00: Summary & exam prep Flashcards
1
Q
Porter’s generic strategies
A
Source of competitive advantage X
Strategic scope:
Low cost Perceived uniqueness
Broad Cost leadership Differentiation
Stuck in the middle
Narrow Focused C.L. Focused differentiation
2
Q
Nadler/Tushman transf. process
A
- Input
- Environment
- Resources
- History
- Strategy
- Transformation process
- People
- Work
- Formal org.
- Informal org.
- Output
- Organization
- Group
- Individual
3
Q
6 segments of the general env.
in 6 segment analysis
A
- Political / legal
- Economic
- Socio-cultural
- Technological
AND (
- Demographic
- Global
OR
- Environmental
- Legal
)
4
Q
Weber’s concept of ideal bureaucracy:
9 properties
A
3 structure properties:
- Each level controls the level below and is controlled by the level above
- People are organized into units based on the type of work they do
- All positions are appointed, except possibly for the top level
- 3 career advancement rules:*
4. Rules are stable and exhaustive; they can be learned
5. People are chosen based on skills
6. Career progression is based on performance - 3 systemic properties:*
7. Org members do not own the means of production
8. It is the best system for top-down directive control
9. Only entrepreneurs are free from bureaucracy
5
Q
In the reading ‘Mapping the Organizational Terrain’, the authors develop a general approach that uses the Congruence Model for solving organizational problems.
Provide a definition for congruence, then list the 8 steps involved in the analysis of organizational problems.
A
Congruence
- In the Congruence Model, congruence is the degree to which the 4 components of the transformation process (and, optionally, also strategy and environment) are _aligned_ to each others.
- The higher the congruence is, the better the organization functions.
The 8 steps for the analysis of organizational problems:
4 steps from symptoms to problems:
- Identify symptoms
- Specify input
- Identify output
- Identify problems
- 4 steps from congruence hypothesis to action:*
5. Describe organizational components
6. Assess congruence (fit)
7. Generate hypotheses about problem causes
8. Identify action steps
6
Q
define Environmental monitoring (or scanning)
A
firm’s analysis of the external environment that tracks the evolution of
- environmental trends
- sequences of events, or
- streams of activities
7
Q
SWOT analysis for the Swatch Group 2016:
A
Strengths
Emotional value; tech; market diversification
Weaknesses
brand dilution; brand overlaps
Opportunities
Asian demand growing; partnerships with retailers
Threats
smart watches; counterfeit; discounted Omegas
8
Q
5 factors of bargaining strength for suppliers in Porter 5 forces model:
A
- Suppliers’ product as important input to the buyer’s business
- Suppliers’ product is differentiated
- Suppliers are dominated by a few companies
- Industry is not an important customer of the suppliers
- Suppliers pose a credible threat of forward integration
9
Q
Which challenges would smart watches pose on the “wedding cake” of the Swatch Group?
A
- Considerations on smart watches’ competitive (dis)advantage on regular watches, e.g.: functionality, perception, image etc.
- Considerations about how would customers react to smart watches?
- E.g.: stability of the segments of the ‘wedding cake’
- On the basis of the above, consequences for the Swatch Group’s positioning
- E.g.: which strategy to pursue?
10
Q
stages of the industry life cycle (4)
A
- introduction
- growth
- maturity
- decline
11
Q
Discuss 3 features of the decline stage
+ the 4 basic strategies (-ings) available in the decline phase as discussed in the reading ‘Business- Level Strategy’.
A
- Falling sales and profits
- Increasing price competition
- Industry consolidation
+
- maintaining = continue biz, hoping competitors will exit
- harvesting as much profit as possible by rapidly decreasing costs
- exiting the market
- consolidating = M&A with competitors to share activities and achieve negotiating power
12
Q
Mergers:
- def=
- 4 (+4) Pros
- 4 Cons
A
- def= Combination of two or more firms into one new legal entity
- Pros = all the potential pros of diversification, depending on the case; for example:
- synergies
- by leveraging core competencies
- by sharing activities
- by pooling negotiating power
- (by vertical integration)
- acquiring resources to expand product offering
- entering new markets
- forcing competitors to consolidate
- synergies
- Cons = all the potential cons of acquisitions, too; for example:
- the financial terms of the merger may be too onerous
- cultures might not mix well, leading to failure
- CEOs may take unwise decisions driven by their egos
- advantages can be easily copied by competitors
13
Q
What is vertical integration? Define it and provide an example
A
Vertical integration:
- It is a kind of corporate strategy
- It implies diversification along the value chain
- It can be forward (Shaw carpets) or backward (Amazon books)
- EG Apple = HW + SW + largely proprietary distribution channels
14
Q
What is related integration? Define it and provide an example
A
Related integration:
- It is a kind of corporate strategy
- It implies diversification into related businesses
- Can be horizontal (Avon) or vertical (Apple)
- EG Gillette = all for shaving
15
Q
Merging org cultures:
When does integration work best? 3 factors
A
- … When the companies have relatively weak cultures
- … When companies’ cultures include several overlapping values.
- …. When people realize that their existing cultures are not good enough, which motivates them to adopt a new set of dominant values
16
Q
3 characteristics of divisional structure
A
- Division by geographies, products or markets
- Divisions hold P&L responsibility
- Divisions are relatively autonomous
17
Q
matrix structure
+ 4 Pros - 3 Cons
A
- CEO
- Corporate managers
- Division (by geography / product / market)
- Function
+ Pros:
- Allows more efficient utilization of resources.
- Improves flexibility, coordination, and communication.
- Increases market responsiveness through collaboration and synergies among structures.
- Increases professional development through a broader range of responsibility.
- Cons:
- Dual-reporting relationships can result in uncertainty regarding accountability
- Working relationships may be more complicated and human resources duplicated
- For one manager it is difficult to do timely planning
18
Q
internal recruiting:
def=
Pros
A
- def= Internal recruiting: Managers recruit existing employees to fill open positions. Employees that are recruited internally are either seeking
- lateral moves (job changes that entail no major changes in responsibility or authority levels) or
- promotions.
- Pros:
- Internal applicants are already familiar with the organizations (goals, culture, rules, and norms)
- Managers already know the candidates (information about their skills and abilities, and actual behavior on the job)
- It is less time-consuming and less expensive than external recruiting
- It helps boost levels of employee motivation and morale
19
Q
4 guidelines for giving feedback
A
- Be specific and focus on behaviors or outcomes that are correctable and within a worker’s ability to improve
- Praise instances of high performance areas of a job in which a worker excels
- give it both formally & informally
- Agree to a timetable for performance improvements
20
Q
Use the Congruence model (transformation process) to summarize at least one example used in class by Prasad Ramakrishnan
A
Ethics: to gift or not to gift?
The example touches upon all for ‘boxes’
- Informal => culture & credibility
- People => share decision: support from corp HQ
- Formal => procedures to create transparency
- Work => solution by hiring big logistics company
21
Q
name and define 1+3 -ive approaches a firm might take in CSR, which ultimately reflect their attitudes toward ethical behavior
A
- obstructionist = deliberately and actively going against the law and ethics
- defensive = just abiding by the law, and no more
- accomodative = making efforts to accommodate stakeholders’ interests when the need arises
- proactive = deliberately learning and promoting the stakeholders’ interests
22
Q
4 perspectives of the Balanced Scorecard approach
A
- Financial perspective
- Innovation and learning perspective
- Customer perspective
- Internal biz perspective: what capabilities must we excel at?
23
Q
According to Seiler, Fischer, and Voegtli (2011), to improve moral decision-making, moral development interventions should include these 3 elements (and more!)
A
- a. The identification of all the parties involved in the scenario
- b. The link to real-life situations
- c. Requests to reflect on intuitive reactions to moral conflicts
24
Q
In the context of the discussion about moral decision making in business enterprises, discuss how, or if, the HR policies presented by Dr. Stefan Seiler fit the ‘transformation process’ proposed by Nadler and Tuhsman.
A
Discussion about how UBS implements its “principles” in practice (work and formal) and changes employees’ “behaviors” within its organization (people and informal)
25
SWOT analysis for Addiopizzo Travel 2009
S: strong brand & experience of Addiopizzo; know-how of local mafia fight
W: limited commercial experience of founders
O: institutions (schools, police) support
T: mafia violence; gov incompetence
26
Describe the value proposition & activities of a coupling hybrid social enterprise + example. Then discuss its implications on the transformation process.
* VP: clients \<\> main beneficiaries
* activities: commercial + social
* eg **Blinde Kuh**
* implications:
* informal org. =\> heterogeneous culture
* formal org. =\> multifunctional structure
* work tasks: commercial alongside social
* people: 2 types of competencies (biz + social)
27
Nadel & Tushman congruence model: elements 4+10 components
* Input
* Environment
* Resources
* History
* Strategy
* Transformation Process
* Work
* Informal
* Formal
* People
* Output
* Organization
* Group
* Individual
28
Porter's value chain:
purpose + structure
+ decide how to implement strategy
+ Margin comes from:
* Support activities
* Firm Infrastructure
* HRM
* Tech Dev
* Procurement
* Primary activities
* Inbound logistics
* Production
* Outbound logistics
* Marketing & sales
* Service
29
list & explain value chain activities
* Primary activities (*sequential*):
1. inbound logistics
2. operations
3. outbound logistics
4. marketing
5. sales and services
* Supporting activities, *sometimes seen as overhead, but determinant*:
1. firm infrastructure
2. human resource management
3. technology development
4. procurement
30
List the six segments of the general environment. For one segment of your choice, provide an example of social enterprise engaged in solving a societal problem in the chosen segment. Briefly describe the social enterprise’s value proposition.
- Political / Legal segment
- Economic segment.
- Sociocultural segment
- Technological segment
- Demographic segment
- Global segment
31
The **competitive** environment -
Porter 5**+1** forces model of industry competition:
reciprocal influences
* Threat of **new entrants**: Profits of established firms in the industry may be eroded by new competitors.
* Bargaining power of **suppliers**: Suppliers can threaten to raise prices or reduce quality of purchased goods/services.
* Threat of **substitute** of products and services: Substitute products &services limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge.
* Bargaining power of **buyers**: Buyers can force down prices or bargain for higher quality or more services by playing competitors against each other.
* Intensity of rivalry among **competitors** in an industry: Threat that customers will switch their business to competitors within the industry.
+ **complementors**
32
Nadel & Tushman Congruence Model Output:
components (5+3+5)
* Organization level:
* revenues
* profits
* growth
* adaptability
* resource utilization
* Group level:
* efficiency
* cohesion
* innovation
* Individual level:
* ethical behaviour
* satisfaction
* productivity
* quality of work-life balance
* learning
33
3 pitfalls of financial metrics
* depend more on result of past decisions
* do not reflect future orientation (innovation, learning, quality, satisfaction...)
* financial goals only may induce inappropriate behaviours
34
Culture: elements
* artefacts
* language
* physical structures
* rituals
* stories and legends
* behaviours
* shared values
* unconscious assumptions
35
How to use A-S-A model to strengthen Co culture?
What is it? Definition: Model (theory) for strengthening organizational culture.
What does ASA mean? Its elements are the following: attraction, selection and attrition. Source: Reading “Organizational Culture”, p. 14.
Possible recommendations (max 4 points):
Attraction: simple recruiting messages. Focus recruitment on creative types whose work is detail- oriented.
Selection: use open-ended interviews to gauge potential recruit’s cultural fit.
Attrition: structure jobs so that there is a review after two years and drum out those whose performance – while possibly strong – is not consistent with the values of the company.
36
4 Hilti Macro-processes
+ located on Nadler-Tushman congruence model
* Strategy development =\> input, strategy
* Strategy implementation =\> transformation process
* Ongoing Strategy Renewal =\> all
* Crisis Management =\> all
37
Hilti Crisis Management
## Footnote
**Decision Making: *3 features***
**Cost Cutting/ Layoffs: *4 limitations***
**Supporting Activities: *2 sacrifices***
**Decision Making: *3 features***
1. Top-down management
2. Back delegation and centralization of decisions
3. Strict goals and control
**Cost Cutting/ Layoffs: *4 limitations***
1. * Consciously taking longer periods for layoffs*
2. * Reduction of direct sales force only in crisis regions*
3. _ Only small reduction of R&D (- 5%)_
4. _ Continuation of cultural training activities (culture not only for good times!)_
**Supporting Activities: *2 sacrifices***
1. All employees at headquarters voluntarily give up 5% of their salary (1 additional week holiday as compensation) to contribute to cost reduction and minimize layoffs
2. The Hilti family (sole shareholder) waives the dividend despite Hilti making a profit
38
***Strategic performance curve***
The *strategic performance curve* assumes that **the character of the strategy formation process depends on the respective state of the company (Fry, 2000)**.
**R**eadiness to change/**c**apability/**c**ommitment
Anticipatory phase: low/high/low
Reactive phase: medium/medium/medium
Crisis phase: high/low/high
39
Describe the strategic performance curve. Then discuss in which phase of the curve Hilti found itself in 1996 and why. Finally explain what the rationale for Hilti to start the strategy process in that phase was.
**Phase:** In 1996, Hilti was in the Anticipatory phase but on the brink of the Reactive phase.
* *Explanation:** The management target of double-digit percentage sales growth in local currencies was not achieved. So the strategic performance increased yet with a slower rate. This provided the impetus for re-examination of Strategy 2000, introduced nine years previous.
* *When and why to start the strategy process:** Strategy development never should wait until the reactive phase and it should start in the anticipatory phase as: The challenge faced by management is that already in the anticipatory or, at the latest, at the beginning of the reactive phase, strategy formation must be pursued in order to avoid lapsing into a crisis situation. So the firm has more room and freedom to act.
40
What is the function of recurrent workshops of Hilti’s top management on strategy related topics? Please provide three arguments. Use evidence from the Hilti case to support your arguments.
1. Environmental scanning
2. Monitoring of strategic goals implementation by BUs & MOs
3. Investment allocation
41
Strategy development VS strategy implementation
**Strategy development:**
* output is the content of a new strategy;
* it is a data-driven process
**Strategy implementation:**
* output is real world change by realizing the chosen strategy;
* it is often underestimated, but more difficult and crucial than strategy development;
* it requires to talk to people's hearts before people's minds
42
Strategy implementation in 8 steps
*2 steps to start:*
1. generate sense of urgency
2. build a strong guiding coalition
* 3 steps to act on vision*
3. creating a **vision**
4. communicating the **vision**
5. empowering others to act on the **vision**
* 3 steps to ensure success:*
6. engineer and achieve early quick wins
7. consolidate and build more change
8. institutionalize to avoid backsliding
43
Strategy development:
segmentation in 3(+1) phases (w sub-phases) & 2 sets of deliverables
1. Preparation
* Setting out the scope
* Defining the team
* Selecting the partner
2. Diagnosis
* Analysis of Customers, Competitors, Own position
* Trends in Market, Technology
* *=\> Fact Base**
3. (*Identification of)* Strategic Options
* Assessment
* Selection
* Balance with own profile
* Gaps / loopholes
* Strength / weaknesses
* **=\> Vision, Mission, Strategic Initiatives**
4. Implementation
44
Why is the creation of the sense of urgency important at the beginning of a change process? Answer the question and discuss when and how Hilti created the sense of urgency within its organization.
− Why: Creating a sense of urgency aims at **overcoming complacency** in an organization. **Only then will the organization understand why a new strategy is needed** and become engaged in a strategy development process.
− When: In 1996
− How: The CEO of Hilti created the sense of urgency by involved the top management first. The occasion was a conference for 150 Hilti top management. The outcome was the full support from the top managers.
45
3 leadership traits needed in a (financial) crisis
− **Predictability**: Give people as much information as you can about what will happen and when. If a shock is preceded by fair warnings, people not only have time to brace themselves but also have the chance to get used to the idea
− **Understanding**: Explain why the changes you are implementing are necessary – and don’t assume you only need to do this once
− **Compassion**: Put yourself in the other person’s place, express empathy and – when appropriate – sorrow for any painful actions that have to be taken. Be close to people.
46
performance measurement with Balanced Scorecard:
genesis & 4 perspectives
* Kaplan and Norton, 1996
goals & measures in each of these areas
* Financial Perspective
* Customers' Perspective
* Internal Biz Perspective --\> what we must excel at
* Innovation & Learning Perspective
47
The **general** env. of a Co, in 6 segment analysis
PESTEL:
* Political
* Economic
* Socio-cultural
* Technological
* Environmental
* Legal
PESTDG:
* Political/legal
* Economic
* Social
* Technological
* Demographic
* Global
48
4=1+2+1 purposes of mgmt methods:
before decision:
* check your assumptions
during decision:
* engage other people
* make decision process transparent
after decision:
* share conclusions
49
management
dual def=
* “The act, manner, or practice of managing; **handling, supervision, or control**: management of a crisis; management of factory workers.”
* “The person or persons who control or direct a business or other enterprise.”
50
Frederick Winslow Taylor:
book
+ 3 fallacies
1. The fallacy, which has from time immemorial been almost universal among workmen, that a material increase in the output of each man or each machine in the trade would result in the end in throwing a large number of men out of work.
2. The defective systems of management which are in common use, and which make it necessary for each workman to soldier, or work slowly, in order that he may protect his own best interests.
3. The inefficient rule-of-thumb methods, which are still almost universal in all trades, and in practicing which our workmen waste a large part of their effort.’
51
2 types of (mis)fit in the coungruence model by Nadler & Tushman:
Fits and misfits can exist:
* among different elements of the transformation process and strategy (“**internal** fit”)
* between strategy and environment (“**external** fit”)
52
Data **tri**angulation method to take strategic decisions:
the 3 methods
***rip***
1. internal interviews
2. Porter's 5 forces analysis
3. regulatory analysis
=\> strategic decision
53
technology forecasting: 3 methods
***dip:***
* 3-round **D**elphi Survey (re- adjustment of focus of investigation on industry-wide trends)
* Follow-up **i**nterviews with OEM-Experts
* **P**atent analysis (good for emerging technologies)
54
intensity of rivalry:
effect & factors
* Rivalry among firms in an industry diminishes profits as resources are devoted to price competition, advertising battles, increased customer service or warranties, etc.
* Rivalry intensifies with:
* Number of competitors
* Slow industry growth
* Lack of differentiation or switching costs
* Etc.
55
threat of new entrants
effect + factors
* Profits of established firms in the industry may be eroded by new competitors
* This threat is lower when barriers to entry are higher:
* Economies of scale
* Product differentiation
* Access to distribution channels
* Etc.
56
Bargaining power of buyers
effect + factors
* Buyers can force down prices or bargain for higher quality or more services by playing competitors against each other
* When do buyers have this power?
* Concentrated groups
* Commodity products/services
* Etc.
57
Threat of substitutes
effect + factors
* Substitute products & services limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge
* The lower the price and the higher the performance of substitutes, the greater this threat
58
corporate strategy VS biz strategy
diff + result of both combined
1. Industry **Attractiveness** and **Linkages** across Businesses:
Which industries should we be in?
How do we derive advantage across businesses?
2. Competitive Advantage:
How should we compete in a given industry?
1 + 2 =\>
Performance / Competitive advantage; Above-average profits
59
introduction stage:
7=2+3+2 features + 4=2+2 strategies
* Unspecified product features & Rapid technological change
* New products that are not known to customers & Poorly defined market segments =\> Low sales growth
* Operating losses & Need for financial support
+
* Emphasis on R&D and marketing activities
* Developing the product and finding a way to get users to try it
* First mover / Late mover
60
growth stage:
2+2 features + 2+1 strategies
* Strong increase in sales
* Developing brand recognition
* Growing competition
* Developing a need for financial complementary value-chain activities (e.g., marketing sales, customer services, and R&D)
+
* Building consumer preferences for specific brands
* Redirecting marketing and sales initiatives from spurring aggregate demand to stimulating selective demand
* Repeat purchasers
61
maturity stage
3 features + 2 strategies
* Saturated markets =\> Slowing demand growth
* Direct competition + Price competition
* Strategic emphasis on efficient operations
=\> Do not be “held hostage” to the life-cycle curve but think about positioning or repositioning your products in unexpected ways
* **Reverse positioning** (products with fewer attributes and lower prices)
* **Breakaway positioning** (existing products that are perceived by customers as different)
62
the 6 internal fits:
*Individual - Organization*
- **Individual** **needs** met?
- **Convergenge** of individual and organizational **goals**?
*Individual - Work*
- How are **individual needs** met by work?
- Do individuals have skills and abilities to meet **work demands**?
*Individual – Informal Organization*
- How are **individual needs** met by informal organization?
- How does the informal organization make use of individual resources consistent with **informal goals**?
*Work - Organization*
- Are organizational arrangement adequate to meet the **work demands**?
- Do organizationl arrangements motivate behavior consistent with **work demands**?
* Work – Informal Organization*
- Does the informal organization structure facilitate **work performance**?
- Does it help meet the **work demands**?
* Organization – Informal Organiz.*
- Are the **goals**, rewards, and structures of the informal organization **consistent** with those of the formal organization?
63
informal org.
def=
+ 3+3 keys
* The **emerging** arrangements including structures, processes, **relationships***
* 3 human elements:*
* - Leader behavior
* - Intragroup relations
* - Intergroup relations
*3 information-related elements:*
* - Norms, values
* - Informal work arrangements
* - Communication and influence patterns
64
formal org.
def=
+ 2+2+3 keys
* The various structures, processes, **methods** that are **formally created** to get individuals to perform taks*
* 2 design:*
* - Grouping of functions, structure of units
* - Job design
*2 work env:*
* - Phyisical location
* - Work environment
*3 worker control:*
* - Coordination and control mechanisms
* - Reward systems
* - HRM systems
65
people aka ***individuals***
def=
+ 2+3 keys
* The characteristics of individuals in the organization*
* 2 soft factors:*
* - Individual needs and preferences
* - Perceptions and expectancies
*3 hard factors:*
* - Individual knowledge and skills
* - Background factors
* - Demography
66
work:
def=
+ 3+1 keys
*The basic and inherent work to be done by the organization and its parts*
3 constraints:
* - Skill and knowledge demands
* - Constraints on performance
* - Degree of uncertainty
+ 1 other:
* - Type of rewards
67
Strategy vs. strategy making, plan vs. planning
The ‘process’ is more important than the ‘product’
68
cost leadership:
summary in 5 tactics - problem
* Integrated tactics
* Aggressive construction of efficient-scale facilities
* Vigorous pursuit of cost reductions from experience
* Tight cost and overhead control
* Avoidance of marginal customer accounts
* - Imitability!
69
cost leadership implemented in the value chain
**Support functions**
* Infrastructure
* Few management layers to reduce overhead costs
* Standardized accounting practices
* HRM
* Minimize employee turnover through effective policies
* Orientation and training programs to maximize employee productivity
* TechDev
* Automated technology to reduce scrappage rates
* Expertise in process engineering to reduce manufacturing costs
* Procurement
* Policy guidelines to ensure Economies of scale and scope
* Shared purchasing operations with other business units
**Primary functions**
* Inbound logistics:
* Effective layout of receiving dock operation
* Operations
* Use of quality control
* Low cost locations
* Outbound logistics
* Fleet mnmgt to support effective supply chain
* Marketing and sales
* Purchase of media in large blocks
* Sales force utilization is maximized by territory management
* Service
* Thorough service repair guidelines to minimize repeat maintenance calls
* Use of single type of repair vehicle to minimize costs
70
cost leadership analyzed in the 5 forces
* Protection against rivalry from competitors
* (! attention – potential price war)*
* Entry barriers from economies of scale and cost advantages
* (! innovation shifts or change in customer preferences)*
* Supports a firm against powerful buyers
* (! depends on customer price sensitivity)*
* Flexibility to cope with powerful suppliers on cost increases
* (! Possible erosion of margins over time)*
* Favorable position with respect to substitute products
* (! Only if bundled with substantial add. features interesting)*
71
differentiation:
features - problems
* Firms may differentiate along several dimensions at once
* Prestige or brand image
* Technology & Innovation
* Customer service
* Dealer network
* Price premiums exceed extra costs of being unique
* Requires integration of all parts of a firm’s value chain
* Speed as first mover or quick response as second mover
Main problems?
* - Justify premium and Dilution of brand
* - Too much of it (perception of differentiating factors)
* - Imitability (always)
72
differentiation implemented in the value chain framework
**Support functions**
* Firm infrastructure
* Superior MIS—To integrate value-creating activities to improve quality
* Widely respected CEO enhances firm reputation
* HRM
* Programs to attract talented engineers and scientists
* Provide training and incentives to ensure a strong customer service orientation
* TechDev
* Superior material handling and sorting technology
* Excellent applications engineering support
* Procurement
* Purchase of high-quality components to enhance product image
* Use of most prestigious outlets
**Primary functions**
* Inbound logistics
* Superior material handling operations to minimize damage
* Quick transfer of inputs to manufacturing process
* Operations
* Flexibility and speed in responding to changes in manufacturing specs
* Low defect rates to improve quality
* Outbound logistics
* Accurate and responsive order processing
* Effective product replenishment to reduce customer’s inventory
* Marketing and sales
* Creative and innovative advertising programs
* Fostering of a personal relationship with key customers
* Service
* Rapid response to customer service requests
* Complete inventory of replacement parts and supplies
73
differentiation analyzed in the 5 forces framework
* Protection from rivalry through unique product features
* (! Shift in customer demand, competition switch to cost focus)*
* High customer loyalty through reputation, quality and innovation
* (! Possible replacement or cost of differention increases)*
* Higher margins to deal with supplier power & prestige
* (! Erosion of margins)*
* Reduces buyer power because buyers lack suitable alternative
* (! Erosion of margins, shift in buyer preferences)*
* Customer loyalty and hence less threat from substitutes
* (! Replacement based on innovations)*
74
focus: features - issues
* Focus on a narrow competitive scope within an industry
* Strategy tailored to serve a segment or group of segments (niche)
* Focus strategies theoretically exist both for cost and differentiation strategies
* Focus strategies pertain to the same logics as do full fledged cost leadership and differentiation strategies
Issues
* - Cannot exploit scale economies
* - Erosion of cost advantage, e.g. Dell
75
Biz strategy over industry life cycle
over 8 dimensions
Phases: intro, growth, maturity, decline
*2 keys:*
1. **Key goal**: Increase market share & awareness; Create consumer demand; Defend market share and extend product life cycles; Consolidate, maintain, harvest, or exit
2. **Key functional area**: R&D, Marketing & Sales, Production, GenMgmt&Fin
* best generic strategies:*
3. **Generic strategies**: diff., diff., diff./CL, CL
* 3 market properties:*
4. **Market growth rate**: low, fast, moderate, negative
5. **Nr of segments**: very few, some, many, few
6. **Intensity of rivalry**: low, increasing, high, changing
* 2 emphasis areas:*
7. **Emphasis on prod design**: very high, high, moderate, low
8. **Emphasis on proc design**: low, moderate, high, low
76
the logic of corporate strategy, in 4=1+3 principles
The logic of corporate strategy
1. ***Pick new industries to enter and decide on means of entry* _(VERY VISIBLE DECISIONS)_**
with 3 gols:
1. Establish ***investment priorities***, steering resources into most attractive business units
2. Pursue opportunities to ***leverage cross-business value chain relationships*** and ***_strategic fits_*** into competitive advantage
3. Initiate actions to boost ***combined performance*** of businesses \<--\> **synergies**
77
taxonomy of diversification types, with their logic
diversification
* unrelated
* related
* horizontal
* vertical
* backward
* forward
78
related VS unrelated diversification:
logic
**related**: synergies through
* leveraging core competencies =\> **+ V.A. for customers**
&
* sharing resources =\> **+ revenues - costs**
* tangible:
* production & manufacturing facilities
* distribution channels
* intangible:
* reputation
* IP
* specialized skills
**unrelated**: synergies through
* portfolio management
* corporate office =\> auditing, accounting, labor rels.
* support activities
* HRM
* infrastructure
* tech dev
* procurement
* info sys
79
logic of horizontal related integration:
3 synergies & 1 warning
* + sharing tangible or intangible resources & activities, either to reduce costs w economies of scope or enhance revenues (new channels & markets)
* + leveraging core competencies
=\> more VA to customers
* + pooling negotiating power
\>\>\> don't abuse from negotiating power!
80
logic of vertical integration:
5 pros & 4 cons
Benefits:
1. Secure source of supply of raw materials
2. Secure distribution channels
3. Protection and control over assets and services
4. Access to new business opportunities and technologies
5. Simplified procurement and administrative procedures
Risks:
1. Expenses associated with increased overhead and capital expenditures
2. Loss of flexibility resulting from inability to respond quickly to changes in the external environment
3. Problems associated with unbalanced capacities or unfilled demand
4. Additional administrative costs
81
diversification: taxonomy of means / modes
* Internal development
* New products
* New markets
* New technology
* Pooling resources of other companies with a firm’s own resource base
* Joint venture
* Strategic alliance
* Acquisitions or mergers
82
internal dev VS resource pooling VS M&A:
* 2(&2) determinants in tradeoff
* another tradeoff
* key challenge
*2 determinants, in tradeoff:*
* **interdependency**: high, low, high
* **=\> control**: full, limited, full
* **uncertainty**: moderate, high, low
* **=\> cost**: moderate, low, high
*1//2 properties in (almost) tradeoff:*
* **Growth**: slow, moderate, fast
* **Risk**: low, moderate, high
***Key challenge**:*
Ability to build needed capabilities, Managing partner relationships, Integration of purchased firms
83
Corp strat summary:
4Qs
1. Choice: diversify or divest?
2. Logic tying curr n target biz together?
3. Means to enter new market?
4. How is value added?
84
Synergies **vs** strategic fit
Synergies are operational, strategic fit implies also
synergies
85
unrelated diversification:
1+1=3 types of synergies
1. **corporate parenting** =
planning & control & audit from shared corp office
**=\> shared mgmt expertise!**
2. **financial synergies** from portfolio mgmt (e.g. less risk, better returns); often involving **restructuring**,
which can be of 3 types:
1. assets: sell unproductive assets, buy new ones
2. capital: debt-equity mix
3. mgmt: chg team
86
**Structure** def=
**Structure** = *formalized* **patterns of interactions** that link a firm’s
* People
* Tasks/Jobs
* goal =\> balancing conflicting demands for specialization and integration
87
Degree of formal organization: impacts on
* employee motivation
* innovation
* *- Loss of autonomy*
VS
**+ Self efficacy
+ Decrease in role ambiguity**
* helpful when it:
* captures learning from previous experience
* Enables people to understand how ‘the system’ works
* Helps coordinating large scale projects
88
When are procedures (positive) resources for action?
When:
* They **enable** individuals **to “repair” problems**:
* Is the process working well?
* How can I improve the process?
* They are **internally transparent**
* Rationale for their working is provided
* Layered access (avoiding information overload)
* Provide feedback on performance
89
Elements of structure: 5 definitions
* **Authority =**
Authority is the power vested in a manager to make decisions and use resources to achieve organizational goals by virtue of his or her position in an organization
* **Hierarchy**
* **Line vs. Staff**
=\> direct command vs advisory authority from specialist functions, like finance
cfr. primary vs support activities
* **Span of Control** = Nr of direct reportees
* (degree of) **Centralization**
90
Tall vs. Flat Organizations
* Tall organization:
* Communication delays
* Slower but thorough decision-making
* Possibly distorted messages
* Flat organization:
* Quick communications
* Possibly overworked managers
91
effects of environment & strategy on structure
* *Stable environment / cost leadership:*
* Focus on **efficiency**
* Favors **centralized, taller** structures
* *Turbulent environment / differentiation:*
* Focus on **flexibility**
* Favors **decentralized, flatter** structures
92
Taxonomy of structures, w pros *& cons*
* ** Simple *\<= young orgs / startups***
* Highly _informal_
* Little task specialization
* _Centralized_ decision-making
* Coordination of task by direct supervision
* Informal evaluation and reward system
* Staff are basically an extension of the top execs personality
* ** Functional**
* + High centralization = coordination and control
* + Efficient use of managerial and technical talent
* *- Possible silo thinking
(e. g. functions vs. whole org)*
* *- Difficult to set uniform performance standards*
* ** Divisional *by geo region, product or mkt segment***
* + Separation of strategic and operating control
* + Development of general management talent
* *- Can be very expensive (duplication)*
* *- Can create a dysfunctional competition among divisions*
* *- Differences in image and quality across divisions*
* ** Matrix: *region X product // project X function***
* + Specialized personnel, equipment and facilities
* + Broader range of responsibility & experience
* - Can cause uncertainty and intense power struggles
* - Working relationships become more complicated
* - Decisions may take longer
* - higher admin costs
93
structure: intra-unit integration: 4 ways
* **liaison _roles_ =**
2 managers from different divisions/functions/levels meet regularly (form daily to monthly) to solve a specific mutual problem
* **task force =**
more than two managers, one of each relevant field, meet in a _temporary_ setup to solve a specific mutual problem, _while_ still doing their “daily business”
* **cross-functional team =**
To address _recurring_ problem a cross-functional team is put together which is _permanent_; e.g. product committee
* **integrating _roles_ =**
roles whose only function is to increase the coordination and integration among functions of divisions to achieve performance gains from synergies.
94
informal organization def=
Implicit, assumed, unwritten aspects of the organization
Culture, norms, values, power, group dynamics, communication patterns
95
Organizational culture def=
+ 2 features
* Definition: a pattern of basic assumptions, values, beliefs and behaviors
* This pattern is “taken-for-granted” in the organization and is taught to new members as the correct way to perceive, think, and feel
* Many organizations have a clear dominant culture, but subcultures and countercultures are also common
96
strong cultures:
* 4 characteristics
* 3 functions
* 2 outcomes
* 4 provisos
* 4 characteristics:
* Charismatic leaders/heroes
* Ritual and ceremony
* Clear vision/direction
* Shared norms/values
* 3 functions:
* Control system
* Social glue
* Sense making
* 2 outcomes:
* org performance
* employee wellbeing
* 3 provisos:
* culture content fits the environment
* Moderate, not cult-like, strength
* Adaptive culture
* ***no unquestioned obedience to authority!***
97
Schein (1992) iceberg model of org culture
*from high to low visibility:*
1. **artifacts**
* language
* stories & legends
* physical structures
* rituals & ceremonies
2. **values** expoused
3. **assumptions** = unquestioned beliefs
98
taxonomy of output
* **Organization level:**
E.g., profit, sales, growth, resource utilization, flexibility/adaptability
* **Group level:**
E.g., innovation, efficiency, cohesion
* **Individual level:**
E.g., satisfaction, productivity, learning, quality of work life, ethical behavior
99
goals that motivate should be...
| (5+2 features)
SMART:
* Specific (Who? What?)
* Measurable (How much/many?)
* Achievable (How?)
* Relevant (Why?)
* Time-bound (When?)
* + aligned: **strategy** =\> goals =\> **rewards**!*
* + ethical!*
100
Financial metrics
4 examples
- 3 pitfalls
* Profit ratios or profit growth
* Growth in sales (revenues)
* Market share
* Cost ratios
- Many financial metrics assess outcomes of **past** decisions and are not future-oriented
- Future orientation includes non-financial metrics e.g., for efficiency, quality, innovation, satisfaction, learning
- Challenging financial goals without behavior goals may lead to inappropriate behaviors
101
Stakeholders def=
+ 4 categories of groups
Stakeholders = the people and groups that supply a company with its productive resources and have a claim on its resources:
* Stockholders
* Managers, employees
* Customers, suppliers, distributors
* Community, society, nation-state
102
**CSR** def=
Corporate social responsibility:
the way a company views its duty or obligation to make decisions that protect, enhance, and promote the welfare and well- being of stakeholders and society as a whole
103
Market hybrid social enterprise
M-pesa (mobile payments)
* Value proposition: Customers = Beneficiaries
* Only market activities
=\> Operational KPIs + board monitoring social impact
Transformation Process
* People =\> Business expertise and knowledge of synergies between social and business
* Formal =\> Functional organizational structure
* Work =\> Tasks focused on business activities
* Informal =\> Homogeneous organizational culture
Ideal financing:
venture capital-type impact investing
104
Bridging hybrid social enterprise (III)
e.g. Addiopizzo Travel
* Value proposition: Customers ≠ Beneficiaries
* Market activities and social activities
* =\> operational KPIs for customers only + board monitoring social impact*
Transformation process
* Work = Business activities integrating both customers and beneficiaries
* Informal = Organizational rule to ensure that both customers and beneficiaries are served
* Formal = Functional organizational structure
* People = Expertise on business activities and learning skills to adapt to beneficiaries and customers’ needs
Ideal financing:
philanthropic funds such as venture philanthropy
105
Blending hybrid social enterprise (II)
e.g. Grameen Bank (microcredit to women)
* Value proposition: Customers = Beneficiaries
* Market activities alongside social activities
* =\> operational KPIs & impact KPIs*
Transformation Process
* People =\> Two distinct types of competencies (business vs. social) or ‘hybrid’ members
* Formal =\> Integrated or differentiated structure
* Work =\> Business activities with additional social activities
* Informal =\> Heterogeneous organizational culture (business vs. social members)
Ideal financing:
re-invested surplus & fixed-return instruments.
106
Coupling hybrid social enterprise (IV)
e.g. Blinde Kuh
* Value proposition: Customers ≠ Beneficiaries
* Market activities & social activities
* =\> operational & impact KPIs*
Transformation Process
* Formal = Multi-functional organizational structure
* Informal = Heterogeneous organizational culture
* Work = Social activities alongside business activities
* People = Two types of competencies (business vs. social)
Ideal financing:
outcome-based contracts, such as social impact bonds
107
Strategy development: how to select the team
* Not too big or too small
* Including the best and brightest people of the organization, with good reputations, both
* long-time members, and
* recent joiners
* Selecting representatives from both large & small BUs and MOs
=\> make sure all kinds of BUs & MOs perceive that their voices are heard and co-shape the new strategy, so as to ensure buy-in
108
Strategy development:
how to use consultants:
2 ways: tasks, when
*(differences!)*
* **Supporting Expert Driver,** *providing*
* Impulse and concepts from other industries
* Methodology and expertise
* when:*
* Strategy renewal is needed
* There is Open culture, and...
* Strong internal strategy competence
* Internal resources (quantity & quality)
* **Project Manager**, providing
* Challenge to internal assumptions
* Overall coordination
* when:*
* Strategy turnaround is needed
* There is Culture resistant to change, and...
* Weak internal strategy competence
* Few resources available
109
Strategy development - using consultants: in any case, how?
1. with CEO & top managers not abdicating their role as ultimate decision makers
2. with internal project manager owning the project (lynchpin)
3. with consultants (methodologies) interacting with internal PMgr (PMgmt) & employees (specialised knowledge & realism)
110
Strategy development: diagnosis phase:
analytical tools
Porter's 5 forces
+ market shares by BUs
111
Strategy development:
the 3 strategic options for Hilti
* **Premium Producer =\> Product**
* Technology
* Quality
* Scale
* cost advantages
* **Application Expert =\> Application Know-how**
* Application knowledge
* Combination of product and advice
* **Service Provider =\> Comfort**
* Ordering and delivery service
* Range of products
* Local proximity
112
Hilti Champion 3C Strategy
the 3 values + the 3 initiatives
_The 3 values:_
* **Customer**
We want to be our customers’ best partner. Their requirements drive our actions.
* **Competency**
We are committed to *(operational) excellence* in innovation, total quality, direct customer relationships and effective marketing.
* **Concentration**
We focus on *products and markets where* we can *achieve and sustain leadership positions*
_The 3 initiatives:_
* ****Product leadership initiative**
* Concentration on product lines and applications
* with potential for innovation leadership
* with potential for market leadership
* with added value perceptible to customers
* Implementation of application know-how into products and services
* Efficient marketing of innovations
* **Market reach initiative**
* Effective marketing and sales by market segment
* small, medium, large, and key accounts
* trades
* =\> Targeted utilization of existing sales channels
* Customer-oriented integration of new sales channels and services
* **Operational excellence initiative**
* Worldwide standardization of business processes to increase efficiency and customer satisfaction
* Continuous improvement of processes
113
Carefully select a new strategy:
2 rules
Consider the strengths, weaknesses and core competencies of the company very well
If the new strategy is too far away from the company’s own strengths, new resources and knowledge must be accumulated
114
Manage the involvement of external consultants
3 rules
***s.o-\>i.r.***
Design a clear **scope** for the content of the strategy review
Assign **ownership** of the whole process to *internal* people
Establish clear **role** definitions
115
A strategy is a process and not a product
expand in 3 considerations
***cfd***
A strategy project cannot be delegated. It’s **CEO** work.
A solid and **fact-base**d diagnosis phase is key for the development of strategy alternatives
Strategy work as an excellent tool for **developing** people
116
Define SWOT analysis
* SWOT analysis is a (business) strategy planning tool which identifies the factors that are influential for a business venture, classifying them in a 2x2 matrix as either helpful or harmful and either internal or external (based on locus of control).
***helpful harmful***
***internal*****S**trengths**W**eaknesses
***external*****O**pportunities**T**hreats
* The goal is to plan a strategy that valorizes the strengths and exploits the opportunities, while neutralizing the weaknesses and mitigating the threats.
117
Strategies for Merging Different Organizational Cultures (4)
+ when each works best
* **Assimilation** = Acquired company embraces acquiring rm’s culture.
* Acquired rm has a weak culture.
* Acquiring rm has a strong culture.
* **Deculturation** = Acquiring rm imposes its culture on an unwilling acquired rm.
* Rarely works - may be necessary only when acquired rm’s culture doesn’t work but employees don’t realize it.
* **Integration** = Merging companies combine the existing cultures into a new culture.
* Existing cultures can be improved, and there is awareness of that.
* Existing cultures are weak.
* **Separation** = Merging companies remain distinct entities with minimal exchange of culture or organizational practices.
* Firms operate successfully in different businesses requiring di erent cultures.
118
Changing and Strengthening Organizational Culture
3 general considerations
+ 4 strategies
1. It is a challenge to change an organization’s culture.
2. Change rarely occurs quickly, and often the culture ends up changing (or replacing) corporate leaders.
3. At the same time, under the right conditions, organizational culture can be a powerful influence on the company’s success.
**1. Actions of Founders and Leaders**
An organization’s culture begins with its founders. Founders are often visionaries who provide a powerful role model. They establish an organization’s culture, but they and subsequent leaders are sometimes able to reshape that culture by applying transformational leadership and organizational change practices.
**2. Aligning Artefacts**
By altering artefacts - or creating new ones - leaders can potentially adjust shared values and assumptions. Corporate cultures are also altered and strengthened through the artefacts of stories and behaviours. Every organization needs “tribal storytellers” to keep the organiza- tion’s history and culture alive. Leaders play a role by creating memorable events that sym- bolize the cultural values they want to develop or maintain.
**3. Introducing Culturally Consistent Rewards**
Reward systems often have a powerful e ect on strengthening or reshaping an organization’s culture.
**4. Attracting, Selecting, and Socializing Employees**
Organizational culture is strengthened by attracting and hiring people who already embrace the cultural values. This process is explained by attraction-selection-attrition (ASA) theory .
119
Employee socialization in 3 stages + 5 good outcomes
* **Preemployment socialization (outsider)**
* Learn about the organization and job.
* Form employment relationship expectations.
* **Encounter (newcomer)**
* Test expectations against perceived realities.
* Possible reality shock
* **Role management (insider)**
* Strengthen work relationships.
* Practice new role behaviors.
* Resolve work & non-work conflicts.
* **Socialization outcomes**
* **sa.lo.m.***
* Higher satisfaction.
* Higher loyalty.
* Higher motivation.
* **s t u***
* Lower stress.
* Lower turnover.
120
1 tool and 2 agents that can improve the socialization process
+ how
* The **realistic job preview** (RJP) potentially improves organizational socialization. Job applicants are given a balance of positive and negative information about the job and work context. They ***minimize reality shock*** in that:
* RJPs scare away some applicants,
* but they also tend to reduce turnover and increase job performance.
* Much organizational socialization occurs informally through **socialization agents**.
* **Supervisors** tend to provide technical information, performance feedback, and information about job duties. They also improve the socialization process by giving newcomers reasonably challenging first assignments, buffering them from excessive demands, and helping them form social ties with co-workers.
* **Co-workers** are important socialization agents because they are easily accessible, can answer questions when problems arise, and serve as role models for appropriate behaviour.
121
Org culture: 3 functions, explained
* **Control system**
* Organizational culture is a form of social control
* It influences employee decisions and behaviour
* Culture is pervasive and operates nonconsciously
* **Social glue**
* Corporate culture makes employees feel part of the organizational experience
* Employees often internalize the dominant culture to fulfil their need for social identity.
* This social glue helps to attract new staff and retain top performers
* **Sense making**
* Corporate culture helps employees make sense of what goes on and why things happen in the company.
* It makes employees understand what is expected of them
122
```
External recruiting:
def + pros & cons
```
* Looking outside the organization for people
* Examples: advertisements, open houses for students etc., career fairs at colleges, recruitment meetings, informal networks (current employees inform friends about open positions), employment agencies, walk-in job hunter, employment websites
+ Advantages: access to a large applicant pool with special skills, knowledge, fresh approach to problems, up to date to latest technology
- Disadvantages: high costs, people lacking knowledge about inner workings of the organization, more training needed, uncertainty about performance
123
pay & benefits:
3 decisions
* **Pay Level** := The relative position of an organizations pay incentives in comparison with those of other organizations in the same industry employing similar kinds of workers. Managers decide between:
* High wages: able to recruit, select and retain high performers, but also raise high cost
* Low wages: cost advantage, but may undermine ability to select and recruit high performers and to motivate current employees to perform at a high level
* **Pay Structure** := The arrangement of jobs into categories reflecting their relative importance to the organization and its goals, levels of skill required and other characteristics
* Pay ranges are established for each job category. Individual jobholders pay within job categories is then determined by factors such as performance, seniority and skill levels
* **Benefits**:
* Legally mandated ones: workers compensation, social security, unemployment insurance
* Other benefits: health insurance, dental insurance, vacation time, pension plans, life insurance, flexible working hours, company-provided day care, employee assistance, wellness programs
* Cafeteria-style benefit plan: A plan from which employees can choose the benefits they want
124
HRM & Strategic HRM, defined
* **HRM**: Activities that managers engage in to attract and retain employees and to ensure that they perform at a high level and contribute to the accomplishment of organizational goals
* **Strategic HRM**: The process by which managers design the components of an HRM system to be consistent with each other, with other elements of organizational architecture, and with the organizatios strategy and goals
125
HRM: 5 components
1. Recruitment & selection
2. Training and development
3. Performance appraisal and feedback
4. Pay & benefits
5. Labor relations
126
7 guidelines for giving effective performance feedback
+ why give feedback?
1. Be specific and focus on behaviour or outcomes that are correctable and within a workers ability to improve
2. Approach performance appraisal as an exercise in problem solving and solution finding, not criticizing
3. Express confidence in a subordinates ability to improve
4. Provide performance feedback both formally and informally
5. Praise instances of high performance and areas of a job in which a worker excels
6. Avoid personal criticism and treat subordinates with respect
7. Agree to a timetable for performance improvements
**+ Why** give performance feedback?
=\> To encourage high levels of motivation and performance
127
**Performance appraisal**
def=
+ appraisal objects w Pros & Cons
+ various appraisal modes
**Performance appraisal :=**
The evaluation of employees’ job performance and contributions to their organization. It gives managers important information for HRM decisions (pay raises, bonuses, promotions, training and development).
3 objects of appraisal:
* **Trait Appraisal** = Managers assess subordinates on **personal** characteristics that are relevant to job performance (skills, abilities, personality)
- Certain personal characteristic does not ensure that personal characteristic is used on the job and result in high performance
- can be unfair and potentially discrimatory
- Employees often cannot use trait appraisal to improve performance
=\> use only when demonstrably needed & useful!
* **Behaviour Appraisal** = Managers assess how workers perform their jobs
+ Clear information about what they are doing right and wrong and how they can improve their performance
+ More likely to lead to improve performance
* **Results Appraisal** = Managers appraise performance by the results or the actual outcomes of work behaviors. Typically objective.
Various appraisal modes
* subjective or objective
* formal or informal
* forced rankings
* 360-degree (supervisor, colleagues, reportees, clients, self)
128
HRM: 7 employee selection tools
1. **- Background Information** = info From job applications and résumés. Useful to screen out applicants who are lacking key qualifications and determining those who are more promising than others
2. **Interviews.**
***3 Types:***
* Structured interview = Same standard questions. Good to yield information, less subjective
* Situational interview questions = Scenarios, ask how applicant would handle it
* Unstructured interview: like ordinary conversation
***4 guidelines:***
* avoid illegal Qs
* train interviewers to avoid bias
* use multiple interviewers
* combine w other methods
3. **Paper and Pencil Tests.**
Types:
* ability
* Personality tests (- not valid & can be faked)
4. **Physical Ability Tests** where physical abilities are needed
5. **Performance Tests** = Measure job applicants’ performance on actual job tasks
6. **Assessment Centers:** 10 to 15 candidates for managerial positions participate in a variety of activities over a few days (activities performed individually or in groups), current managers observe the candidates behaviour and measure performance
7. **References** = Former employers or other knowledgeable sources are asked to provide candid information about the applicant
* - Former employers are reluctant to provide negative information
129
Training & development
defs=
+ 3 types of training & 6 types of development
Training VS dev. =\> low levels VS professionals & managers
3 Types of Training
1. Classroom Instruction, often w videos & role play etc.
2. On-the-Job Training Provided by coworkers or supervisors
3. Apprenticeships: can include classroom instruction and on-the-job training
Types of Development
1. **- Classroom Instruction**
2. **- On-the-Job Training**
3. - **Varied work experiences** =\> Employees with high potential should have a wide variety of different job experiences (line and staff positions), because varied work experiences broaden employees’ horizons and help them think about the big picture
4. **Mentoring**: experienced member of an organization provides advice and guidance to a less experienced member (protégé); can be formal
5. **Formal education** = Employees get reimbursed for tuition expenses they incur while taking college courses and obtaining advanced degrees
* + Reward given to employee but also effective way to develop employees who can take on new responsibilities and more challenging positions
6. **Long distance learning**: to save time and travel costs using videoconferencing technologies
130
Hybrid enterprises: the 2 dimensions and their determinants
* Contingency of value spillover of biz transactions:
* Relevant?
* Automatical, or contingent on other actions?
* Overlap b/w clients and beneficiaries:
* Are the beneficiaries
* accessible?
* able to pay?
* willing to pay?
131
Indications for governance of hybrid enterprises
to avoid mission drift
* Any type
=\> board must monitor client segmentation
* Only market activities
=\> board must check theory of change (are social benefits happening?)
* Market activities & social activities
=\> mgmt must monitor impact (e.g. w impact KPIs)
* Clients\<\>Beneficiaries
=\> invite advocates of beneficiaries into the board
132
Dynamic 5 Factor Model of Leadership in a Complex Adaptive System:
rationale
+ 2 equations and 5 elements
* The dynamic five-factor model tries to formulate a comprehensive leadership model that helps to **evaluate the relevant factors influencing leadership behaviour in a particular situation**. Combining the model with the scenario approach, one can identify, analyze and illustrate dynamic changes over time. Thus leadership behavior can be understood in its dynamic nature.
* LeadershipBehavior = f (
* **ic.e.s.***
* IndividualCompetencies ,
* Environment ,
* Situation )
* Environment = f (
* **c.o.g. reversed***
* Group *(of people)* ,
* Organization ,
* *(general)* Context )
133
five-phase strategy-based interactional moral dilemma approach
1. presentation of a real-life situation including a **moral dilemma** to the group
2. development of **individual solutions** by the participants
3. **group discussion** of reflections, solutions and justifications in 4-6 people (interactional approach)
4. **group agreement** on best possible solution within group
5. **inter-group sharing** of experience
134
Moral decision-making training:
factors determining effectiveness
* **Duration and intensity** of the training
* **Dilemma approach**: focus on the ability to integrate and **balance** several aspects into the problem-solving process:
* relevant **instrumental aspects** (success-related)
* **moral aspects**
135
Orgs' ethical behavior & stakeholders:
6 categories
1. Stockholders \<\> financial return linked to company’s reputation
2. Managers decide on resources \<\> return to career investment
3. Employees \<\> fair rewards consistent w performance
4. Customers \<\> loyalty! can kill Co by not buying!
5. Suppliers and Distributors \<\> needed netwrok, expects fair & timely payments
6. Community, Society, Nation \<\> deserves salaries, wages, taxes in exchange for providing the infrastructure
136
Ethics: 3 + 1=3 rules
1. Utiliarian Rule: = produce the greatest good (or least harm) for the greatest number of people.
2. Moral rights rule: = maintain and protect the fundamental rights and privileges of people (e.g. Freedom, life, ...)
3. Justice Rule = distribute benefits and harm among people and groups in a fair, equitable and impartial manner.
4. Practical rule: All three previous rules should be used, but Ethical questions are seldom clear-cut
=\> An ethical decision should be one that a manager has no hesitation about communicating to the people outside the company because the typical person in society would think that the decision is applicable. Answering yes to three questions:
1. Decision within the accepted values or standards of my business activity?
2. Am I willing to see the decision communicated to the people / groups affected?
3. Would the people with whom I have a significant personal relationship (family, friends) approve the decision?
137
environmental forecasting:
3 processes, explained
**Environmental forecasting =**
the development of plausible projections about the direction, scope, speed and intensity of change.
1. **Environmental scanning =**
Surveillance of a firm’s external environment to **predict environmental changes** and detect changes already under way
1. Listen - ask your customers questions about your products and services
2. Pay attention - read trade publications related to your industry
3. Follow trends online
4. Go old school - ask your customer what they think
2. **Environmental monitoring =**
A firm’s analysis of the external environment that tracks the **evolution of environmental trends, *sequences of* events*, or streams of* activities**
3. **Competitive intelligence =**
A firm’s activities of collecting and interpreting **data on competitors** and identifying competitors’ strengths and weaknesses
138
Other 2 tools for environmental analysis
* scenario analysis: in-depth forecasting, considering all environmental segments
* SWOT analysis
139
Factors influencing the intensity of Porter's 5 forces of industry competition:
1. **Rivalry between competitors**
1. Number of competitors
2. Industry growth rate
3. Fixed cost
4. Storage costs
5. Product differentiation
6. Switching costs
7. Exit barriers
8. Strategic stakes
2. **Suppliers' bargaining power**
1. Concentration relative to buyer industry
2. Availability of substitute products
3. Importance of customer to the supplier
4. Differentiation of the supplier’s products and services Switching costs of the buyer
5. Threat of forward integration by the supplier
3. **Buyers' bargaining power**
1. Concentration of buyers relative to suppliers
2. Switching costs
3. Product differentiation of suppliers
4. Threat of backward integration by buyers
5. Extent of buyer’s profit
6. Importance of the supplier’s input to quality of buyers’ final product
4. **Threat of new entrants**
1. Economies of scale
2. Product differentiation
3. Capital Requirements
4. Switching costs
5. Incumbent’s control of distribution channel
6. Incumbent’s proprietary knowledge
7. Incumbent’s access to raw material
8. Incumbent’s access to government subsidies
5. **Threat of substitute products or services**
1. The differentiation of the substitute product
2. Rate of improvement in price/performance relationship of substitute product
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How the Internet and Digital Technologies influence industry
analyzed through Porter's 5 forces of industry competition
1. Threat of New Entrants
1. *- Lower barriers to entry increase number of new entrants.*
2. *- Many Internet-based capabilities can be easily imitated.*
2. Bargaining Power of Buyers
1. _+ Reduced the power of buyer intermediaries in many distribution channels_
2. *- Switching costs decrease.*
3. *- Information availability online empowers users*
3. Bargaining Power of Suppliers
1. _+ Online procurement methods can increase bargaining power over suppliers_
2. *- The internet gave suppliers access to more customer and makes is easier to reach end users*
3. *- Online procurement practices deter competition*
4. Threat of Substitutes
1. _+ Internet-based increases in overall efficiency can expand industry sales_
2. *- Internet-based capabilities create more opportunities for substitution*
5. Intensity of Rivalry
1. *- Since location is less important, the number of competitors increases.*
2. *- Differences among competitors are harder to perceive online.*
3. *- Rivalry tends to focus on price and differentiating features are minimized*
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The Balanced Scorecard:
Def + Breakdown into 4 perspectives
- Cons
Strategic management tool by Kaplan and Norton;
method of evaluating strategic firm performance using measures from 4 key perspectives:
1. Customer Perspective: how well a firm satisfies customers expectations, **How do customers see us?**
* Time
* Quality
* Performance and service
* Price
2. Internal Business Perspective: how well internal processes, decisions and actions are contributing to customer satisfaction
* **What must we excel at?**
3. Innovation and Learning Perspective: How well does the firm perform in changing and adapting products and services regarding the changing environment
* **Can we continue to improve** and create value?
* Intangible assets:
* Human capital
* Information capital
* Organization capital (culture)
4. • Financial Perspective: measures the performance regarding strategy implementation and execution
* How do we look to shareholders?
* Typical goals are:
* Profitability
* Growth
* Shareholder value
Limitations and potential pitfalls:
* Balanced scorecard is a long-term and evolutionary process, not a quick fix
* Lack of a clear strategy
* Limited or ineffective executive sponsorship
* Too much emphasis on financial measures rather than non-financial measures
* Poor data on actual performance
* Inappropriate links of scorecard measures to compensation
* Inconsistent or inappropriate terminology
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Competitive advantage:
2 sources, explained
* experience curve =
as (cumulative) volumes grow, learning enables to decrease costs
* competitive parity (on cost or differentiation) =
differentiator or cost leader performs at least comparably with competitors on the other front
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COMBINATION STRATEGIES
def + 2 ways + 3 pitfalls
COMBINATION STRATEGIES
Some firms are able to attain both types of advantages simultaneously. For example, **superior quality** can lead to lower costs because of less need for rework in manufacturing, fewer warranty claims, a reduced need for customer service personnel to resolve customer complaints, and so forth. Thus, the benefits of combining advantages can be additive, instead of merely involving trade-offs
***Typical means:***
* Automated and Flexible Manufacturing Systems
=\> **mass customization** = with manufacturing and information technologies, many firms have been able to manufacture unique products in relatively small quantities at lower costs
* **Exploiting the Profit Pool** = he total profits in an industry at all points along the industry's value chain.
***Pitfalls***
* possibly ending up “stuck in the middle.”
* Underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain
* Miscalculating sources of revenue and profit pools in the firm’s industry
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diversification: 3-level taxonomy of synergies,
w 5 of 2nd-level type
as linked to diversification types
* **related diversification**
* ***economies of scope***
* _leveraging core competencies_
=\> more value added via combined skills
* _sharing activities_
=\> reducing costs or enhancing revenues and differentiation
* ***market power***
* _pooling negotiating power_
* _vertical integration_
=\> + control, - transaction costs
* **unrelated diversification**
* ***portfolio management = ???***
* ***corporate parenting***
* ***restructuring***
* **strategic alliances & joint ventures**
* ***entering new markets***
* ***reducing costs in the value chain***
* ***technology diffusion***
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condition for firm alliance success
there must be **strategic fit**, i.e. complementarity of strengths, such that the alliance is a **win-win** situation
146
product team structure
* **+ similar goals to matrix structure, but does away with double bosses by means of grouping employees in cross-functional product teams w 1 leader**
* each team is globally interacting / responding to the various functions
* **+ artificial internal boundaries are eliminated**
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functional structure:
def + pros - cons
A function is a group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs.
**+ 4 pros:**
* direct supervision
* highly centralized
* few rules and regulations fosters creativity
* enhances coordination and control within each of the functional area centralized decision-making efficient use of managerial and technical talent (if grouped as such)
***- 5 cons:***
* Less cross communication between areas
* Can lead to silo-thinking
* difficult to establish uniform performance standards across the entire organization
* can lead to unclear responsibilities
* Employees may act in self-interest
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simple structure
def + 3 pros - 2 cons
Used in small company’s who have a single or very narrow product line in which the owner-manager (or top executive) makes most of the decision
**3 pros**
* direct supervision
* highly centralized
* few rules and regulations fosters creativity
***2 cons***
* can lead to unclear responsibilities
* Employees may act in self-interest
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divisional structure
peculiar def & pros & cons of each of the 3 types
1. Geographic structure
* Grouping according to region
* **Allows easy regional specific customization**
* ***- Each division has its (global) value chain which is not in line with the one of others***
2. Product structure
* Put each product line in or business in self-coordinated division. Each division has its own HR, R&D, finance,...
* **Is specialized in only one product
=\> Group/manager can become expert of industry**
* **+ Corp. strategy is easy to follow by corp. managers**
3. Market structure
* Grouping according to customer need / market need.
* **+ Is most responsive to changes in needs or environment**
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tall VS flat organizations
tradeoff in 3 points
* Levels of authority versus number of employees a each level
* Tall Org. have long communication paths. So decisions take time until in place and it takes time to notice something on the top.
* Tall Org. also have more communication than flat ones.
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(de-)centralization of authority:
def + tradeoff in 3 pros and 1 con
Decentralization describes the action of **giving low-level managers and non-managerial employees the right to make decisions** about how to use resources.
* + Thus, fewer managers are needed and they act more as coach and facilitator =\> flatter organization
* + employees can react better to changes in customer needs; they are more flexible even in tall organizations
* + In fast-paced sectors (where the state-of-the art changes rapidly) decentralization should be pursued to allow fast changes from the consumer side.
* ***- Too much decentralization brings the risk that employees may pursue their own goals.***
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Minimal chain of command =
Top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources. E.g. to reduce the negative effects of too tall organizations.
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Interactional Dual Process model of moral decision-making:
the 5 components
1. **Moral Perception**:
how one sees the moral conflict of a situation.
2. **Internal Dual Process**:
the process of **reasoning** _AND_ **intuition**.
3. **\>\>\> Moral Judgment and Decision \<\<\<**
4. **Post hoc reasoning**:
to support or adjust his previously made decision.
5. **Social Interaction**:
during and after the decision making process.
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Moral agency: 4 necessary conditions
1. actions are done **intentionally**
2. consequences of actions are **anticipated**
3. an actor can act in a **self-regulated** manner
4. an actor can **reflect** upon the quality and impacts of his or her behavior
155
Interactional Dual Process Model of moral decision making:
4 implications for moral development interventions, justified
1. **Developing Moral Perception**
\<= in the *individual*, the goal of ***ethics*** competes with ***success*** *~ instrumental rationality of professional behavior*
2. **Developing Moral Reasoning and Emotional–Intuitive Processes**
\<= *immediate* thinking patterns or moral processing schemata are needed
3. **Fostering Social Interaction**
\<= moral decisions are taken not only by individuals but also by groups
4. **Developing Procedural Knowledge**
\<= each moral decision situation is unique
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moral decision making:
the 5 procedural components
1. General analysis of the situation
2. Developing alternative solutions
3. Evaluation of alternative solutions (pros and cons)
4. Deciding on a preferred solution
5. Justification for the decision made
157
moral decision making:
the 5 content components
1. Identifying moral components
2. Identifying instrumental components
3. Balancing moral components
4. Balancing moral with instrumental components
5. Developing “compensation actions”
158
structural VS interactional influence of a leader
= influence on the organization VS on the people
159
leadership responsibility
def in 4=2+2 components
* **Setting and achieving the right objectives**
* **Respecting ethical obligations towards other people** (e.g., fairness, justice, honesty, integrity, etc.), the organization, the society in general, an the environment/planet
* **Understanding the situational context**
* **Managing complexity and changing circumstances**
