ACHIEVING SYNERGY Flashcards
A concept that states that the whole is
greater than the sum of its parts; that two units
will achieve more together than they could
separately.
Synergy:
According to Goold and Campbell, synergy can
take place in one of six forms:
Shared know-how:
Coordinated strategies:
Shared tangible resources:
Economies of scale or scope:
New business creation:
Structure follows strategy
synergy:
Combined units often
benefit from sharing knowledge or skills.
Shared know-how
synergy:
Aligning the business
strategies of two or more business units may
provide a corporation significant advantage by
reducing inter-unit competition and developing a
coordinated response to common competitors
(horizontal strategy).
Coordinated strategies:
synergy:
Combined units can
sometimes save money by sharing resources,
such as a common manufacturing facility or
R&D lab.
Shared tangible resources:
Coordinating the
flow of products or services of one unit with that
of another unit can reduce inventory, increase
capacity utilization, and improve market access.
Economies of scale or scope
synergy:
Exchanging knowledge
and skills can facilitate new products or services
by extracting discrete activities from various
units and combining them in a new unit or by
establishing joint ventures among internal
business units.
New business creation
synergy:
The process
through which changes in corporate strategy
normally lead to changes in organizational
structure.
Structure follows strategy
An organizational
structure in which employees tend to be
functional specialists organized according to
product/market distinctions.
Divisional structure:
A pattern of
structural development that corporations follow
as they grow and expand.
Stages of corporate development:
Stages of corporate development Stages
STAGE 1: Simple structure:
STAGE 2: Functional structure:
STAGE 3: Divisional structure:
STAGE 4: Beyond SBUs:
A structure for
new entrepreneurial firms in which the
employees tend to be generalists and
jacks-of-all-trades.
STAGE 1: Simple structure:
A time when an
entrepreneur is personally unable to manage a
growing company.
Crisis of leadership:
An
organizational structure in which employees
tend to be specialists in the business functions
important to that industry, such as
manufacturing, sales, or finance.
STAGE 2: Functional structure:
A time when people
managing diversified product lines need more
decision-making freedom than top management
is willing to delegate to them.
Crisis of autonomy:
An
organizational structure in which employees
tend to be functional specialists organized
according to product/market distinctions.
STAGE 3: Divisional structure:
A time when business units
act to optimize their own sales and profits
without regard to the overall corporation. See
also suboptimization.
Crisis of control
A phenomenon in which a
unit optimizes its goal accomplishment to the
detriment of the organization as a whole
Suboptimization
A crisis that occurs when a
corporation has grown too large and complex to
be managed through formal programs.
Red tape crisis
A situation that exists
when employees in collaborative organizations
eventually grow emotionally and physically
exhausted from the intensity of teamwork and
the heavy pressure for innovative solutions.
Pressure-cooker crisis:
This is good at the
beginning but soon becomes a liability as
“favoritism.”
Loyalty to comrades:
Focusing on the job is critical at
first but then becomes excessive attention to
detail.
Task-oriented:
A grand vision is needed to
introduce a new product but can become tunnel
vision as the company grows into more markets
and products.
Single-mindedness:
: This is good for a
brilliant scientist but disastrous for a CEO with
multiple constituencies.
Working in isolation
How organizations
grow, develop, and eventually decline.
Organizational life cycle:
It is the organizational equivalent of the product
life cycle in marketing. These stages are
Birth (Stage I),
Growth (Stage II),
Maturity (Stage III),
Decline (Stage IV), and
Death (Stage V).
A core competency of
a firm that over time matures and becomes a
weakness.
Core rigidity/deficiency.
A process in which unit costs are reduced by making large numbers of the same product.
Economies of scale
A process in which unit costs are reduced when the value chains of two separate products or services share activities, such as the same marketing channels or manufacturing facilities.
Economies of scope
Combined units can
combine their purchasing to gain bargaining
power over common suppliers to reduce costs
and improve quality
Pooled negotiating power:
