to buyers
Ø
Patent all feasible alternatives – Xerox did
this!
Ø
Protect you know-how – vertical integration
Ø
Tie up suppliers - into exclusive contracts
Ø
Raise input costs – eg: raise average industry
wages
Ø
Pursue interrelationships
Ø
Encourage government policies that raise
barriers
Ø
Form coalitions to raise barriers
Reconfiguration
A challenger innovates in
the way it performs activities in the value chain or in the configuration of
the entire chain
Redefinition
A challenger redefines its
competitive scope compared to the leader
Pure Spending
A challenger buys a market position through
superior resources or greater willingness to invest, out of which competitive
advantage grows
Successful strategies in hostile environments share common
characteristics:-
Ø
Achieve the lowest delivered cost position
relative to competition, coupled with both an acceptable quality and pricing
policy to gain profitable volume and market share growth.
Ø
Achieve the highest product/service quality
differentiated position relative to competition coupled with an acceptable
delivered cost structure and pricing policy to gain margins sufficient to fund
re-investment in the differentiation.
4 major requirements to managing strategic change in mature
industries:-
1.
Focus on global strengths
2.
Aggressive niche practices
3.
Temporary task-force management
4.
Conscious management of networks
Factors to consider in developing strategies:-
Ø
The reasons for the decline (and their
uncertainties)
Ø
Industrial structural traits
Ø
Corporate wide strategic needs
Ø
The possession of internal corporate strengths
appropriate to the competitive situation
Ø
To acquire existing competitors (or help them to
exit sooner)
Ø
To invest in marketing campaigns
Ø
To exert price cutting pressures on high cost
competitors
Some reinvestment is made in the declining industries to enable
the firm to compete either:-
Ø
By continuing to use the same tactics it had
formerly employed
Ø
By waiting until some uncertainties regarding
its competitors are resolved
This is a repositioning strategy which: retrieves the value of the investments in some parts of the
market, whilst investing in other parts.
This means retrieving the value of earlier investments. The cash flows only in. This is also called
harvesting. Although income is still
being generated, the firm has made a decision to exit as soon as:-
Ø
The salvage value of the remaining assets =
remaining revenue that can be generated
Ø
Other corporate criteria have been reached
Sell out before the assets shrink too much
The 5 phases (according to Greiner) (ALSO SEE 5.2.2)
Phase 1
Creative and informal management = Crisis of leadership (growing organisation cannot be managed by informal
methods alone)
Phase 2
Capable business mgmt, more structure and formality = Crisis
of autonomy (demands for greater
autonomy by lower mgmt)
Phase 3
Delegation and decentralisation = Crisis of control (loss of control over diversified operations)
Phase 4
Greater co-ordination, systems and planning = Crisis of red tape (procedures take precedent
over problem solving – tensions between line and staff)
Phase 5
Strong interpersonal collaboration, greater spontaneity in mgmt = Crisis
of ? (employee burnout – need for
revitalising and team problem solving)
Ø
Know where you are in the development sequence –
recognise when time for change has come
Ø
Recognise the limited range of solutions – and
be prepared to dismantle current structures and managerial styles and systems
Ø
Top mgmt needs considerable self-awareness
ALSO SEE 5.2.2
Strategies to help an org move to the next stage might include:
Ø
Structural change and redesign
Ø
Creation of a learning org
Ø
Team based approaches to project mgmt
Ø
Reorganisation around core capabilities and
outsourcing of others
Ø
New motivation and reward structures
Ø
Redesigned career paths and novel human resource
mgmt practices
Ø
Spontaneous self-organisation can harness an
individuals initiative and creativity
Ø
Cultivation active fringes who have not
assimilated the dominant logic can aid renewal
Ø
Permitting experimentation in parallel can
increase learning
Ø
Encouraging contention rather than stifling
argument
Only 50% of acquisitions can be termed successful by any measure
(Hunt 1990)
Where one loses its corporate existence (Can be friendly or
unfriendly)
A combination of two companies where an entirely new corporation
is formed, and both old companies cease to exist.
The selling off of part of a business by its mgmt.
2 or more owners create a separate entity by investing in its
creation.
Operating economies can be achieved through combining companies in
some way. Duplicate facilities can be eliminated, and others consolidated (such
as purchasing – to gain from discounts for quantity- for example)
A firm may not be able to grow at a desired rate internally. It may well be quicker, and possibly cheaper
to simply acquire.
Acquisitions and alliances are particularly good for achieving
entry into a new geographical market (especially where government rules exist
about imports and local manufacture, etc.)
Widen portfolios rapidly
Operations:
Ø
Product and process patent protection
Ø
Unique process know-how
Ø
Unique machinery parts & supplies
Ø
Unique efficient manufacturing control
Mktg & Sales
Ø
Pioneering a major position nationally /
globally
Ø
Capture of leading distribution channels
Ø
Unique customer services
Ø
Unique mktg techniques
Technology development
Ø
Unique R&D skills
Ø
Consistently successful NPD
Performance criteria:
Ø
ROCE
Ø
Sales margin
Ø
Sales growth
Ø
Market share
Ø
NPV
Company characteristics:
Ø
Size
Ø
Geographical location
Ø
Product range, Mktg or R&D
Ø
Strengths
Management:
Ø
Quality
Ø
Style
Ø
Compatibility between the firms
Industry sector characteristics:
Ø
Stage of industry evolution
Ø
Competitive dynamics
Ø
Too large an acquisition may create problems of
corporate digestion. Too small may be too costly
Ø
Geographical location relative to the parent may
determine extent of control
Ø
Products should be a good strategic fit
Ø
Marketing and R&D strengths in the purchased
company- are they sufficient?
Ø
Legal acceptability
Ø
Political acceptability
Ø
Organisational acceptability
Ø
Complementarity of tasks & skills
Ø
Geographical
Ø
Organisational sizes
Ø
Cultures
(See also – 3.5.1)
Type |
Ownership Severance |
Relative Frequency |
New Ownership Form |
1. Franchising |
Complete- limited period |
Frequent |
Subsidiary or independent |
2. Contracting-out |
Complete but trading relationship remains |
Frequent |
Subsidiary |
3. Sell-off |
Complete – usually permanent |
Small sell-offs frequent – part of a series Large sell offs- function of crisis |
Subsidiary |
4. Management leverage buy-out |
Complete – usually permanent (parent may retain equity interest) |
Small – frequent Large – becoming more frequent in UK (frequent in us) |
Independent |
5. Spin-off demerger |
Split rather severance – may involved dilution of ownership –
usually permanent |
Small – frequent, especially in high technology where mgmt takes
equity stake |
Quasi-independent |
6. Asset-swap/strategic trade |
Complete, but exchange involved so size o parent maintained |
Unusual – small asset swaps may arise in anti-trust divestitures
– large asset swaps voluntary |
Subsidiary |
The main distinction between sell-offs and buys-outs is that
sell-offs result in the asset being absorbed as a subsidiary in another
company, whereas buy-outs create a new independent org.
Ø
Economic
Ø
Financial
Ø
Market
Ø
Political
Ø
Social
(See also 3.4.13)
Ø
What do they possess that may be complementary ?
Ø
Is the collaboration possible in mktg, R&D
and technology?
Ø
Can you collaborate without overlapping or
endangering each others objectives?
Given the problems of adapting to different company and national
cultures, it is particularly important that a JV be given:
Ø
Autonomy –
including its own mgmt structure and decision making powers for all operations
Ø
Flexibility –
to evolve naturally as circumstances change
Hamel: 3 features which
determine the extent and balance of learning in alliances:
Ø
Intent:
- whether a company sets out to internalise its partners skills or knowledge –
to substitute its own lack of competitiveness
Ø
Transparency:-
Whether the social context and transferability of skills aids the learning
process
Ø
Receptivity:-
Whether the organisation is capable of absorbing new skills or is prevented by
complacency, arrogance, legacy, etc.
Buzzel and Gale(1987):-
Most profitable firms where at each extreme – either fully
integrated or specialised. Those stuck
in the middle appear least profitable.
Mains reasons why firms integrate activities:
Ø
To ensure supplies and distribution
Ø
To ensure better production an inventory control
Ø
To achieve lower buying and selling costs
Ø
To build high entry barriers
Costs of integration:
Ø
Loss of specialisation
Ø
Imbalances in efficient scales of throughput
Ø
Loss of flexibility – slow to move
Ø
Increased capital requirements
(Miles and Snow)
Global competition has made extensive vertical integration
unsustainable. Large firms will have to
specialise where they have an edge. And
establish contracts with other firms to affect other activities.
Ø
Equal partners
Ø
Linkages guided by the market mechanism rather
than plans or mgmt controls
Ø
Broad access computerised information systems
…network structure is driven by the opportunity for lower costs –
it is a long term effort by a hub firm to develop and manage
inter-organisational relationships based on mutual trust
(Johnston and Lawrence 1988)
“A set of independent companies that work closely together to
manage the flow of goods and services along the entire value added chain”
Become increasingly important strategic options due to:-
Ø
The intensification of competition in the 80s
which forced firms to refocus their efforts
Ø
The globalisation of markets and the
accompanying need to build scale and presence
Ø
The inadequacy of internal resources to develop
successive generations of technology
Ø
The speed of change / the need to remain
flexible
Ø
The quest for improved quality
Ø
The pressures from investors on top management
to maximise return on assets and refrain from cross-subsidisation
Relationship
|
Nature
of relationship |
Market
transactions |
Ø
Low asset specificity Ø
Standard transactions Ø
No skills or incentives required to complete Ø
Communications and incentives via price
mechanism |
Collaborative
relationships |
Ø
Intermediate asset specificity |
Integration
|
Ø
Highly specific assets, proprietary technology
and KNOW-HOW Ø
Cannot easily be communicated Ø
Governed internally by organisational
incentives (pay, promotion, etc.) |
Core
skill |
Type
of advantage |
Locationally
specific assets (eg – mining) |
Location (resource mobility) |
Physically
specific assets (eg – possession of new process or efficient plant) |
Physical (technological advantages) |
Human
specific assets (know-how, experience, knowledge, etc.) |
Human (know-how advantages) |
Dedicated
assets (specific to particular transactions – eg- casts for car
components) |
Dedicated (specialised investment) |
Is influenced by the following factors:
Typical NPD times
The length of important capital investment projects
How long the firm can maintain a sustainable competitive edge with
existing products
Typical time-scales to acquire and develop important resources
Special situations such as financial crisis or threat of take-over
Ø
Geographic expansion (new country or region)
Ø
Vertical integration (forwards or backwards)
Ø
Diversification into related or unrelated
businesses
Ø
Development of core competencies
Ø
Growth by mergers or acquisitions
Ø
Downsizing or closure
Ø
Development of synergies between business units
Ø
Determining the basis of competition (low cost,
differentiation, hybrid)
Ø
Determining the market scope to be addressed
(broad or niche)
Ø
Design value chain to mach chosen strategy of
competition
Ø
Rapid NPD
Ø
Intensive advertising and promotion
Ø
Premium pricing
Ø
Variety of distribution channels
Ø
Must be appropriate to the firm’s position on
the industry, organisational lifecycles and as a leader or follower
Ø
Must be consistent with the firms strengths and
weaknesses, O&T
Ø
Must be consistent with the CEO & top mgmt
desires ( & shareholders)
Strategic fit =
When internal capabilities (mission, goals, strategy, S&W) fit
the external environment (environmental forces, stakeholders, competition,
opportunities, threats)
Three categories for evaluation:
Ø
Suitability
Ø
Feasibility
Ø
Acceptability
(See below for expansions)
Test of suitability:
Ø
Strategic
logic – matching environmental opportunities with available resources
Ø
Will the strategic options lead to a balanced
portfolio with businesses in different stages of lifecycle?
Ø
Are strategic alternatives appropriate (given
competitiveness and stage of maturity?)
Ø
Appropriate to leader or follower (whatever the
firm is)
Ø
Research
evidence – testing strategic moves against the findings of research
Ø
Cultural
fit – matching strategies to culture
PIMS = Profit Impact of Marketing Studies
On average market leaders earn rates of return three times as high
as competitors ranked fifth or lower in any market. But PIMS researchers believe the impact of market share was much
exaggerated by BCG. PIMS explanation is
broader:
Ø
High market share companies are able to buy in
goods and services at more competitive rates
Ø
They also benefit from experience curve effects
Ø
They also benefit from advantages of scale
Entails a thorough review of the org’s situation:
Ø
Financial
resources – for funding the strategy
Ø
Material
Resources – eg: machinery
Ø
Skills
base – mgmt and technical levels
Also involves reviewing
the consequences:
Ø
Impact on the market
Ø
Competitor reactions – which could negate the
strategy
Despite all other fits – the strategy must still prove acceptable:
Ø
Meet financial goals
Ø
Involve degree of risk which is acceptable
Ø
Fulfil expectations of key stakeholders
Ø
It presents a single integrated mgmt report on
the various components of the org
Ø
Forces mgmt to optimise use of all the resources
present
Ø
Provides link between long term strategy and
short term tactics
Ø
Do not mistake data for information
Ø
You are what you measure
Ø
What gets measured gets managed
= RONA, return on sales and sales generation (see diagram below)
EBIT = Profit before interest and tax = Profit before tax +
interest payable
Profit before interest > from P&L
account
Interest payable > from
notes
Net assets = total assets – current liabilities
Total assets and current
liabilities > from balance
sheet
The future sum to be received including compound interest is
expressed in relative terms to today.
The present value of £1 receivable in one years time including interest
at 10% is 90.9p. This is found be
expressing £1 today in terms of £1.10 (the sum to be received in 1 years time-
including interest). So that £1 in one
years time is equivalent to:-
£1/£1.10 = £0.909
Ø
Growth in sales
Ø
Profit margin on sales
Ø
Taxation
Ø
Fixed capital investment – replacement and
incremental (RFCI and IFCI)
Ø
Working capital investment (IWCI)
Ø
Cost of debt
Ø
Cost of equity
Ø
Gearing
If you borrow £100,000 at 12% interest, repaying the £100,000 at
the end of the term, the rate of return or cost of debt is 12%
The cost of equity is said to be made up of three elements:
1.
A basic return for providing capital (excluding
any extra return for taking risk)
2.
An extra return, experienced over time by the
whole stock market for investing in shares, whose prices may go up and down
3.
A measure of how typical a particular share’s
price movements are compared with the average movement of all shares on the
stock market
Example:
Debt = 100
Equity = 200
Ratio = 50%
For every £1 of equity, there is 50 pence of debt.
Or :- 33.3% of all capital is debt (debt (%)) and 66.7% of all capital
is equity (equity (%))
Cost of debt (%) x debt(%) + ROE (%) x equity (%) = WACC
Ø
The transition from growth to maturity in
developed economies, leading to over capacity (in many economies)
Ø
The need to compete against global market
leaders
Ø
The entry of aggressive competitors into niche
areas
Ø
The shift from integration to specialisation (in
terms of how much of the value chain orgs. own)
Ø
The shift in added value between the players in
the chain
Ø
The demands of innovation and faster
time-to-market performance
Awareness
Stakeholders understand and believe in the vmost and
implementation plans
Capability
Stakeholders involved believe they can develop the necessary
skills and therefore can cope and take advantage of these changes
Inclusion
Stakeholders feel they value the new roles and opportunities, and
choose to behave in the new ways(attitudes, skills and ways of working)
Distinctive features:
Ø
Comprise the means of deploying the corporate
strategy throughout the organisation
Ø
Cover shorter time horizons than the corporate
strategy & are more specific
Ø
Require active involvement of lower mgmt
Ø
Are developed for any unit or division
Ø
Need to be developed and co-ordinated to ensure
consistency with corporate strategy
Key factors include:
Ø
A
clear strategic aim – benefits often slow and intangible – costs
are more immediate and tangible – therefore people need to understand the
reasons for the change
Ø
Support
from the top – top mgmt accountable for the change. Important for people to see how it is being
controlled
Ø
Project
mgmt – major changes often lead to changes in the power
structure. Successful implementation
needs involvement of users and mgmt
Ø
Timing –
longer planning = quicker implementation – earlier success – faster diffusion
Ø
Pragmatism –
people respond to change positively of it deals with problems they recognise
Ø
Reward
systems – reward relevant behaviour – reinforces change – supports
implementation
Ø
Planning –
achieving ownership is crucial.
Managing stress, helping to cope
Ø
Using
existing systems – Where possible – maximum compatibility create
a much better basis for implementation
Ø
Co-ordination –
cross-functional problems
Ø
Role
modelling – leaders changing their behaviour to provide an example
Ø
Flexibility –
be flexible
Ø
Identify
clear targets – establish plans accountabilities and
budgets. Utilise a problem-orientated
approach to control. Search for a
solution – not for the guilty
Ø
The
environment in which the org operates (esp how volatile it is)
Ø
The
degree of diversity in products and markets – larger firms tend
to diversify into a number of markets and divisionalise their structure based
on products or regions
Ø
The
size of the company – bigger = more formalised and hierarchical
Ø
Technology –
physical hardware through which work flows (production plant)
Ø
Human
factors – work organisation is often inappropriate in factories to
people’s needs.
ALSO SEE 3.3.1 (for DIAGRAM)
(Linked to 5 phases of growth model above):
Ø
Differentiation (through marketing or
innovation)
Ø
Focus
Ø
Cost leadership
Ø
Asset parsimony (capital intensity)
The multi-divisional org has a number of independent businesses
which may interconnect with each other only marginally
Ø
Has its own well defined set of external
customers
Ø
Identifies a set of common but distinct
competitors
Ø
Function as a separate business
Ø
Defines its own strategy rather than being
dependent on other areas of the business
Ø
Measures performance in financial terms
(Doz and Prahalad 1991)
Essential characteristics of modern diversified internationally
operating companies:
Ø
Will not have pure organisational forms –
complete centralisation or total decentralisation
Ø
Processes and function capable of
differentiating between the needs of various products, countries, functions
Ø
Mechanisms for compromise - between various interest groups in the org
Ø
Optimal flow of information
Ø
Flexible organisational structure- to encourage
new channels of inter-unit collaboration and to sustain contacts with key
stakeholders outside the formal structure (suppliers, partners, etc.)
Ø
Sufficient stability and consistency to ensure
management tasks are carried out – but open to innovation and change
Where flexibility, learning, communication & interface skills
more essential than ever.
1.
Many change programmes fail because they are
implemented within a part of the organisation – little integrated approach
between divisions
2.
change may best be achieved by focusing change
efforts horizontally, along the customer value stream, rather than vertically
3.
Vital role of organisational learning in a
period of change – change requires and leads to learning
Two approaches to change:-
1)
a planned approach – decide direction, stages,
milestones, objectives, etc.
(Can lead to expectations over and above what can be achieved)
2)
a market-based approach (reactive) – incentivise
people in the pursuit of a particular direction, desired objectives, preferred
patterns, etc – but less concerned about milestones
(Market mechanisms used to incentivise change behaviour. So long as adequate resource, information
and support is provided, this often leads to dramatic changes in behaviour)
Crucial issue (SOCIAL CAPITAL):
Where virtual orgs, teaming and networks are so important,
cohesion becomes a major issue. New forms
are needed if the traditional ones of department and division no longer
exist. Social capital (social cohesion
/ social solidarity / shared values / common commitment) is essential to
success.
BPR requires a focus on a flow of interrelated tasks across
business units which are traditionally viewed in isolation.
Process improvement
These are essentially incremental advances at an operational level
(improvements in process efficiency, etc.)
Process re-design
An extension of process improvement beyond the boundaries of one
department for function (likely to result in greater improvements and
organisational changes)
Process re-engineering
A step change in managing processes by reconfiguring the value
chain from one side of the business through to the other. (higher risk than
first two)
Business re-engineering
Starts a level up from process re-engineering –and can involve
major changes to the relationships between business units, within
multi-business companies and between suppliers and buyers along the value
chain. (More externally focused than
others, and often requires transformational change to succeed)
(Hammer 1994) sees BPR being driven by :
Customers
More discriminating than ever before – means more demanding and
creating greater pressure for value, service and quality.
Competition
Deregulation and technological change have intensified rivalry –
new entrants can now challenge dominant players – barriers to entry are falling
and margins are declining
Change
Product and service lifecycles have been radically reduced, and
product opportunities open and close extremely rapidly
(Hammer) – main criteria for process selection:
Dysfunction:
Which processes are in the deepest trouble?
Importance:
Which processes do customers care about most? And which can determine customer
satisfaction and retention?
Feasibility:
Which processes can be re-engineered with the available resources
in the quickest time with the least resistance?
Ø
TQM
Ø
Value chain analysis
Ø
Business modelling
Ø
Work flow analysis
Ø
Outsourcing
Ø
Competitive benchmarking
Ø
Don’t devolved BPR to average performers
Ø
Don’t assign responsibility to an IS specialist
Ø
Don’t neglect a comprehensive measurement system
Ø
Don’t settle for the status quo or accept second
best because of resistance within the organisation to such radical change
BPR may:
Ø
Cut across mental models used to make decisions
Ø
Invalidate or call into question long held
values
Ø
Require the revision of habits built overlong
periods of time
Ø
Remove people from their comfort zones
Ø
Erode personal power bases
Ø
Challenge bureaucratic inertia
Emphasis on:
Ø
Time and patience
Ø
Consistency of commitment
Ø
Trust between members
Ø
Communications of project progress to the
organisation
Drew’s (1994) research found:-
Single most important barrier to success was organisational stress
(“future shock”). People stressed from
having to cope with increased workloads and technological change
“turkeys having to vote for Christmas”!!!
Companies usually underestimate the amount of communication and
education that are required
1.
Meeting customer requirements
2.
Conformance to specifications
Quality is applied to every area of the org. The aim being to produce zero defects.
1.
Create consistency of purpose toward improvement
of product and service
2.
Adopt the new philosophy
3.
Cease dependence on inspection to achieve
quality
4.
End the practice of awarding business on the
basis of price tag
5.
Improve constantly and forever the system of
production and service
6.
Institute training on the job
7.
Institute leadership
8.
Drive out fear
9.
Break down barriers between departments
10.
Eliminate slogans exhortations and targets for
the workforce
11.
Eliminate work standards (quotas)on the factor
floor
12.
Remove barriers that rob worker of their right
to pride of workmanship or craftsmanship
13.
Institute a vigorous programme of education and
self-improvement
14.
Put everybody in the company to work to accomplish
the transformation
1. Lack
of constancy of purpose
2. Emphasis
on short-term profits
3. Evaluation
by performance, merit ratings and annual review of performance
4. Mobility
of managers
5. Running
the company on visible figures alone
1.
Quality planning
2.
Quality control
3.
Quality improvement
1.
Mgmt commitment
2.
Quality improvement teams
3.
Quality measurement
4.
Cost of quality evaluation
5.
Quality awareness
6.
Corrective action
7.
Zero defect planning
8.
Employee training
9.
Zero defects day
10.
Goal setting
11.
Error cause removal
12.
Recognition
13.
Quality councils
14.
Do it all over again!
(Schaffer and Thompson (1992)) identified 6 factors which makes
TQM difficult to apply:
1.
Process rather than results orientated
2.
TQM is perceived to be too large-scale and
diffuse
3.
Bad results are excused for the sake of the
programme’s success
4.
Over-optimistic measurements of success
5.
TQM is staff and consultant driven (rather than
by line mgmt)
6.
TQM is biased to orthodoxy rather than
questioning cause and effect
Internal
Factors |
External
Factors |
Ø
Poor mgmt |
Ø
Decline of market |
Ø
Inadequate financial control |
Ø
Competitive pressure |
Ø
Lack of mktg / sales effort |
Ø
Product life-cycle |
Ø
High cost structure |
Ø
Other environmental factors |
Ø
Mistaken acquisitions |
|
Ø
Problems with big projects |
|
6 key factors help to determine the feasibility of recovery:
1.
The number of causes of decline
2.
Severity of crisis
3.
Stakeholder attitudes
4.
Strategic mgmt style
5.
Industry attractiveness
6.
Relative business strength
Cost reduction
May be implemented in conjunction with asset reduction and revenue
increasing. These are suggested where
sales are between 60 and 80% of break even.
When a firm is below but close to break even, reducing some costs can
tip the balance.
Revenue increase (product marketing focus and improved marketing)
These are recommended where sales are 30 to 60 % of the break even
point. Some immediate increases in
revenue may result from price-cutting, more advertising, or more direct sales
effort.
Asset reduction
These should be followed where sales are less than 30% of the
break-even point. The firm is in severe
financial crisis, so it has to divest itself of whatever assets it can realise
quickly.
|
Contraction |
Expansion |
Industry structure |
Ø
Reduce number of firms Ø
Concentrate on production capacity |
Ø
Arrange mergers Ø
Co-operative supply agreement |
Finance and liquidity |
Ø
Reduce overheads, costs working capital Ø
Sell off assets |
Ø
Re-establish profitability Ø
Raise cash for investment |
Mgmt and organisation |
Ø
Cut back admin. and central staff |
Ø
Appoint entrepreneurs Ø
Hold them accountable |
Planning and control |
Ø
Eliminate 5-yr planning control on tight
monthly budget |
Ø
Re-allocate resources based on strategy for
each operation |
Product / Markets |
Ø
Prune existing product line Ø
Close marginal business |
Ø
Invest in fewer key product/markets Ø
Introduce more cost effective products |
Production / Operations |
Ø
Fewer models, simpler designs, close capacity Ø
Reduce manning, move labour-intensive
operations |
Ø
Invest in latest machinery Ø
Involve work force in improved quality
productivity |
Technology |
Ø
Close obsolete plant Ø
Withdraw out-dated products |
Ø
Invest in modern process and new products |
Personnel |
Ø
Reduce manning Ø
Eliminate inefficient methods |
Ø
Increase productivity , re-train, increase pay |
Socio-practical |
Ø
Collaborate to build new businesses |
Ø
Collaborate to minimise social problems |
Process re-engineering is often associated with 80% failure rates
Turnarounds with 75% failure rates
Corporate acquisitions with 50 – 60% failure rates
More than 50% of new businesses fail within the first three years
(Peter’s and Waterman 1982)
Organisational structure is not enough – what really distinguished
excellent companies was culture. In
particular, a sort of people-centred culture that said people mattered, and
demonstrated this with lean structures, clear communication, and cross
functional project teams assigned with significant autonomy…… A supportive and friendly culture will win
individual’s emotional commitment to the organisation and its change.
Participative evolution – is said to be
required when the organisation is in fit with the environment, time is
available and key interest groups favour the proposed change. |
Charismatic transformation – is deemed
appropriate when the organisation is out of fit with the environment, there
is little time, but key interest groups support change. |
Forced evolution – is said to be
necessary with the same circumstances of organisational fit and available
time, but when key interest groups oppose the proposed change. |
Dictatorial transformation – is advocated
when the organisation is out of fit, has little time and change necessary for
survival is opposed be key interest groups. |
Or “Bounded by reality”:-
Individuals do not have the time or ability to consider all
options theoretically open to them in collecting and evaluating information.
The fundamental democratic and participative assumption of the
organisational development strategy, may be undermined by the way it is used
hierarchically by some senior managers.
OVERT
The classic management power of getting others to do what you
want.
Advocates using resources and power bases to achieve tasks
COVERT
The most visible people in decision making are not always the most
powerful.
Dominant groups can control the status quo by controlling agendas
and limiting who is involved in decision making
CONTEXTUAL
Power used to shape perceptions, cognition’s, and preferences so
that individuals accept the status quo because they cannot imagine any
alternative
3 Core activities for any organisation:-
This relates to
accomplishment of things such as:
Ø
Meeting delivery dates
Ø
Quality standards
Ø
Turnover targets
Includes activities and
systems such as:
Ø
Appraisal
Ø
Training
Ø
Budgetary control
Ø
Reward systems
3)
Adapting to the external environment
Includes:
Ø
Marketing
Ø
Product / service development
Ø
Public and community relations
…in businesses that have been turned round:- (Grinyer, Mayes and
McKiernan)
1.
adverse changes in total market demand
2.
falling revenues due to intense demand
3.
high-cost structure
4.
inadequate financial control
5.
poor management
6.
big projects that fail
7.
acquisitions
8.
lack of marketing / sale effort
9.
poor quality / reliability
(Grinyer, Mayes and McKiernan)
1.
action-orientated mgmt
2.
effective financial controls and mgmt information
3.
an emphasis on people within the firm
4.
good internal communications and industrial
relations
5.
simple organisational structure with a small
head office
6.
incentives and motivation for employees
7.
a clear product market focus with a deliberate
concentration on what the firm can do best
8.
an emphasis on customers
9.
a strong market focus
10.
a drive for quality
11.
delegation of operating decisions to responsible
cost and profit centres
12.
regular reviews of strategy (the formality of
this process tends to increase with firm size)
13.
forward looking approach which invests in the
future through plant, equipment, R&D and training
Concerned to assess the following:-
Ø
Organisational
effectiveness – the effective organisation provides a launch
pad for change because it is effective (and therefore generates adequate
revenue) and efficient (and therefore has motivated staff)
Ø
Organisational
capability – overlaps with effectiveness, but looks at potential to improve
the firm
Ø
Releasing
potential – an ignition system within the firm that will allow the potential
to be realised
Whilst only individuals actually learn – if we can observe changes
in culture and behaviour over a period of time then the consequences may be
more wide-reaching. In this case we
might refer to organisational rather than just individual learning.
(Senge 1990) The 5 skills or characteristics are:-
Ø
Systems
thinking: Everyone must learn how
to view things as a whole – and that events impact other things
Ø
Personal
mastery: continually clarifying
and deepening personal vision / focusing energies / developing patience /
seeing reality objectively
Ø
Mental
models: holding mental perceptions of reality and holding them
rigorously to scrutiny
Ø
Build
a shared vision: everyone holding a shared vision of the future
(leadership is key here). The leader
creates vision but is willing to have it reshaped by others.
Organisation go through an eco-cycle comprising of 8 stages:
1.
Strategic mgmt
2.
Consolidation
3.
Crisis
4.
Confusion
5.
Charismatic leadership
6.
Creative network
7.
Choice
8.
Innovation
…found present in the most successful operations (Hayes):
1.
all employees are responsible, thinking adults
who want to do their best
2.
human resources are too valuable to waste or to
leave untapped
3.
creative talents and skills are widely
distributed at all levels of an organisation and society
4.
workers will surface important problems and
concerns if they feel the organisation will respond appropriately
5.
work is more interesting when people are
challenged in performing it
6.
people take pride in training others
7.
better performance occurs when artificial
differences in how people are treated are removed
8.
real responsibility motivates high performance
9.
people make better decisions and implement them
better when they work together
Learning is as much about changing attitudes and perception as it
is about learning skills (production techniques or a new discipline)
Ø
Diverger
proceeds from feeling and watching
Ø
Assimilator
proceeds from watching and thinking
Ø
Converger
proceeds from thinking and acting
Ø
Accomodator
proceeds from acting and feeling
Key activities of the change agent should be:
Ø
To formulate and implement the change programme
Ø
To gain acceptance of the change so that it is
internalised into daily operations through motivation and commitment
Ø
To interface between change, the org and those
involved
The interpersonal skills rather than their technical ability are
most important(p121)
Plus:
Change Factors
Ø
The type of change to be implemented (major /
enhancements / structural / etc)
Ø
Specialist skill requirements (technology)
Ø
The pace of change required
Organisational Factors
Ø
The general climate for change
Ø
The familiarity of the org with change
Ø
Senior managers support
Ø
Views and approaches to change
Personal Characteristics
Ø
Competence (technical and interpersonal (see
above))
Ø
Strengths and weaknesses (esp. technical and
interpersonal)
Ø
Mgmt style, personal values, interests and
assumptions, etc
Ø
Power, position and reputation
Advantages |
Disadvantages |
Access to resources |
Too remote from people or situations to be changed |
Power and influence to implement change rapidly |
Acting on unreliable info. Filtered upwards and misinterpreted
or translated |
Easy access to and influence over org strategy and strategic
info. |
People comply because of the change agent’s position of
authority rather than their commitment to the change |
Global views of the issues |
People may be resistant because introduction at this level is
seen as coercive. |
Advantages |
Disadvantages |
A change at the top can symbolise to all that change is about to
happen |
Poor assessment of the situation and inappropriate decisions may
be made as knowledge is weak |
A fresh perspective of the opportunities, constraints and
problems can be taken without distractions of existing loyalties or politics |
A reliance on secondary information which may be distorted or
misunderstood |
Advantages |
Disadvantages |
Free of cultural and political influences – can take a more
rational and objective approach |
Like a new CEO, they lack organisational knowledge – may
undermine solutions |
May gain greater co-operation form those affected if they are
perceived to be politically neutral |
Usually report directly to senior mgmt, which can influence
proposals and actions offered and accepted |
Can strengthen existing mgmt teams in compensating for lack of
specific change mgmt skills |
Not totally unbiased. They have preferred methods |
|
Generally employed to manage specific change programmes already
identified by the org. The problem
may have already been mis-identified. |
Advantages |
Disadvantages |
Closer to problems, conditions and solutions |
Often merely added to their every day jobs – role conflict –
lack of commitment, motivation and time |
Can be used as an opportunity to develop the manager’s skills
and expertise – gradually diffusing change expertise throughout the org. |
Not all managers enjoy the challenges and pressures of change |
Manager’s personal network can be extended as operational
boundaries are crossed – improving formal and informal communications and
understanding |
Conflicts can arise from working outside operational and
hierarchical boundaries 0 can be challenged by peers and superiors |
Motivation and org loyalty can be improved as managers are stimulated
by the challenges/demands placed on them |
Inadequate support and training is common |
Commitment to the notion of change increases |
|
Advantages |
Disadvantages |
Multi-disciplinary nature of a team means the problems can be
tackled form a number of angles.
Barrier to the change can be better understood |
Departmental managers reluctant to release staff for projects
(hence, top mgmt support critical for success) |
Acceptable solutions are often found as team members own the
implementation – and have to face the consequences of poor solutions when
they return to their departmental role |
Conflict between established structures and the team |
Can break down org. barriers through their diverse constituency |
Team not always given authority required |
Complex change can be broken into manageable chunks and member’s
skills used accordingly |
Effective team working needs personal investment into learning
how to work in groups |
Can help individuals develop skills and improve motivation and
commitment to change |
Specialists may experience role conflict if asked to work
outside their core competency |
With any change effort – it requires an element of risk. Like individuals, organisations have varying
acceptance to risk.
Organisations indicate their acceptance of risk through implicit
and explicit action (who gets promotions, rewards, type of projects, etc.)
1. Option
(describe)
2. Resources
(analyse)
3. Benefits
(establish)
4. Risks
(quantify – probability of success?)
Unfreeze
…current situation and perceptions by identifying and surfacing
dissatisfaction with the current state
Implement
Once people see for themselves the need to change they will be
ready to look for or accept the new situation
Re-freeze
Change can only be regarded as successful if people accept and
adopt new behaviour and internalise it into their daily operations
Fear |
|
Lack of commitment |
A feeling that skills may be inadequate |
|
People perceive the need to change differently from managers |
Fear that they may lose their job |
|
People perceive the needs of change or the change plans
differently from managers |
Fear that they may be presented with difficult situations that
may require them to adopt new situations, jobs, routines of work with a new
set of people |
|
People perceive that changes are likely to undermine personal
power or reputation |
Fear that flatter structures may reduce career opportunities |
|
People perceive the costs to them personally being greater than
the benefits |
Fear that increased responsibility or extra work requirements
will lead to failures and stress |
|
|
Communication is an essential part of the change process. Change agents need to communicate their
vision of the future and the path that will take them there.
(Handy1985):
Ø
Use several communication methods- (formal and
informal)
Ø
Encourage 2-way communication – it can allow
change agent to check the masses’ understanding of the change (feedback,
questions, etc)
Ø
Keep links with the communication process short
(reduces likelihood of confusion)
To do this people need:
Ø
Intelligible information
Ø
To develop new skills
Ø
Support to help them deal with problems
Ø
Encouragement to try new systems
It is further suggested that the following are important for
improving performance:
Ø
Provision if short workshops
Ø
Technical support
Ø
Access to people who can help
Ø
Control over the rate of individual learning
Ø
Empathy with individuals
..us to:
Ø
Provide
people with help to deal with the change
Ø
Avoid
over-organising so that there is flexibility to deal with problems
Ø
Communicate
effectively
Ø
Recognise
the problems that others experience as real – and empathise
Ø
Gain
full commitment to change by supporting people
(Kotter 1988)
Managing =
Fundamental processes such as :- planning, organising, budgeting,
controlling.
Whereas leaders are responsible for creating:
Ø
A vision
Ø
The best strategy to achieve the vision
Ø
The ideal environment for the strategy and the
vision
2 Main characteristics:
Ø
They have a high self-regard
Ø
They are outcome driven
Areas of Competence (Bennis and Nanus)
Ø
Mgmt
of attention – ability to communicate clear objectives and
directions
Ø
Mgmt
of meaning – communicate meaning clearly, achieving understanding
Ø
Mgmt
of trust – to be consistent in complex circumstances, so that people can
depend on them
Ø
Mgmt
of self – to know ones self – and to work with ones strengths and
weaknesses
Ø
Diagnosing –
being able to understand the situation, now, future and gaps
Ø
Adapting –
…your behaviour and other resources in ways that help to close performance gaps
Ø
Communicating –
even if you know what needs to be done and how – you must be able to
communicate it effectively in order to achieve
Transactional leaders focus on:
Relationships issues and their ability to dominate others. They motivate through the use of sanctions
and punishment or rewards.
Transformational leaders use:
Their personal talent, creativity and vision to motivate people
and empower them to transform social systems and create change.
Ø
People feel significant
Ø
Learning and competence matter
Ø
There is a team spirit, flexibility and
excitement
Ø
Quality and excellence matter and are something to
strive for
Ø
Has there been unsuccessful past experience of
change?
Ø
Do we have a risk averse culture?
Ø
Are there communication problems?
Keep everyone informed by making information available, explaining
plans, allowing access for questions,
Show how change fits business needs.
Start small and build up
Ø
What are people’s expectations of change?
Ø
What are the objectives of change?
Clarify the benefits of changes to those involved (and to the
company)
Emphasise where new systems utilise existing knowledge
Minimise surprises
Communicate plans – in specific terms familiar to the audience
Ø
Are procedures, systems, departments, product
and service seen as a problem?
Ø
Who planned the changes – top mgmt or staff
department?
Plan for visible outcomes for change
Clarify employee’s views – explore concerns
Specify who wants change and why
Ø
Will top mgmt support the changes openly?
Ø
Will they provide necessary resources?
Ø
Is mgmt performance appraisal an obstacle to
change?
Build a power base by becoming the expert in problems involved
Develop clear objectives, plans & timetable
Ø
Do planned changes fit other business plans?
Ø
Is there a clear sense of direction?
Ø
Do the proposed changes place greater demands on
people?
Ø
Does it involve new technology / expertise?
Identify relevance of change plans by reviewing and specifying how
it fits
Implement changes using flexible, adaptable people, familiar with
the change
Do not over sell change.
Be clear about conflicts.
Ø
Will team members be inflexible?
Ø
Will manager have to work hard to ensure
commitment?
Ensure that team has clear and agreed goals
Involve all members of the team in ways they each see as relevant
Be prepared to face and deal with conflict
Ø
Do we have clear plans, deadlines and
milestones?
Ø
Is there clear accountability?
Ø
Do we have a realistic timetable?
Assign one person to be accountable overall
Define goals carefully by checking feasibility with those involved
Define specific goals with small clear steps
Translate plans into action by publishing them
Ø
How wide is the scope/scale of change?
Ø
Are people supportive, informed, prepared?
Plan the rate of change carefully by piloting to learn from
experience
Enlist firm support – ensure all is well understood
Ø
Are we providing specific, relevant training?
Ø
Is it flexible and geared to people’s needs?
Ø
Is it supported in the work place?
Ø
Are we targeting the right people for training?
Clarify objectives of training
Use existing skills and knowledge
Allow people to learn at their own pace
Use different learning approaches
Incorporate feedback into training programme
Ø
Does the change impose new controls on people?
Ø
Does it reduce discretion?
Ø
Are there incentives built into the change?
Enhance people’s jobs and status
Ensure quick, visible benefits
Provide incentives
Involve people by asking for suggestions
Ø
Do visible benefits occur?
Ø
Is the impact on cost, performance, profit well
documented?
Ensure results are well documented, accessible and described
positively
Arrange wide recognition of success of people involved throughout
the org
Ø
Are people subject to high levels of stress?
Ø
Is performance declining due to stress?
Ø
Is there a high incidence of people problems?
Plan change to control the impact on people
Seek ways to control the pressure
Allow more resource and time where changes are novel
Empathy – communicate then listen
Include:
Ø
The use of project mgmt – which encourages
people to work together to achieve common goals
Ø
Mgmt by walking around – helps to break down
barriers between different levels of hierarchy
Ø
The use of education and participation methods
to encourage people to work together continuously
Ø
Gain information and sow seeds for change
Ø
Get to know and understand people who may need
to be influenced
Ø
Build foundations for support and communication
Ø
Help to identify common experiences and surface
differences before they become problematic
Ø
Widen their sources of input
Perception
The need for change is recognised by all
Potency
Those who feel the need must be able to affect the change
Political will
A consensus amongst those who can promote change
Precision
In pin-pointing the areas for change
Planning
The answers to : “what has to be done?” / “who is responsible?”
The need for change (or constant adaptation) :- Will Smith once said “You can be on the
right track but you’ll get run over if you just sit there)
Components of corporate strategy:
Ø
Choice of generic strategy direction
Ø
Choice of product-market scope direction
Ø
Choice of value-chain positioning
Ø
All 3 put together = corporate strategy
Internal focus :=
KSF’s of the industry
Key resources and competencies possessed by the firm
Matching them!