E2 Flashcards
PESTEL
Factors provide a framework for analysing or reviewing a situation, the strategy, position or direction of an enterprise
Political
Economic
Social
Ecological
Legal
Conducted on 3 levels: Local, National and Global
Porters five forces
Micro model - framework for industry analysis. Determine the competitive intensity and therefore the attractiveness of the market. A change in one of the forces usually requires reassessment of the marketplace
- Bargaining power of suppliers
- Bargaining power of customers
- Threat of new entrants
- Availability of substitutes - substitutes fulfil the need in different way.
- Intensity of competitive rivalry - all the above feed into this.
6th force - Government. Major supplier and buyer. Also sets policies etc.
Porters generic strategies
Organisations should select one of the following 3 strategies - to deal with the 5 forces:
- Cost leader: aim to have the lowest costs. Not necessarily having the lowest prices but charge lower price than the differentiator
- Differentiation: aim to do things, or appear to do things, differently. Tend to be able to charge a higher price but also have higher costs.
- Niche or focus: concentrate on a segment of the market. Possibly combine with either of the above 2 strategies.
There is a ‘middle of the road’ path - when prices fall or costs rise, these are squeezed out of the market first
Ecosystem concept
More modern, holistic view of the business environment/models
Economic community supported by a foundation of interacting organisations and individuals
All members of the ecosystem are affected by the actions of all other members
The environment strongly influences what the organisations do and the strategies they choose
Drivers of the evolution of ecosystems
- the internet and the access this provides - globalisation
- the wealth of data that is available: big data. Available for companies to use in decision making
- the increase in customer empowerment: have access to more information, can buy from more places and have more legal rights
Digital customers - what do they want
- Contextualised interactions: tailored to the needs of the individual
- Seamless experience
- Real time info
- Great service
- Self service
- Transparency
- Peer review and advocacy
How do businesses meet the demands of the digital customer
- Design thinking: shift from designing 1 product to designing a series of experiences
- Experiential pilots: monitoring customer response and reaction to new experiences
- Prototyping: bringing models to market prior to perfection and evolving new models
from customer experiences. - Brand atomisation: design products for wide distribution by themselves and other
providers
The strategic journey 2020 (Christison and Choo)
Five models providing tools and techniques for businesses to navigate their strategic journeys:
- Mission model: core purpose of an enterprise (pulls followers to its vision)
- Business model: what constitutes and drives the business (grows its value)
- Value model: what constitutes value, how to find opportunities to create it
- Operating model: how the business runs (processes)
- Transformation model: how it executes change to improve business agility to continue value
delivery and growth
The network model
From traditional to modern -
- Asset builder: deliver value by using physical goods
- Service provider: deliver value through skilled people
- Technology creator: deliver value through ideas
- Network orchestrator: deliver value through connectivity
Network Orchestrators
Companies that deliver value through connectivity. They create platform that participants use to interact or transact with other members of the network.
- Tend to grow faster and use assets more efficiently
- Tended to have higher market valuations than traditional enterprises
- Believe value can continually be added
- Currently are the minority of companies
10 principles of network orchestration:
- Create digital capabilities
- Invest in intangible assets (sources of assets are changing)
- Actively allocate your capital (what are you doing with your funds, not necessarily the same as
last year…) - Lead through co-creation (empower team/network members)
- Invite your customers to co-create (from customers to community…)
- Focus on subscriptions, not transactions (also building relationship with customers)
- Embrace the freelance movement (from employees to partners)
- Integrate big data
- Choose leaders who represent your customers (from governance to representation)
- Open your mind to new possibilities (from closed to open)
Characteristics of ecosystems
Two key factors:
- Participants (essentially buyers and sellers)
- Interactions (essentially the product or service)
In an ecosystem, these basic parties are characterised by the following:
Participants (RRC)
Role (ie what they do buy/sell/support/partner)
Reach (ie how far they extend in the environment)
Capability (ie their key value proposition)
Interactions (RCC)
Rules (define how interactions occur)
Connections (links within the ecosystem)
Course (the speed and direction of interactions)
Complexity and orchestration
Nature of an ecosystem determines the complexity of interactions and the level of orchestration required:
Complexity - number and diversity of participants, sophistication of activities, range and nature of relationships
Orchestration - strength and extent of influence, formality of interactions, degree of enforceability
HIGH COMPLEXITY/TIGHT ORCHESTRATION
Lion’s pride - high barriers to entry. open to be dominated by powerful orchestrator
HIGH COMPLEXITY/LOOSE ORCHESTRATION
Hornet’s nest - higher barriers to entry but low orchestration
LOW COMPLEXITY/TIGHT ORCHESTRATION
Wolf pack - lower barriers to entry. Overall less chance of dominance.
LOW COMPLEXITY/LOOSE ORCHESTRATION
Shark tank - need to innovate to be competitive as low barriers to entry and high competition
Different forms of business organisation
Outsourcing
Offshoring
Shared Service Centres (SSC)
Strategic alliance: an arrangement between two or more organisations to share resources to
undertake a mutually beneficial project in a non-permanent way, eg airlines running routes
through strategic alliances.
Franchising. The franchisee produces or supplies a branded product or service, and pays the
franchiser for use of the brand and ‘system’. The franchiser is responsible for marketing and
retains overall control of the brand.
Consortia. An association of organisations to deliver a particular project.
Licensing. The right to produce or supply a product or service in return for a fee.
Joint venture. A separate shared entity is formed by two or more independent organisations to
pursue an opportunity.
Defining value
Factors influencing value (3Ts) - dubious at best
- Financial and non-financial factors. Critically, value does not have to be just monetary. (If you want to remember 3Ts of value, nickname this one ‘a tenner’!)
- Tangibility. This is important in a digital age, where increasingly value is in intangible factors
rather than ‘bricks and mortar’ - Time. Weighing up short term and long term values might be a critical factor in ongoing success.
Stakeholders
(1) Internal – directors, employees. All employees should take an interest in their company, whether
for reasons of job security or because they are on some form of performance-related pay.
(2) Connected – shareholders, lenders, customers, suppliers (i.e. there is some form of financial
relationship).
(3) External – government (local and central), pressure groups, local community.
The first two groups are primary stakeholders in that they have some sort of relationship with the
organisation which is likely to be contractual. The third group are secondary stakeholders.
Mendelow’s matrix - stakeholders
LOW POWER/LOW INTEREST
Minimal effort
LOW POWER/HIGH INTEREST
Keep informed
HIGH POWER/LOW INTEREST
Keep satisfied
HIGH POWER/HIGH INTEREST
Key players - Chosen strategy must be acceptable to these stakeholders
Stakeholder salience
In stakeholder salience theory, stakeholders are considered in terms of:
- Their power to influence the organisation
- The legitimacy of their relationship with the org
- The urgency of their relationship with the org - not just time but importance
Mapped in a venn diagram - increase number of factors = increased salience
Salience theory diagram
LOW SALIENCE - low effort
Dormant - Power only
Demanding - Urgency only
Discretionary - Legitimacy only
MEDIUM SALIENCE
Dangerous - Urgency & Power
Dominant - Power & Legitimacy
Dependent - Urgency & Legitimacy
HIGH SALIENCE
DEFINITIVE - ALL 3 FACTORS
Customer segmentation
Customer segmentation is dividing a customer base into groups of individuals that are
similar in specific ways relevant to marketing, such as age, gender, interests and spending
habits.
- Undifferentiated marketing. This is the delivery of a single product to the market place
with very little concern for segment analysis. - Differentiated marketing. Here the company makes several products each aimed at a
separate segment. Although more time consuming and costly, the advantage is that
each product should appeal more to each targeted group. It may be possible to charge
a price differential in each segment. - Concentrated marketing. The company focuses on a single segment for its product
hoping to meet the exact needs of that group better than any other organisation
Cost model
One way of determining what to spend is to use a cost method, ie to calculate all the associated costs
of making/distributing a product or service and then factor that into pricing considerations.
A cost model is likely to be used by organisations which are creating social value rather than monetary
value, ie not-for-profit organisations.
It will also be used by all business in their planning and budgeting.
Revenue model
A revenue model is more about
Which revenue source to pursue
What value to offer
How to price the value
Who pays for the value.
It identifies what product or service will be created to generate revenues and the ways in which the
product or service will be sold.
Sharing of residual value
At a basic level the ‘surplus’ value created by a company in its operations, ie profit, has been used in two ways:
- Distribution to shareholders in the form of dividends. INCREASES THEIR WEALTH
- Investment in the organisation as a form of finance to fund new strategies/projects. INCREASES THE VALUE OF THEIR CAPITAL ASSET
Digital disruption
When new technologies etc. affect
and change the value of the industry’s existing services and goods.
‘Disruptive technology’ replaces an existing technology and transforms how businesses are
run.
E.g.
Cloud Computing
Mobile tech
Blockchain
Digital wallets
Data analysis
Fintech - banking software
Accenture’s Technology Vision
Accenture’s Technology Vision report from 2015 identifies five technology trends for companies to be aware of:
- The Internet of me: Through personalised apps, the digital experience is very individualised for
consumers - Outcome economy: Entities don’t just provide a service but are able to measure the outcome of
the service they deliver - The platform (R)evolution: How
customers are reached digitally has changed significantly. - The intelligent enterprise: Advances in artificial intelligence and data capture enables
companies to turn big data into smart data. - The workforce reimagined: Machines and humans working together.
‘innovator’s dilemma’
World Economic Forum in collaboration with Accenture
To survive in the digital age, traditional companies need to accept disruption to remain competitive. Many companies do not want to stop doing what makes them successful, but do not want to be left behind.
- Innovation at the ‘edge’ of your company so as not to mess with the core
- ‘Black ops’: the idea that a team is working covertly to help transform the business
- Copy Google: learn from the best – by focusing on big ideas and partnering to achieve objectives
Strategies to build disruptive business models
- Build - built from within
Time allows (not moving too quickly)
The disruption is closely associated with the core business
Company can hire the right people to build new model - Buy - buy someone else who is already doing
Time is an issue
Disruption is critical to survival
Core model needs to change substantially for success - Partner - modern, flexibility and speed
Not strategically important to ‘own’ the disruptive factor - Invest - more formal or controlling way of partnering. Invest in start-up.
Incubate and accelerate models
Linked to investing.
Accelerators “accelerate” growth of an existing company. A company applies to an ‘accelerator’ company, and if accepted, that company is given a small amount of investment, and access to a network of mentors to help develop the company. Typically there is a timeframe set for acceleration.
Incubation. Companies are sponsored onto incubation programmes through trusted sources. May relocate to network and receive mentoring
Digital Operating models
Customer centric - A customer-centric model focuses on customer value both at point of sale and in terms of after care.
EXtra frugal - EXtra frugal organisations aim to provide good quality solutions to customers at a low price. Particular impact in developing countries as it makes new technologies affordable. Extra lean processes to prevent unnecessary cost
build up which must be passed to the customer.
In terms of costs, this may involve businesses outsourcing.
Data powered -
- Collecting data well
- Interpreting it well
- Allowing that interpretation to drive decision-making
Skynet
It is a model which uses machines
intensively to increase productivity and flexibility in production. It is obviously suited to manufacturing
enterprises, but not exclusively.
Open and liquid - Open organisations are those committed to openness as a defining element in how they create value.
- Sharing and open collaboration
- Open participation
- Co-creation
LOOK AT THE REST OF CHAPTER 3
IF YOU LOOK AT IT NOW YOU MIGHT SHOOT YOURSELF :)
The psychological contract
Not legal - more like expectations between employee and employer
Maintaining the psychological contract can be an important consideration in motivation
Leadership concepts - POWER
A simple definition of power is ‘the ability to get things done’.
French and Raven 5 categories of power:
Legitimate power
Derives from the relative position and duties attached to a post within an organisation.
The formal authority that belongs to the holder of the position.
Referent power
The power or ability of individuals to persuade and influence others - charisma and interpersonal skills
Expert power
Derives from the skills or expertise of the person and the organisation’s needs for those skills
and expertise.
Reward power
Depends upon the ability of the holder to give rewards
2.1.5 Coercive power
The power to penalise or punish.
Coercive power tends to be the least effective form of power as it builds resentment and
resistance.
Leadership concepts - AUTHORITY
Authority may be defined as the right to do something, or to ask someone else to do it and
expect it to be done. Authority is therefore a type of legitimate power.
Traditional authority
Derives from long-established customs, habits and social structures. Accepted and agreed by society.
Rational-legal authority
Based on formal rules. Attached to the position rather than to the individual.
Charismatic authority
Secured by the personality or acts of an inspirational person.
Delegation
Delegation involves the passing of authority from one party to another. Although authority
may be passed, responsibility remains with the original holder of authority.
Types of delegation
Consultation: manager seeks views and input from others.
Explanation: manager provides instruction and guidance.
Abdication: manager leaves the task to others.
Custom and practice: although authority remains with the manager the norm is that the task is
performed by others.
Fayol (1849-1926) classical theory of management
Five primary functions of management:
(1) Planning,
(2) Organising,
(3) Commanding,
(4) Co-ordinating,
(5) Controlling.
(POCCC)
Frederick Taylor (1856 – 1915) Scientific management
Taylor’s beliefs
Industrial management of his day was amateurish
Management could be formulated as an academic discipline
Best results would come from the partnership between a trained and qualified management
and a co-operative and innovative workforce
Each side needed the other, and there was no need for trade unions
Taylor’s principles
Replace rule-of-thumb work methods with methods based on a scientific study of the tasks.
Scientifically select, train, and develop each employee.
“Detailed instruction and supervision of each worker in the performance of that worker’s
discrete task”.
Divide work nearly equally between managers and workers.
Trist and Bamforth
Criticism of scientific approach
Trist and Bamforth’s work on business systems showed up problems with the scientific approach.
It was based on the introduction of a new approach to coal-cutting in mines, which resulted in a large fall in worker morale and increased absenteeism.
Although there were scientific reasons for the new
approach, it had resulted in workers no longer working in the same teams, communication becoming more difficult and workers disliking the amount of specialisation within their jobs.
The introduction of new reward schemes led to bad feeling. Management ignored the needs of individuals and groups, which were particularly important in close mining communities.
Mayo – The human relations school
Human Relations Movement - group of six women and segregated them
Over the period, changes such as new payment systems, rest breaks of different sorts and lengths,
varying the length of the working day, and offering food and refreshments were tried. In almost all cases, productivity improved.
‘The Hawthorne effect’
The women felt important because they had been singled out
Relationships made for a more pleasant working environment.
Work satisfaction depends to a large extent on:
– The informal social relationships between workers in a group and,
– The social relationships between workers and their bosses.
- The effects of the group should never be underestimated.
The “Hawthorne effect” refers to the change in behaviour or performance which is thought to occur when people are faced with new or increased attention.
Contingency theory
Contingency theory rejects a general view of what is best for organisations or management. Instead
the effectiveness of management practices will be determined by the circumstances.
Burns and Stalker
Burns and Stalker draw a distinction between mechanistic and organic organisations.
Mechanistic - clear definition of responsibilities and specialisation. Managers are
responsible for communication.
Culture of loyalty and obedience to the hierarchy. Appropriate in environments where change happens only gradually, if at all.
Organic – greater emphasis on importance of individuals and skills and attributes they bring.
Employees involved in problem-solving and communication takes place in all directions, not
just top-down. Less emphasis on loyalty and obedience. Individuals may be recruited widely. This is likely to be abetter form if rapid change is expected in the business environment.
Mintzberg - roles of a manager
Interpersonal
Figurehead - Representing organisation at functions, conferences etc
Leader - Hiring, firing, training, motivating staff, aligning individual and organisational goals
Liaison - With peers, as well as subordinates
Informational
Monitoring environment - Gathering formal and informal information
Spokesperson - To internal and external audiences
Disseminator - Pass on relevant information to subordinates
Decisional
Entrepreneur - Initiate projects
Disturbance - handler Take decisions when there is a deviation from the plan.
Resource allocator - Distribute limited resources to achieve objectives
Negotiator - Internally and externally
Approaches to leadership
Trait theories
Early studies of leadership focused on the personality traits or qualities of different leaders
List became large and contradictory
Criticism of trait theory is that there are always examples of effective leaders lacking in one or more of the supposedly ‘essential’ traits.
Leadership is too complex, and too dependent
upon the situation
Adair– Action-centered leadership
The most important task of a manager will
depend on the situation the manager faces.
Effective leadership depends on identifying the priority at a particular time and taking action to deal with the priority.
TASK/INDIVIDUAL/GROUP
Fred Fiedler – The Fiedler contingency model
leader’s effectiveness is based on ‘situational
contingency’, that is a result of interaction of two factors, known as ‘leadership style’ and ‘situational
control’.
Lease preferred co-worker.
A high LPC score suggests that the leader has a human relations orientation.
A low LPC score indicates a task orientation.
No ideal leader
Hersey and Blanchard
Manager-subordinate relationship as based on three main issues:
- Task behaviour – the extent of direction given by the leader
- Relationship behaviour – the amount of two-way communication
- Level of maturity – the willingness of the subordinate to take responsibility for his or her own behaviour
The higher the level of the subordinate’s maturity, the less the manager should focus on direction (task).
As maturity increases - move down this list
Telling - high task, relationship low
Selling - high task, relationship high
Participating - low task, high relationship
Delegating - Low task, low relationship
Warren Bennis - knowledge workers
Key to competitive advantage is the organisation’s capacity to create an environment capable of generating intellectual capital.
Bennis’ seven qualities of a Leader:
- Technical competence: business literacy and grasp of one’s field
- Conceptual skill: a facility for abstract or strategic thinking
- Track record: a history of achieving results
- People skills: an ability to communicate, motivate, and delegate
- Taste: an ability to identify and cultivate talent
- Judgement: making difficult decisions in a short time frame with imperfect data
- Character: the qualities that define who we are
First 3 are a given - last 4 differentiate you as a leader
Bennis states that the leader’s followers need four things
- Meaning or direction
- Trust in and from the leader
- A sense of hope and optimism
- Results
Blake and Mouton’s Managerial Grid
Two variables:
Concern for task
Concern for people.
Balance between the two is required
1.1 Impoverished–- Manager is lazy, no interest in staff or work. LOW LOW
1.9 Country club – Manager enjoys good relationship with staff and attends to their needs but has LOW HIGH
little concern for the task.
9.1 Task manager / authoritarian – Total focus on achieving the task. Little or no concern for staff HIGH LOW
5.5 Middle of road (sometimes called “dampened pendulum”) – Adequate performance.
9.9 Team – High work achievement, through working with committed people who have their personal goals aligned with those of the organisation. HIGH HIGH
Issues
High concern for staff is not necessarily ideal
Difficult to place managers accurately on the grid
There are other environmental influences on managers, e.g. industry, organisation culture, state
of economy, nature of task and character of the staff
Behaviour may be difficult to change
May be useful to assign managers with different and complementary strengths to a team
Skyrme’s principles
Skyrme (1997) set out some principles relating to virtual companies.
Culture issues, such as the need for a high level of trust and mutual support in such entities
Practical matters, such as remembering, when communicating by email, to ensure different
topics are covered in different emails (especially if they relate to different groups of people
Personal qualities required of an accountant: (CTR3)
Courtesy – Accountants should conduct themselves with courtesy and consideration towards all they come into contact with during the course of performing their work.
Timeliness – Produce work on time. Arrive on time for work and for meetings.
Reliability – Work meets professional standards.
Responsibility – Take ownership of work.
Respect – Develop constructive relationships.
Respect other people’s perspectives.
Professional qualities required: (SASI)
Scepticism – Accountants should question information supplied to them. Where is it from? Is there supporting evidence? Who supplied it? Why was it supplied?
Accountability – The accountant is accountable for his own actions and decisions. He should not pass
the buck.
Social responsibility – Be aware that work may affect the public. For example, accounting profits may be used by a range of users, including investors, employees, suppliers, customers, HMRC, prospective investors.
Independence – Have an independent mind. Produce work that is free from bias and prejudice. Beseen to be independent. (For example, think carefully before accepting hospitality from clients or suppliers.)
Employee alignment and empowerment
Employee alignment is a process of linking organisational goals to employees’ personal goals
in order to reach higher employee engagement and satisfaction.
Peter Drucker – (MBO)
1.2 Peter Drucker – (MBO)
Management by objectives (MBO) is a control strategy developed by Peter Drucker back in the 1950s.
Drucker advocated the setting of objectives or targets in four areas.
Profitability
Management performance
Worker performance
Public responsibility
The general approach to MBO is:
Set objectives, quantify targets (SMART)
Communicate objectives and targets
Organise the work into manageable activities
Allocate tasks
Ensure adequate resources
Communicate clearly
Measure performance against target
Communicate results (this would be in an appraisal)
Review objectives
Kaplan and Norton’s Balanced Scorecard
Kaplan and Norton developed the Balanced Scorecard to ensure that a wide view was taken towards objective setting and to control. The scorecard promotes the idea that financial success is not the only important measurement of an organisation’s performance.
The four key measurement areas are:
Financial: “How do we look to shareholders?” (Encourages looking at a few KPIs)
Customer: “How do customers see us?” (Encourages getting customer feedback measuring complaints etc.)
Internal processes: “What must we excel at?” (Encourages improvement of internal operations
to ensure competitive advantage)
Innovation and learning: “Can we continue to improve and create value?” (Encourages
development of new productions, acquisition of new skills for the workforce).
A difficulty is how to measure and track the non-financial aspects.
Steps in managing people performance
Step 1: Identify assessment criteria
Identify the criteria against which employees will be assessed.
Step 2: Agree performance levels
Managers agree performance levels / objectives with their subordinates and put into place a
development plan to reach them. The objectives set should be SMART (specific, measurable,
achievable, relevant and time bound).
Step 3: Monitor and control
The performance of subordinates is monitored against their objectives with regular feedback and
counselling given as and when necessary.
Step 4: Periodic performance reviews (appraisals)
Staff appraisals are performed with appropriate training and development agreed with the employee.
It is important that the appraisal takes place in a neutral environment and away from office
disturbances.
