• considers the longer term (think of a time-horizon of about five years or beyond)
• considers the whole organisation.
• it gives direction to the whole organisation, and integrates its activities
• it considers all stakeholders
• it looks at how to gain a sustainable competitive advantage
• it relates the organisation, its resources and competences to its environment.
Aim of fulfilling S/K expectations. 3 main groups to influence: Environment, Strategic capability, Expectations of Stakeholders
Strategic decisions - made under conditions of complexity and uncertainty; they have wide impact on the org and often lead to major change
Strategy: pattern of activities that seeks to achieve objectives of orgn and adapt its scope, resources & operations to environmental changes in the long term
Strategic Planning Process
- Set missions
- Establish objectives (Repeat after 7)
- Internal & External appraisal / Sk/h Appraisal (Repeat after 7)
- Generate strategic options
- Strategic choice
- Plan & implement strategy
- Review & Control
Advantages of Strategic Planning
forces organisations to look ahead
improved fit with the environment
better use of resources
provides a direction/vision
helps monitor progress
ensures goal congruence
Disadvantages of Strategic Planning
can be time consuming and expensive
may be difficult in rapidly changing markets
can become a straightjacket
some unplanned for opportunities may be missed
can become bureaucratic
is less relevant in a crisis
Functions of Planning
What does planning do?
Planning - objectives define what the plan is about
Responsibility - objectives define the responsibilities of managers and depts
Integration - objectives should support one another and be consistent; this integrates the efforts of different depts
Motivation - the first step = Objectives must be created for all areas of performance
Evaluation - performance is assessed against objectives and control exercised
MbO Management by objectives
SMART Goals and objectives should be
Realistic (or results focused)
JS&W Characteristics of Strategic Decisions
High degree of uncertainty
Implications for organisational culture
Massive impact on operational decision-making
Affect the org as a whole
Integrated approach reqd
Lead to change
JS&W 6 areas for decision making
- Org LT direction
- Scope of orgs activities
- Advantage in competition
- Adapting their activities to fit the business environment (evolving with customer reqmts)
- Exploit special resources and special competences
- S/K values and expectations
Planning Models - Strategy
- JSW: Rational Model - Strategic Planning
- Mintzberg: Emergent Strategies
- Lindblom: Incrementalism
- Free-wheeling Opportunism
JSW Strategic Planning (Rational Model)
Time span several years
- Strategic Analysis (SWOT PESTEL Cost/Benefit, Environment, Capability, Expectations)
- Strategic Choice (Market, Price, Location, Resource, Direction and method)
- Strategic Implementation (Make it happen)
Mintzberg: Emergent Strategies
-Strategic planning results from a number of ad-hoc choices, perhaps made lower down the hierarchy
-Objective of strategy is unclear and elements still develop as the strategy proceeds, continuously adapting to changes
-Strategy is evolving, incremental and continuous
Involves small scale extensions of past practices "incrementals" which is more successful as likely to be more acceptable as consultation, compromise and accommodation were built into the process
- Rational planning impossible and likely to result in disaster if actively pursued
- Don't like planning really
- Once set up and established, owner loses interest
- Prefer to see and grab opportunities as they arise
- Planning takes too much time and too constraining
- Enjoys taking risks
Free-wheeling Opportunism - advantages
- Flexible and can spontaneously adapt to a rapidly changing situation
- None of the procedural constraints that formal strategic planning has
- Decisions can be made rapidly and implemented, giving the org a competitive advantage
- Supports & encourages an innovative culture in org
Free-wheeling Opportunism - Disadvantages
- No long term vision for future
Threats may not be seen in advance
- In large undertakings, sub-optimisation will occur when it is used No clear objectives to work towards
Factors to consider when determining planning method
- Size and leadership style
- Org culture and structure
- Nature of its activities
- Skills and aspirations of its managers
The Strategy Lenses Coming together of three areas
Strategy is likely to come from a variety of sources and a combination of Planning Models. Johnson and Scholes suggest that strategy will be formed through the coming together of three 'strategy lenses'
Strategy as design - rational top down process; mgrs analyse/evaluate strategic constraints to establish clear & rational course of strategic action
Strategy as experience - worked in past, uses this to predict future
Strategy as ideas - innovation & diversification of ideas come from all EEs
Environment may be divided into 3 concentric layers:
-competitors & markets
The layers and the elements within them all interact with one another
The Environment - Analysis of Macro Environment
Key drivers of change
OT of SWOT
The Environment - Analysis of Industry or Sector
- Porters 5 forces
- Life Cycle Model
The Environment - Analysis of Competition and Markets
- Strategic groups
- Market segments
- Cycles of Competition
The Environment - Forecasting Analysis
- Time Series
Political taxation policy, government stability and foreign trade regs.
Economic interest rates, inflation, business cycles, unemployment, disposable income and energy availability / cost.
Social population demographics, social mobility, income distribution, lifestyle changes, attitudes to work / leisure, levels of education and consumerism.
Technological influenced by govt spending on R&D, govt and industry focus of technological effort, speed of technological transfer and rates of obsolescence.
Ecological/environmental org produce goods with min environmental damage
Legal influences e.g. taxation, employment law, monopoly legislation and environmental protection laws
Key drivers of change
Market globalization (consumer tastes, improvements in global comms/logistics)
Cost globalization (economies of scale, experience effects, sourcing efficiencies, exch rate, high costs of product development)
Govt activity and policy (free trade, technical standardization)
Global competition (competitive forces, exit/entry strategy)
Economies of scale - Environment
Arise when a business grows to the extent that it is able to increase its input of all 4 types of productive resource: land, labour, capital and enterprise. The effect is to cause the whole structure of short-run costs to fall
Environmental Protection Policy
-Key aspect of corporate social responsibility
-Green pressure groups increased membership & influence #-Employees are increasing pressure on the businesses in which they work on safety and public image
-Legislation is increasing almost by the day
-Environment risk screening has become increasingly important
How green issues impinge on business
- Consumer demand for products that appear friendly
- Demand for less pollution from industry
- Greater regulation by govt eg recycling targets
- Demand that businesses be charged with the external cost of their activities
- Scarcity of non-renewable resources
- Opportunities to develop products and technologies that are environmentally friendly Taxes
6 ways business & environmental benefits can be achieved
1. Integrating the environment into capital expenditure decision
2. Understanding and managing environmental costs
3. Understanding and managing life cycles costs
4. Introducing waste minimisation schemes
5. Measuring environmental performance
6. Involving management accountants
Industry / Sector Analysis
Porters Five Forces - (use to assess if industry attractive)
Influence the state of competition in an industry, and collectively determine the profit potential of the industry as whole
Threat of new entrants to the industry
Threat of substitute products or services
Bargaining power of customers
Bargaining power of suppliers
Rivalry amongst current competitors in the industry
Govt - the 6th force - Policies - can encourage /restrict
Industry / Sector
Past: carried out separate PESTEL and 5 Forces analysis for mobile phone industry, mp3 industry, camera industry
Present: started to converge and many products (Apple i-Phone) offer all features. This convergence is likely to increase as technology advances ∴ companies facing greater levels of substitutes than before
Use PESTEL and 5 Forces
Focuses on the 'most likely’ potential future market state
Gives best case and most likely scenario
Time consuming and expensive to carry out
1. Decide drivers for change
2. Bring drivers together into a variable framework
3. Produce 7-9 mini scenarios
4. Group mini scenarios into 2-3 larger scenarios
5. Write the scenarios
6. Identify issues arising
Industry scenario analysis (5 types)
*Assume most probable - puts too much faith in scenario process / guesswork
*Hope for best - firms design strategy based scenario most attractive to them - wishful thinking
*Hedge - firm chooses strategy that produces satisfactory results under all scenarios. Not optimal.
*Flexibility - firm plays a "wait and see" game. Safer but sacrifices "first-mover" advantages
*Influence - firm tries to influence future by influencing demand for related products in order that its favoured scenario will be realised
Analysis of Environment
Factor conditions physical resources: land, minerals weather, capital , skills, motivation, price, industrial relations, infrastructure.
Demand conditions: demand for product / service. Determines how buyers responds / perceives - creates pressure to innovate.
Relating and supporting industries: Supported by a network of related industries. Assist growth
Firm strategy, structure and rivalry: organisational goals can be determined by ownership structure. Unquoted companies may have slightly longer time horizons to operate in because their financial performance is subject to much less scrutiny than quoted companies.
Diamond - Demand conditions
No cultural impediments to communications
Perceived demand of home market
Sophisticated and demanding buyers
Anticipation of buyer needs
Rate of growth
Early saturation eg US customers needs high customer service
Influencing the diamond
Clustering is key to national competitive advantage.
Cluster - linking of industries through relationships that are either vertical (buyer-supplier) or horizontal (common customers, technology, skills). Govt can influence context and create clusters
Linear regression analysis
Also known as the "least squares technique" Derives line of best fit Y=a+bX Y - dependent variable X - the independent variable a - intercept of the line on the Y axis b - gradient Don't extrapolate past set span - cannot be used to predict future reliably
Limitations of Simple Linear Regression
1. Assumes linear relationship between variables
2. Only measures relationship between two variables
3. Only interpolated forecasts tend to be reliable (extrapolation no good)
4. Regression assumes historical data continues into the future
5. Interpolated predictions are only reliable if there is a significant correlation
Relationships between two variables and is measured by r (Pearsonian correlation coefficient).
Closer r is to +/-1 the stronger the relationship between the two variables. If r>0.8: strong positive correlation
Two variables might be:
(a) perfectly correlated
(b) partly correlated
The coefficient of determination
r2 is always between 0 and 1
Higher, the more confidence one can have in the equation
Example: "factory overhead is a function of machine-hours with r2 = 0.80," ⇒ "80% of the total variation of factory overhead is explained by the machine hours and the remaining 20% is accounted for by something other than machine-hours." The 20% is referred to as the error term
Time series analysis
Series a b c d e
Moving average M: average of a + b or c + d
Centred average C: average of M1 and M2
Variation: M1 - b or M2 - c
Time series analysis - advantages
Can be non-linear
Identifies seasonal variations
Time series analysis - disadvantages
Based on historical data
Less useful in the long term
Seasons may change
Delphi Techniques:- Selecting panel of experts, each asked to produce an independent forecast. These f/casts are shared and each then goes to produce a revised f/cast. Process continues until they are in agreement and a definitive f/cast is produced Sales force opinions:- Sales mgr gathering input from the sales team and collating their opinions into an aggregate f/cast Executive Opinion:- arise from meetings of high level mgrs during which they develop f/casts based on their knowledge of their own individual areas of responsibility Market research:- Involves use of customer surveys to evaluate potential demand
Critical Success Factors
-Essential areas of the business that must be performed well if their mission, objectives and goals of the business are to be achieved -Performance requirements
-Features valued by customers e.g. profitability, market share
CSFs are measured by KPI
Key Performance Indicators
Quantitative - Sales, Costs, ROCE
Qualitative - Market share, Customer returns
Relative or absolute - Complaints per customer (not total complaints)
Value for money - effectiveness and efficiency
CSF: Health & Safety
Indicator: Accident record
Mechanism: Inspection of records
Disadvantages of Non Financial Performance Indicators
- Setting up time consuming and costly
- Complex system that managers find difficult to understand
- No clear set of NFPI that org can use
- Comparison with other orgs limited
Ashbridge College Model of Mission
Links business strategy to culture & ethics through 4 separate elements:
PURPOSE - why does org exist & who for
VALUES - beliefs / moral principles that underlie org's culture
STRATEGY - provides commercial logic i.e. What is our business? what should it be?
POLICIES & STANDARDS OF BEHAVIOUR - provide guidance on how the org's business should be conducted (Mission leads to motivation) Reflects the values or expectations of stakeholders and answers the question 'what business are we in'
Individual factors that are valued by customer and hard to copy.
Assess RESOURCES and COMPETENCES against capabilities
For competitive advantage:
Unique resources - special needs of business (tangible and intangible)
Core competences - Abilities that lead to competitive advantage
Competency - Organisational Knowledge
Strategic Capability and Resource Audits
Resource audits look at SW of SWOT. Tangible and Intangible Resources
9 Ms model - factors:-
Make-up (culture, structure, brands)
Mgmt info Markets
Materials Men and women
Product Life Cycle (Can be applied to industry as well as product)
Consider the following cost factors for each stage:
Product development / improvement
Marketing costs Competition costs
Production cost per unit and Total costs
Product Life Cycle - Introduction
(Consider customers, R&D, company, competitors, profitability)
Characteristics: slow sales growth, high unit costs
Strategic capability: Marketing skills to stimulate demand
A development stage comes before inception / introduction
Product Life Cycle - Growth
(Consider customers, R&D, company, competitors, profitability)
Characteristics: sales will rise, unit costs falls
Strategic capability: Resources and production capacity to meet demand
Product Life Cycle - Maturity
(Consider customers, R&D, company, competitors, profitability)
Characteristics: growth rate slows, profit good
Strategic capability: Competitive skills and support/defence of CSFs
Product Life Cycle - Decline
(Consider customers, R&D, company, competitors, profitability)
Characteristics: sales decline, falling profits
Strategic capability: Ability to find and exploit new growth opportunities If fail, next step...
Senility: Characteristics: loss, falling sales
Contents of Mission Statement
Policies, standard of behaviour
Advantages of Mission Statement
Help resolve stakeholder conflict
Set the direction of the organisation
Communicate values /culture internally
Helps the marketing process by communicating with customers
Disadvantages of Mission Statement
Full of meaningless terms like "best" - staff don't know what to aim for
Written retrospectively to justify past actions
Ignored by managers
Might simply be a public relations exercise
Stakeholders - types
Internal - employees
External - Govt, unions
Connected - Customers, suppliers, banks
Mendelow Matrix: Stakeholder Mapping
to help analyse stakeholders
4 models of corp gov
1. Anglo saxon - fast in action but short termist and unresponsive to external criticism
2. Rhine - has more robust gov and takes a long view of investment
3. Japanese - values consensus, takes a very long view and makes decision slowly. Accountability and gov may be poor
4. Latin - emphasises the role of the state: investment likely to be for the very LT but gov may suffer from political activity
Implications of governance for strategy
• Increasing power of governance bodies.
• Increasing SH power, ensuring companies are run with S/H interests prioritised.
• Greater pressure on boards to formulate strategy and be seen to control the businesses concerned.
• Greater scrutiny of quoted businesses, resulting in more short-termism.
• Greater emphasis on risk assessments, so directors may feel pressured to undertake lower risk (and hence lower return) projects.
• Greater scrutiny of mergers and acquisitions in particular
Recognises that Org is evaluated not only from financial perspective, but that a wider spectrum of stakeholders need to be considered for organisational reports.
These stakeholders are increasing concerned about areas such as governance and the organisation’s impact on society as a whole.
Integrated Reporting - Contents
- Re-emphasising mission and values
- Insight into progress made towards strategic goals
- Communicate or reinforce its strategy to its S/K
- Progress through relevant measures of strategic performance.
- Failure to meet set targets can be commented upon and remedial actions, if appropriate, can be outlined.
Porters Value Chain
Using the value chain
A firm can secure competitive advantage in several ways:
- Invent new or better ways to do activities
- Combine activities in new or better ways
- Manage the linkages in its own value chain
- Manage the linkages in the value network
Use to decide how individual activities might be changed to reduce costs of operation or to improve the value of the organisation’s offering
The organisation’s value chain does not exist in isolation. There will be direct links between the inbound logistics of the firm and the outbound logistics of its suppliers, for example. An understanding of the value system and how the organisation’s value chain fits in to it will therefore aid in the strategic planning process.
Shell Directional Policy Matrix
Designed as a guide to strategy
Porter Competitive Strategy Options
Analyses strategies in terms of price and perceived value added. Customer will buy from the provider whose offering most closely matches their own view of the proper relationship between price and perceived benefits
Each position has its own CSF since each position is defined in market terms.
Strategy Clocks - positions
1 No frills (Ryan Air)
2 Low price (Dell)
3 Hybrid (IKEA)
4 Differentiation (British Airways)
5 Focused differentiation (First Class Service on Airlines)
6, 7, 8 Strategies destined for ultimate failure (high price, low perceived added value due to rival options) (iPad)
Price v Perceived Benefit (Quality)
Strategy Clock - Diagram
Competitive Advantage for Success
Theory holds that relative opportunity costs determines the appropriateness of particular economic activities in relation to other countries
Competitive Strategy for Success: cost leadership, differentiation, focus
Consider how, benefits, threats, suitability
Valued, rare, robust
Price based strategies
• further cost efficiencies,
• winning price wars, or
• accepting lower margins.
LOCK IN STRATEGY
This approach can work for both price-based and differentiation-based strategies. It happens where a business’ products become the industry standards. Examples are:
• Microsoft Windows
• Internet explorer
where the frequency, audacity, innovation and aggressiveness of competitors creates an environment of constant movement and change. Examples are seen in:
• the impact of the internet on the music business
• technological developments in telephony
Repositioning on the Strategy Clock required
Process of gathering data about targets and comparators, that permit current levels of performance to be identified and evaluated against best practice.
Compare competitive position to rivals
Adoption of identified best practices should improve performance
Historical benchmarking - internal comparison of current against past performance.
Unsatisfactory as can induce complacence
UK public sector: league tables are example of this approach.
Best in class benchmarking - looks for best practice wherever it can be found. Involves making comparisons with similar features or processes in other industries.
Advantages of benchmarking
Set targets / best practice
Monitoring performance between departments
Find area for improvements
Shows efficiency of the creative process
Disadvantages of benchmarking
Time consuming / costly
Specific / meaningless (can be about doing things right rather than doing the right thing)
Hard to gather info Info historic and maybe beyond our control
Distorts attention to benchmarked areas only (yesterdays solution to tomorrows problems)
Staff may feel threatened
Doesn't identify reasons
Depends on accurate info
Strategic Choice - Models to use
Exploits SWOT strategies:
SO - use strengths to maximise opportunities (maxi maxi strategy)
ST - use strength to minimise threats (maxi mini strategy)
WO - minimise weaknesses by taking advantage of opportunities (mini maxi strategy)
WT - minimise weaknesses and avoids threats (mini mini strategy)
Growth Vector Matrix
Describes how a combination of a firms activities and new products can lead to growth
Strategy is assessed by considering:
EVALUATION of Strategic Choice
Suitability - consider OT of SWOT
Acceptability - stakeholders like? Cash? Risk/Return
Feasibility - consider SW of SWOT For each item above draw a conclusion
Use the above to evaluate Financial Choices
Develops strategy in small experimental steps.
Resource allocation procedures may lead to the emergence of strategy, as may the cultural processes that make up the paradigm
Simple and static conditions permit the planning approach.
Stable but complex environments promote decentralisation of strategic development.
Assess: Suitability, Feasibility, Acceptability
Alternative Methods of Strategic Development
Acquisition - Advantages
it is a quick way to grow
there can be synergistic gains
acquire the necessary strategic capabilities
overcomes barriers to entry
can choose a target that fits best (see portfolio analysis later)
enhances reputation with finance providers
Acquisition - Disadvantages
can be very expensive
synergies are not automatic
can lead to cultural clashes
there may be legal barriers to overcome (e.g. competition law)
all parts of the target are acquired (including its problems)
requires good change management skills
Organic Growth - Advantages
can spread the cost
no cultural clashes or control issues
can be set up in any way
may get access to government grants
easier to terminate
can be developed slowly (less risk)
Organic Growth - Disadvantages
lack of experience in new areas
less attractive to finance providers
there may be barriers to organic entry
it may be too slow
no access to skills, reputation etc. or other strategic capabilities required for success
managers may be spread too thinly
Joint Venture - Advantages
can share the set-up and running costs
can learn from each other
can focus on relative strengths
may reduce political or cultural risks
it is better than going it alone and then competing
Joint Ventures - Disadvantages
can often lead to disputes
may give access to strategic capabilities and eventually allow the partner to compete in core areas
there may be a lack of commitment from each party
requires strong central support which may not be provided
transfer pricing issues may arise and performance appraisal can be complicated
Franchising - Advanatages
receive an initial capital injection
can spread brand quickly
easy to terminate
a good way to test the market before full investment
franchisee may provide better local knowledge
franchisor management can focus on strategic rather than operational issues
Franchising - Disadvanatages
may give access to strategic capabilities and eventually allow the partner to compete in core areas
there may be a lack of goal congruence
there is a loss of control over quality, recruitment etc.
there may be a lack of consistency across franchises
it may be difficult to attract franchisees
Looks at the relationship between HQ and individual business units. This will become more important if a business follows the route of growth through acquisitions – the aim will be to become a good "parent" to new subsidiaries.
Goold and Campbell (1991) identified three broad approaches or ‘parenting’ styles reflecting the degree to which HQ becomes involved in the process of business strategy development.
3 approaches to parenting style Goold & Campbell Theory
Strategic Planning - Head office decides everything
Financial control - Subsidiary decides how to get there within set financial targets Strategic
Control - in between of above two
3 approaches to Corporate Strategy JSW
Rational for adding value
A well-managed corporate parent should be able to add value. In their book, Exploring Corporate Strategy, Johnson, Scholes and Whittington identify three corporate rationales or roles adopted by parents in order to do this:
Portfolio Manager - ran all subs separately eg Virgin
Synergy Managers - Integrate as far as possible eg Tesco
Parental Developers - Provide help when needed
Where does SBU fall e.g. Can use to consider where a new SBU would fall
Market means whole industry, not parent group of companies
Can also use for different products
PROBLEM CHILD / QUESTION MARK
Need little capex
Strategy - build / harvest
Requires capex in excess of cash generated
Strategy - build
May be ex cash cow fallen on hard times
Strategy - hold or harvest
Need little capex
Strategy - hold or harvest
Strategic Characteristics of Public Sector
- influence of ideology on strategy
- external influence and control by govt
- political constraints on funding and strategic choices
- reqd to provide a universal service
- competition for resource inputs
- demonstrate best value in outputs
- demonstrate in social outcomes
Considers where SBU or product should move next
Assess benefits SBU can derive from HQ
Factors affecting organisational structure
The links between strategy and structure
The influences that have a bearing on organisational structure and design include:
• strategic objectives
• nature of the environment
• future strategy
Basic Structural Types
- Entrepreneurial: quick flexible decisions, too slow for large companies, Lack of specialism / expertise in some areas
- Functional / Bureaucratic: people are organised according to the type of work that they do
- Multidivisional: divides org into semi-autonomous divisions that may be differentiated by territory, product, market
- Holding company: extreme form of Multidivisional in which divisions are separate legal entites
- Matrix: attempts to ensure co-ordination across functional lines by embodiment of dual authority in org structure
- Transnational: attempts to reconcile global and scale with local responsiveness
- Team: extend matrix approach by using cross-functional teams
- Project: extend matrix approach by using cross-functional teams; Projects naturally come to an end and so project teams disperse
Advantages of centralisation
Control - senior mgmt have greater control over activities and sub-ordinates
Corporate view - senior managers can make decisions from the point of view of the org as a whole
Balance of power - between different fxns and depts
Experience counts - senior mgrs more experienced
Standardisation - procedures throughout org
Lower overheads - authority in one place so no duplication of mgmt effort
Leadership - useful in times of crisis
Advantages of decentralisation
Workload-it reduces stress and burdens of senior management
Job-provides subordinates with great job satisfaction by giving them or saying what they do
Local knowledge-subordinates may have better knowledge and senior management
Flexibility and speed-delegation should allow greater flexibility and quick response to change.
Training-management at middle and lower levels groomed for eventual senior management positions
Control by establishing appropriate subunits or profit centres to which authority is delegated, the system of control within the organisation might be improved
Organisational configuration (Mintzberg theory)
Way of expressing the main features by which both formal structure and power relationships are expressed in organisations
Theory suggests there are five ideal types of organisation each of which configures five standard components in a different way.
Each component of the organisation has its own dynamic which leads to a distinct type of organisation.
Building blocks and co-ordinating mechanisms
Org structure exists to co-ordinate the activities of different individuals and work processes and that the nature of co-ordination changes with the increasing size of an organisation. Building Blocks:
• strategic apex – higher levels of management
• technostructure – provides technical input that is not part of core activities
• operating core – members involved in producing goods
• middle line – middle and lower-level mgmt
• support staff – support that is not part of the operating core
• ideology – beliefs and values.
Environment: Simple/ dynamic
Internal factors: Small, Young, Simple tasks
Key building block: Strategic apex
Key co-ordinating mechanism: Direct supervision
Internal factors: Large, Old, Regulated tasks
Key building block: Techno-structure
Key co-ordinating mechanism: Standardisation of work
Environment: Complex/ static
Internal factors: Professional control, Simple systems
Key building block: Operating core
Key co-ordinating mechanism: Standardisation of skills
Environment: Simple/static, Diverse
Internal factors: Very large, Old, Divisible tasks
Key building block: Middle line
Key co-ordinating mechanism: Standardisation of outputs
Adhocracy - complex and disorderly, little formalisation of behaviour, relies on expertise of its members, but not through standardised skills.
Environment: Complex / dynamic
Internal factors: Young, Complex tasks
Key building block: Operating core / Support staff
Key co-ordinating mechanism: Mutual adjustment
Internal factors: Middle-aged / Simple systems
Key building block: Ideology
Key co-ordinating mechanism: Standardisation of norms
Link between the structures and the building blocks
As the business and its structure grows, different building blocks develop and can become more important:
Classification of control processes
Organisations and their strategies are managed and controlled by the formal and informal processes at work within them. There are a number of different possible processes, any or all of which may operate alongside one another. These processes may be:
• formal or informal
• focused on inputs or on outputs
• direct or indirect processes.
Co-operative business activities, formed by two or more separate organisations for strategic purposes.
Ownership, operational responsibilities, financial risks and rewards are allocated to each member, while preserving their separate identity and autonomy.
Long-term collaborations bringing together the strengths of two or more organisations to achieve strategic goals.
Can also help result in improved access to information and technology.
Used also to retain some of the innovation and flexibility that is characteristic of small companies.
Used to extend an org’s reach without increasing its size.
Also known as the flexible firm has a core of permanent managers and specialist staff supplied by a contingent workforce of contractors and part-time and temporary workers. Popular during recessions
Geographically distributed network with little formal structure, probably held together by IT applications, partnerships and collaboration Aka cybernetic corporation Depend on electronic linking in order to complete the production process
Org welded together by ideology or culture. There is job rotation, standardisation of values and little external control. This relates to ideology, the force for cooperation. This kind of configuration features simple systems and network relationships in team structures. It works well in a simple and static environment.
Aim of BO is to remove barriers to growth and change and ensure EEs, org, customers and suppliers can collaborate, share ideas and identify best way forward for org. Boundaries found in orgs are:
• Vertical boundaries - remove boundary between authority
• Horizontal boundaries - remove boundary between functions
• External boundaries - remove boundary between customers & suppliers
3 main types of BO:
• Hollow structure – where non-core activities are outsourced
• Modular structure – where some parts of product prdn are outsourced
• Virtual structure – where org made up of collaboration of other org parts
Major challenges for org structures
- Flexibility of organisation design
- Effective systems
Types of change
Change required, extent and speed of it
Harmans Process Strategy Matrix
Reviews Process Importance & Complexity to assess it
According to Paul Harmon a process-strategy combines strategic importance of a process with process complexity and dynamics
Commoditisation of business processes and outsourcing
Commoditisation is the evolutionary process that reduces all products and services to their lowest common denominator
• There is comparability between the firm’s processes and the competences of outside suppliers.
• There is standardisation of processes making it easy to assess whether the process will be improved by outsourcing and to find appropriate outsource agents.
• The costs of outsourcing these services can be lower than the cost of providing them internally.
Advanatges of Business Process Outsourcing (BPO)
• Cost savings (currently the main decision-making factor).
• Improved customer care.
• Allows management to focus on core activities.
Disadvanatges of Business Process Outsourcing (BPO)
• as more processes become commoditised, it is more difficult for organisations to differentiate themselves from rivals
• problems finding a single supplier for complex processes, resulting in fragmentation
• firms are unwilling to outsource whole processes due to the strategic significance or security implications of certain elements
• inflexible contracts and other problems managing suppliers
• problems measuring performance
• data security.
Business Process Re-engineering or Redesign (BPR)
Business Process Management (BPM)
Business Process Improvement (BPI)
Redesign: starts with a clean sheet of paper
Simplification: eliminates redundant process elements
Value added analysis: eliminates activities that do not add value
Gaps and disconnects: target problems at departmental boundaries
Business process re-engineering
Challenges basic assumptions about business methods and objectives they are designed to achieve.
IT useful BPR: fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance ie cost quality, service and speed. Planning, analysis, redesign, development, transition
IT substituting products - examples
1. Video conferencing subs for air transport
2. IT is the basis for new leisure activities (computer games) which subs for TV or other pursuits
3. Email subs for postal deliveries
Advantages of Using Generic Software Solutions
• Cheaper to buy than bespoke solutions are to develop.
• Available almost immediately.
• System bugs discovered by vendors before sale
• Good packages are likely to come with good training and on-screen help facilities.
• New updated versions of software likely to be available on a regular basis.
• The experience of many users with similar needs has been incorporated into the design
• Different packages will be available for different operating systems or data structures.
Disadvantages of Using Generic Software Solutions
• Do not fit precisely org needs – compromise may be necessary
• Org is dependent upon an outside supplier for maintenance of software; many software suppliers are larger than most of their customers, and are therefore difficult to influence.
• Different packages used by org may have incompatible data structures.
• Using same packages as rival organisations removes opportunity of using IS for competitive advantage.
Implementation of IT system
- data migration – transferring data from old to new
- training – training staff on new system
- changeover – introducing new system to business operations
• Parallel running
• Direct changeover
Based on limited standardised modules. Organisation must adapt to the standard system rather than designing its own most appropriate and efficient process. However, adapting a standard package to local requirements, destroys the advantage of purchasing the standard package and introduces further complications.
Harman's view: you begin with a solution. Rather than analysing what happens currently and then developing an improved system, ERP forces the organisation to adjust itself to the requirements of the software
Davenport's view: process standards will have a positive effect on how business is conducted.
Barriers to entry and IT
Porters 5 Forces
Can raise entry barriers by increasing economies of scale, raising the capital cost of entry or effectively colonising distribution channels by tying customers/suppliers into the supply chain or distribution chain
IT can surmount entry barriers - use of IT can dec the costs of selling/distribution and even substitute for traditional methods entirely eg internet banking
Bargaining power of customers re IT
(state evidence and if high or low)
Porters 5 Forces
1. IT can raise switching costs by locking customers into networks
2. Customers info systems can enable a thorough analysis of marketing info so that prdts and services can be tailored to the needs of certain segments
3. Customers also have access to improved info; this can increase their bargaining power
4. Suppliers can gain access to larger number of customers, reducing their dependencies on a few large buyers
Bargaining power of suppliers and IT (state evidence and if high or low)
Porters 5 Forces
1. Increasing the number of accessible suppliers. Supplier power can derive from various factors such as geographical proximity and the fact that the org requires goods of a certain standard in a certain time. IT enhances supplier info available to customers
2. Closer supplier relationships. Suppliers' power can be shared. CAD can be used to design components in tandem with suppliers. Such relationships might be developed with a few key suppliers. The supplier and the org both benefit from performance improvement, but the relations are closer.
3. Switching costs. Suppliers can be integrated with the firm's administrative operations, by a system of electronic data interchange
Threat of new entrants
(state evidence and if high or low)
Porters 5 Forces
2 considerations:- Barriers to entry, Response of competition
Barriers to entry:- Scale economies Product differentiation Capital requirements Knowledge requirements Switching costs for customers Access to distribution channels Cost advantages of existing producers, independent of economies of scale: Patent rights, experience and know how, govt subsidies and regs, favoured access to raw materials
Threat from substitute products
(state evidence and if high or low)
Porters 5 Forces
Eg video conferencing instead of overseas travel
Threat high if: Sub offers an attractive to alternative to the industry's product in terms of price and performance - buyer's cost of switching to the sub is low
Rivalry amongst competitors
(state evidence and if high or low)
Porters 5 Forces
Factors determining the intensity of competition
-Market growth (slow)
-Cost structure (high fixed costs)
-Switching (suppliers can compete)
-Capacity (high vol business)
-Uncertainty (of what other firms are doing)
-Strategic importance (success is prime strategic objective)
-Exit barriers (make it difficult for an existing supplier to leave the industry eg FAs, redundancy pymts, mgr reluctance, govt pressure)
IT and the state of competitive rivalry
1. IT can be used to support a firm's competitive strategy of cost leadership, differentiation or focus.
2. IT can be used in a collaborative venture, perhaps to set up new comms networks. Some competitors in the financial services industry share the same ATM network
Strategic group = competitors and collaborators
E business : transformation of key business processes through use of Internet technologies
E-commerce: E-business that includes a financial transaction.
- costs are reduced
- capability is increased
- communications are improved
- control is enhanced
- customer service is improved
- competitive advantage may be achieved, depending on competitors' reactions
Obstacles to adopting e-business: lack of skills, Internet use and awareness in businesses and population; and fears about privacy, effectiveness, cost, security etc
Stages of E-Business
- Web presence
- Integrated e-commerce
Risks to Computer System
• Dissatisfied employees might deliberately modify or destroy information in the system.
• A hacker or industrial spy might break into the system.
• Viruses or malicious software could be introduced.
• Accidental mistakes could be made on input to the system.
• Inadequate security of the hardware or data.
• Faults in the hardware system.
Controls on a Computer System
E BUSINESS & VALUE CHAIN
- Disintermediation - intermediaries removed eg Amazon
- Reintermediation - establishment of new intermediary roles for traditional intermediaries that were dis-intermediated eg Kelkoo
- Counter-mediation - creation of a new intermediary by an establishment company in order to compete via e-business with established intermediaries eg B&Q setting up DIY.com to help people do their own DIY
Push supply chain models
• Products are built, distributed, and ready for the customer demand.
• Product design is led by the manufacturer.
• Product quality is often determined by RM suppliers and component manufacturers.
• Little product personalisation to customers.
• Low set-up costs and economies of scale are possible.
• Inventories are built up waiting for customers to demand them (a push system is sometimes referred to as a Make to Stock (MTS system)).
Pull supply chain models
• Planning for a product starts when the customer places the order and creates firm demand.
• Product design is often customer led (a pull system is sometimes referred to as a Make to Order (MTO system)).
• Personalisation of the product by the customer is possible.
• Inventory levels are minimised (systems such as JIT and TQM can be used).
• Lead times can be much higher.
• Set-up costs are higher and economies of scale are not always possible.
Restructuring the supply chain
Vertical disintegration: various diseconomies of scale or scope have broken a production process into separate companies, each performing a limited subset of activities required to create a finished product.
Vertical integration: style of ownership and control with companies united through a hierarchy and sharing a common owner. Difficult to determine where one legal entity ends and another starts. Operate as a single organisation with shared goals, processes and sometimes corporate cultures.
Virtually integration: core business functions, as well as non-core functions, take place in external organisations. Tightly organised, often difficult to determine where one legal entity ends and another starts.
Benefits of e-procurement
- savings in labour and procurement costs
- better inventory control
- better control over suppliers (may even be able to influence their design and production)
- reduction in errors
Risks of e-procurement
- become over reliant on the technology
- there may be staff resistance
- cost savings may fail to materialise
- prices may become out of date or uncompetitive
E BUSINESS RAPPA'S 9 BUSINESS MODELS
CUB SIM MAA
Community model - Where users themselves invest in a site e.g. by the contribution of content, money or time. This can be combined with other models, e.g. advertising or subscription
Utility model - Model based on metered usage or pay-as-you-go
Brokerage model - Those that bring buyers and sellers together and facilitate transactions
Subscription model - Where consumers pay for access to the site, usually for high added value content e.g. financial information
Infomediary model - Collecting data about consumers and their purchasing habits and selling this information to other business
Merchant model - selling of goods and services on the traditional retail model
Manufacturer model - Direct selling by the creator of a product or service to consumers, cutting out intermediaries
Affiliate model - Offering financial incentives to affiliated partner sites
Advertising model - supported by advertising revenue, a website will provide content and services together with advertising e.g. Banner ads
Stages of Marketing
Stages for marketing a product:
- Market analysis - identify gaps / opportunities in business' environment
- Customer analysis – divide potential customers into segments with similar purchasing characteristics
- Market research – determine characteristics of each segment e.g. size, potential, level of competition, unmet needs
- Targeting – deciding which segments to target (PESTEL, 5 forces and forecasting)
- Marketing mix strategies – developing a unique marketing mix for each segment in order to exploit it properly.
Marketing mix 4Ps
Set of controllable variables and their levels that the firm uses to influence the target market
Product, price, place and promotion Place - channel, logistics
Service: People, processes (ticketing system), physical evidence (tickets)
The application of the Internet and related digital technologies to achieve marketing objectives Developing an effective e-marketing plan:
Situation analysis - where are we now
Objectives - where do we want to be
Strategies - how do we get there
Tactics - what are the individual steps we need to take
Actions - what are the things we need to do
Control - what we will measure to know we are succeeding
E Marketing 7Ps
- people/participants (e.g. having adequately trained staff and support services)
- process (e.g. payment and delivery processes)
- physical evidence (e.g. website layout and navigation).
Bait pricing – lowest priced model advertised in the hope of attracting customers to the line and decide to buy a higher priced item from the range.
Bundle pricing – 2+ products packaged together & sold 1 price
Captive product pricing – must buy two products. First one cheap to attract customer (customer is captive) but 2nd expensive
Cost plus pricing – cost per unit calculated + mark-up
Going rate pricing – prices are set to match competitors.
Loss leaders – sold at a loss with expectation that customers will then go on and buy other more profitable products.
Negotiated pricing – price through bargaining
Penetration pricing – a low price is set to gain market share.
Perceived quality (or prestige) pricing –high price is set to reflect/create an image of high quality.
Periodic discounting –temporary reduction in prices for a limited period
Price discrimination – different prices for the same product in different markets, e.g. peak/off-peak rail fares.
Price skimming – high prices are set when a new product is launched. Later the price is dropped to increase demand (customers willing to pay more been ‘skimmed off')
Factors Determining Price
- Cost (ensure all costs are covered)
- Customers (how much customers willing to pay)
- Competitors (how much competitors are/will be charging)
- Corporate objectives (what we are aiming to achieve e.g. low price may be necessary when we are trying to break into a new market).
The elasticity of demand
The relationship price and demand is also affected by the elasticity of demand for the product
Low elasticity products (i.e. where a large change in price only creates a small increase in volume) the normal strategy is to increase prices slightly so that overall revenue and profits increase. (The opposite applies when elasticity is high.)
Inelastic products are usually ones where there are few substitutes and customer needs are high (such as utilities and petrol).
Used to develop plans to accommodate the characteristics of the new media
- Industry structure
- Independence of location
Customer Life Cycle
Reasons for Segmenting Markets
Better satisafaction of customer needs - one solution will not satisfy all customers
Growth in profits - some customer will pay more for certain benefits
Revenue growth - segmentation means that more customers may be attracted by what is on offer, in preference to competing products
Customer retention - by targeting customers, a number of different products can be offered to them
Targeted communications - segmentation enables clear communications as people in the target audience share common needs
Innovation - by identifying unmet needs, companies can innovate to satisfy them
Bases for Segmentation
Geographical - relies heavily on personal selling. Can be combined with socio-demographic segmentation
Psychological or Lifestyle Segmentation - people's subjective feelings and attitudes towards a particular product/service/life
Behavioural segmentation - attitudes to and use of product, and benefits they expect to receive. Considers usage rate, impulse, brand loyalty, sensitivity. (Sensory segment, Sociables, Worriers, Independent)
Socio Demographic Segmentation - based on social, economic and demographic variables
Integration of all aspects of a project, ensuring that the proper knowledge and resources are available when and where needed, and above all to ensure that the expected outcome is produced in a timely, cost effective manner.
Successful - if completed at specified level of quality, on time and within budget
Quality - end result should conform to project specification.
Budget - without exceeding authorised expenditure
Timescale - progress must follow the planned process, so that the 'result' is ready for use at the agreed date.
Project life cycle
Projects - Contents of a Business Case
• an assessment of the current strategic position
• the constraints that are likely to exist for any project
• the risks that might arise for the project and how these will be managed
• an assessment of the benefits and costs of performing the project and how these will be managed
Risk Management Matrix
(assessing risk found during a project)
Leads to plans on how each risk should be dealt with
Can trf by: Insurance, disclaimer, Waiver, Inductions
Project - key drivers
The key drivers of any project will be the business strategy and the organisational objectives. Before work commences on a project, it is important that these drivers are understood and discussed. This is known as driver analysis.
Projects: Assess Benefits of
Benefits should be
Assessment of the financial rewards that may be derived from the project. Appraisal methods:
• accounting rate of return (ARR)
• payback period
• net present value (NPV)
• internal rate of return (IRR)
Project Appraisal: ARR
Accounting Rate of Return
• The ARR for a project may be compared with the company's target return and if higher the project should be accepted.
• Faced with a choice of mutually-exclusive investments, the project with the highest ARR should be chosen.
Project Appraisal: Pay back period
The time a project will take to pay back the money spent on it. Based on expected cash flows and provides a measure of liquidity.
It is often assumed that the cash flows occur evenly during the year.
• Compare the payback period to the company's maximum return time allowed and if the payback is quicker the project should be accepted.
• Faced with mutually-exclusive projects choose the project with the quickest payback.
Project Appraisal: NPV
The net benefit or loss of benefit in present value terms from an investment opportunity.
Represents the surplus funds (after funding the investment) earned on the project. This means that it tells us the impact on shareholder wealth. Therefore:
• Any project with a positive NPV is viable.
• Projects with a negative NPV are not viable.
• Faced with mutually-exclusive projects, choose the project with the highest NPV.
Project Appraisal: IRR
Internal Rate of Return
This is the rate of return at which the project has a NPV of zero.
• If IRR is greater than cost of capital, project accepted.
• Faced with mutually-exclusive projects choose the project with the higher IRR.
The advantage of NPV is that it tells us the absolute increase in shareholder wealth as a result of accepting the project, at the current cost of capital. IRR simply tells us how far the cost of capital could increase before the project would not be worth accepting.
• communicate what has to be done, when and by whom
• encourage forward thinking
• provide the measures of success for the project
• clarify time, resources, and money required for project
• determine if targets achievable
• identify activities the resources need to undertake.
Project Initiation Document
Formal, detailed document which contains planning information extracted from other sources such as
• business case
• the dissemination plan
• the risk assessments
• Gantt charts
Contents of Project Plan
Overview of project
Exit and Sustainability Plan
Controlling the project means:
• taking early corrective action when needed
• balancing project effort
• looking for where effort can be reduced
• making changes early rather than late.
Post Project Review
It typically involves:
• disbanding the team and ‘tying up loose ends’
• performance review
• determination of lessons learnt
• formal closure by the steering committee.
Project Management Software - Advantages
• Improved planning and control.
• Improved communication.
• Improved quality of systems developed.
Project Management Software - Planning
• The ability to create multiple network diagrams.
• The ability to create multiple Gantt charts.
• The ability to aid in the creation of the PID.
Project Management Software - Estimating
• The ability to consider alternative resource allocation.
• The ability to create and allocate project budgets.
• The ability to allocate time across multiple tasks.
Project Management Software - Monitoring
• Network links to all project team members.
• A central store for all project results and documentation.
• Automatic comparison to the plan, and plan revision.
Project Management Software - Reporting
• Access to team members.
• Ability to create technical documents.
• Ability to create end of stage reports.
SBU Strength Matrix
NFP - Measures for Service Efforts
Input measures- economy
Output measures - effectiveness
Output measures - achievement of objectives
Efficiency measures - Inputs v outputs
Price competition makes cost efficiency fundamental to survival
Achieved in 4 main ways
1. Exploitation of scale of economies
2. Control of the cost of incoming supplies
3. Careful design of products and processes
4. Exploitation of experience effects (experience curve, as output increases, cost per unit falls)
Value management in NFPs
An alternative strategy model developed for use with government organisations focuses the attention of managers on three key issues:
• public value to be created
• sources of legitimacy and support for the organisation
• operational capacity to deliver the value.
Funding strategies for NFPs
Need core costs covered:
• Costs that will always need to be funded, regardless of the number of projects and
• Fundamental to the organisation’s survival, even if they cannot be directly associated with any specific outcome.
Funding Strategies Required
Funding strategy different at each stage
Factors to consider when choosing a financing package
- Cash flow
- Exit routes
(GOVT, EQUITY, DEBT)
Problems with standard costing in modern environments
(Activity Based Costing Preferred)
• Products are often non-standard
• Standards can become quickly outdated
• Production is highly automated
• Often an ideal standard is used
• Modern envmts more concerned with continuous improvement
• Modern managers need more detailed info
• More 'real time' performance measures are needed
Cost Drivers & Pools for ABC Costing
• A cost pool is an activity that consumes resources and for which overhead costs are identified and allocated. For each cost pool, there should be a cost driver.
• A cost driver is a unit of activity that consumes resources. An alternative definition of a cost driver is a factor influencing the level of cost.
Advantages of ABC
• More accurate cost per unit ∴ pricing, sales strategy, performance management and decision making improved
• Better insight into what drives overhead costs.
• Recognises that O/H costs are not all related to prdn and volume
• Allows mgmt of cost drivers by mgrs (drivers identified)
• Derives realistic costs in complex business environment.
• Can be applied to O/H costs, not just production O/H.
• Easy to use in service costing as in product costing
Disadvantages of ABC
• Benefit limited if O/H costs are primarily volume related or if the O/H is small proportion of overall cost.
• Impossible to allocate all O/H costs to specific activities.
• Choice of both activities and cost drivers might be inappropriate.
• Can be more complex to explain to S/K of the costing exercise.
• Benefits obtained might not justify costs.
Dealing with Risk
EV summarises all the different possible outcomes by calculating a single weighted average (Long run average or mean).
Not the most likely result; average outcome if the same event was to take place thousands of times.
EV = Σpx
x represents the future outcome
p represents the probability of the outcome occurring
Purpose of Budgeting
Master or Functional Budget
Master budget: entire organisation; brings together the departmental or activity budgets for all the departments or responsibility centres within the organisation.
Functional budgets: eg sales budget.
When a key resource is in short supply and affects the planning decisions, it is known as the principal budget factor or limiting budget factor.
Factors to consider before investigating
• size of the variance
• whether favourable/adverse – firms often treat adverse variances as more important than favourable
• correction costs versus benefits
• ability to correct
• past pattern
• budget reliability
• reliability of measurement/recording systems.
The Strategic Role of HR
Strategic analysis, HRM can generate strengths and opportunities for a business (or poor HRM might create weaknesses and threats).
Strategic choices, HRM can help a business to develop and sustain competitive advantage.
Strategy into action, HRM can play a vital role in creating good project managers, redesigning processes, achieving a flexible organisational structure etc.
Goals of HRM
Strategies to be successful HRM must be effective in 4 areas (4C's):
• commitment (requires good motivation and leadership)
• competence (requires good recruitment, assessment, training, staff development)
• congruence (requires good job design)
• cost-effectiveness (normally comes from the achievement of the others).
Approaches to Leadership
• transformational or charismatic leaders who provide a vision, inspire people to achieve it by instilling pride and gaining respect and trust. These leaders appear to be particularly effective in times of change and uncertainty
• transactional leaders who focus on managing through systems and processes. These leaders are likely to be more effective in securing improvement in stable situations.
• Clarify goals and objectives and the focus is on short term
• Focus on control mechanisms
• Solving problems
• Maintain status quo or improve current situation
• Plan, organise and control
• Guard and defend existing culture
• Positional power exercised
This is best suited to static, predictable environments.
• Establish long-term vision
• Create a climate of trust
• Make people solve their own problems by empowerment
• Change the current situation. Every threat is seen as an opportunity
• Train, coach, counsel and mentor people
• Change culture
• Power comes from relationships and influencing people. The pressure exerted is subtle and has greater finesse
This is best suited to environments where change is inevitable and may be unpredictable
Approaches to Job Design
• scientific management (have very specific job roles, strict limits and controls over employee actions, and a standardisation of job roles across staff levels)
• job enrichment (belief that it could improve job satisfaction and hence performance by meeting the need for factors identified by Herzberg as motivators (achievement, recognition, attraction of the job itself, responsibility and advancement))
• Japanese management (TQM, with every employee taking responsibility for quality, taking part in quality improvement activities and carrying out QC of their own work; cellular manufacturing to improve flexibility, with assembly of complete components carried out by a team of flexible, multi-skilled workers)
• business process re-engineering. (involves establishment of a more horizontal structure with work carried out by self-managed teams with a degree of autonomy; makes extensive use of IT to enable new forms of working and collaborating within an org and across organisational boundaries)
Factors to consider when choosing a job design
• the organisation's goals
• the need for staff motivation
• the need for control over staff actions
• ethical issues
• legal issues.
Methods of Establishing HR Development
- Focuses on needs
- Often off-the-job
- Can be employee driven
- Needs a predictable environment
- Creates a learning culture
- Happens within the organisation itself
- Uses coaching and mentoring
- Uses competency frameworks
- HRM closely linked with other key activities
Competences are expressed in visible, behavioural terms and reflect the main components of the job which must be demonstrated to an agreed standard and must contribute to the overall aims of the organisation. Competency frameworks cover the following categories:
• communication skills
• people management
• team skills
• customer service skills
Aims of Knowledge Management
Capture, organise and make widely available all the knowledge the org possesses,
Organisational knowledge - the collective and shared experience accumulated through systems, routines and activities of sharing across the org. Is a strategic capability
Data then info then knowledge
Knowledge - trends in information
Success is dependent on how effectively information is turned into useful knowledge that is then applied to products and processes.
KM: how to acquire, share, retain and use info, knowledge and experience, and how to build on and develop it.
Explicit Knowledge: formal e.g. content of reports, spreadsheets or manuals
Tacit Knowledge: informal, not written down, and includes knowledge, understanding of good practice and mgmt skills.
Both types of knowledge need to be managed.
How do we create knowledge
4 processes using info:-
1. Comparison with earlier experience
2. Consequences - the implication of info
3. Connections - relationships between items
4. Conversation: discussion with others
Analysing the Business Overall
People play a vital role in supporting strategy, facilitating organisational change and making business systems work efficiently.
To maximise business opportunities it is important that changes and opportunities are assessed across a wide range of views.
The POPIT (or four-view) model provides details of the key aspects that should be considered in managing changes within any business system:
People, Organisation, Processes, IT
set of actions that is consistent over time, has not been stated in a formal plan and has developed or emerged outside the formal plan and between planning reviews
Focuses on learning – there are many different ways that organisations can learn to add value to their product or service through areas such as process redesign and e-business.
Creation of growth strategies, new product categories, services or business models that change the game and generate significant new value for consumers, customers and the organisation.
Focuses on control
Unrealised strategies - come about because:
• Org’s underlying assumptions turn out to be invalid
• Pace of development overtakes it
• Changes in org’s external environment, e.g. changes in the market for the goods and services that the firm produces and in the nature of the competition facing the company
• Organisation’s internal environment changes.
Cristicisms of Rational Strategic Planning Process
Ignores the effects of:
• cultural influences in maintaining strategic stability and sometimes resisting strategic change
• power structure within the organisation
• effect of politics and the relative influence on the decision-making of different individuals and groups.
Where the organisation’s strategy gradually, if imperceptibly, moves away from the forces at work in its environment.
Types of strategic change
Change can be classified by the extent of the change required, and the speed with which the change is to be achieved:
Culture is the set of values, guiding beliefs, understandings and ways of thinking that are shared by the members of an organisation and is taught to new members as correct. It represents the unwritten, feeling part of the organisation.
Culture is ‘the way we do things around here’ (Charles Handy).
Culture is a set of ‘taken-for-granted’ assumptions, views of the environment, behaviours and routines (Schein).
6 physical manifestations of the
THE ORG PARADIGM AND VALUES
- Control systems
- Rituals and routines
- Organisational structures
- Power structures
Orgs find that some elements of the cultural web are easier to change than others e.g. may be easier to change the formal organisational structure than it is to change long established routines and habits.
Change management looks at how these changes can be achieved effectively and efficiently
Consists of the identification of the factors that promote and hinder change.
Promoting forces should be exploited and the effect of hindering forces reduced
Factors encouraging and facilitating change (driving forces)
Factors that hinder change (restraining forces).
There will be resistance to change - factors: social, personal, job
Ways to deal with resistance:
- Education & communication
- Power / coercion
- Facilitation & support
- Manipulation & co-optation
to help managers design approach to change
The business change lifecycle
- Definition – creating a project to achieve this alignment
- Realisation – assessing the success of the alignment
Alignment – determining the type of change required
- Implementation – putting design into action and managing its success
- Design – determining the detail changes required
Alignment – determining the type of change required