Copy of Business Organisation and Strategy PDF

Lecture 1 Introduction to business models Business: profit seeking organisations that provide goods and services ↳What they have in common is that they all have to satisfy needs of customers ↳They sell goods to make profit How do they make money? Making a b...

Lecture 1 Introduction to business models Business: profit seeking organisations that provide goods and services ↳What they have in common is that they all have to satisfy needs of customers ↳They sell goods to make profit How do they make money? Making a business plan - making choices about what they will do to generate revenue Value chain- each company and step included to finalise and make the final product Revenue is the money that the company brings in through the sale of goods and services Business model - a concise description of how a business intense to generate revenue Profits = revenues - cost Competitive advantage - some aspects of a product or company that makes it more appealing to its target customers Two types of businesses - creating revenue by making things most of which are tangible (Laundry Detergent) - capital intensive businesses - companies that create value by performing activities that deliver benefit to the costumer (Netflix) - labour intensive businesses - more present in developed countries - some companies might give goods and services to customers therefore they fall in both categories (Apple) Healthy connection in businesses = between risk and reward Moral hazard = link between risk and reward is broken = everyone suffers the consequences if outcome is negative Non profit organisations - they provide goods and services without having a profit motive Business sales models: - Another business B2B - A consumer B2C Consumers can sell to: - Other customers C2C There must be a balance between: potential contributors (offering valuable goods and services) and potential negative effects (generating pollution and waste) Major functional areas in a business enterprise: - 1. Research and development - Information technology (IT) - 2. Manufacturing, production or operations - 3. Marketing - 4. Finance and accounting - 5. Human resources - 6. Business services Economy - the sum total of all the economic activities within a given region Economics - the study of how a society uses its scarce resources to produce and distribute goods and services Microeconomics - the study of how consumers businesses and industries collectively determine the quantity of goods and services demanded and supplied at different prices Macroeconomics - the study of “big picture” issues in an economy, including competitive behaviour amongst firms, the effect of government policies, and overall resource allocation issues Factors of production - Knowledge - Human resources - Natural resources - Capital - Entrepreneurship The economic impact of scarcity Scarcity - a condition of any productive resource that has a finite supply Opportunity cost - the value of the most appealing alternative not chosen (the one that you lost cause you didn’t choose it) Tradeoff - the balance between two desirable outcomes Economic systems  - The policies that define a society's particular economic structure; the rules by which a society allocates economic resources - It can be free market or planned - In a free market the individuals and businesses are free to choose what they want to produce, how to produce them, whom to sell it to, price - In a planned economic system the government is largely responsible for the allocation of resources, limit freedom of choice in order to accomplish government goals - The spectrum of economic/government systems= communism, socialism and capitalism Lecture 2 Entrepreneurship and start-ups Entrepreneurs capture problems in society and find solutions and turn it into an opportunity Opportunity is a favourable set of circumstances that create a need for a new product, service or business ↳attractive, timely, durable, and anchored in a product, service or business that creates or adds value for its buyer or end users Entrepreneurship as a research field A process → predictive output A model → mindset of entrepreneur Shane and Venkataraman (2000): Causation or causal logic (managerial thinking) ↳ selecting between given means to achieve given goals The effectual cycle What is entrepreneurship? → Shane and Venkataraman (2000): ‘entrepreneurial opportunities exist and (some) entrepreneurs successfully exploit them’ → Sarasvathy (2001): ‘entrepreneurs create opportunities’ Risk vs uncertainty ↳Risk is when the probabilities of the possible outcomes are known (such as when tossing a coin or throwing a dice); uncertainty is where the randomness of outcomes cannot be expressed in terms of specific probabilities. Explaining entrepreneurship with effectual logic Entrepreneurs start with what they have at hand, and imagine possible effects with their set of means. They don't focus on a specific goal (they can have vague ideas), e.g. they identify where there is traction and engagement on which effects. Entrepreneurs believe they can ‘control’ the future thanks to their actions and the engagement of the stakeholders, therefore they don’t need to predict it. Entrepreneurs are generally in these situations where uncertainty is high. Effectual logic is ‘means driven’ and effectuation is the response to move the project forward. The five principles that drive entrepreneurs actions  1. Means ↳ start with who you are, what you know and who you know, not with pre-set goals 2. Affordable loss ↳ invest what you can afford to lose, not with expected returns 3. Co-creation partnership ↳ build a network of self-selected stakeholders, not with competitive analysis 4. Leverage contingencies ↳ embrace and leverage surprises, contingencies, failures and not avoid them 5. Worldview ↳the future comes from what people do, not with inevitable trends Why become an entrepreneur? - Desire to be their own boss - Desire to pursue their own idea - Financial reward Traits of an entrepreneur - Bias to action - Welcome and create change - Optimistic - Resourceful - Manage risk - Intensely curious - Experiment - Failure-savvy - Know their customers - Ask for forgiveness not permission Characteristics of a small business - Most small businesses have a narrow focus - Have to get by with limited resources - Often have more freedom to innovate - Entrepreneurial firms find it easier to make decisions quickly and react to changes in the marketplace Economic role of small businesses and entrepreneurial firms - Provide jobs - Introduce new products - Meet the needs of larger organisations - Inject a considerable amount of money into the economy  - Take risks that sometimes larger companies avoid - Provide specialised goods and services Types of start-up firms 1. Salary substitute firms ↳provide their owner(s) a similar level of income to what they would be able to earn in a conventional job 2. Lifestyle firms ↳ provide their owner(s) to pursue a particular lifestyle, and make a living at it 3. Entrepreneurial firms ↳ bring new products and services to the market by creating and seizing opportunities regardless of the resources they currently control Corporate entrepreneurship conceptualization of entrepreneurship at the firm level ↳ all firms fall along a conceptual continuum that ranges from highly conservative to highly entrepreneurial ↳ the position of a firm in this continuum is referred to as entrepreneurial intensity Start-up business options 1. Start-Up Strategy ↳ Create a new, independent business 2. Financial Outlay at Start-Up ↳ Some businesses can be started with very little cash; others, particularly in manufacturing, may require a lot of capital. Can be considerable; some companies sell for multiples of their annual revenue, for example 3. Possibilities for Borrowing Start-Up Capital or Getting Investors ↳ Usually very limited; most lenders and many investors want evidence that the business can generate revenue before they’ll offer funds; venture capitalists invest in new firms, but only in a few industries. Banks are more willing to lend to “going concerns,” and investors are more likely to invest in them. 4. Owner’s Freedom and Flexibility ↳ Very high, particularly during early phases, although low capital can severely restrict the owner’s ability to manoeuvre. Less than when creating a new business because facilities, workforce, and other assets are already in place—more than when buying a franchise 5. Business Processes and Systems ↳ Must be designed and created from scratch, which can be time consuming and expensive. Already in place, which can be a plus or minus, depending on how well they work  6. Support Networks ↳ Suppliers, bankers, and other elements of the network must be selected; the good news is that the owner can select and recruit ones that he or she specifically wants. Already in place; may need to be upgraded 7. Workforce ↳ Must be hired and trained at the owner’s expense. Already in place, which could be a positive or a negative, but at least there are staff to operate the business. 8. Customer Base, Brand Recognition, and Sales ↳ None; must be built from the ground up, which can put serious strain on company finances until sales volume builds. Assuming that the business is at least somewhat successful, it has a customer base with ongoing sales and some brand reputation (which could be positive or negative). Why new businesses fail 1. Leadership Issues ↳ Managerial incompetence: Owner doesn’t know how to plan, lead, control, or organize. ↳Lack of strategic planning: Owner didn’t think through all the variables needed to craft a viable business strategy. ↳Lack of relevant experience: Owners may be experienced in Business but not in the particular markets or technologies that are vital to the new firm’s success. ↳Inability to make the transition from corporate employee to entrepreneur: Owner can’t juggle the multiple and diverse responsibilities or survive the lack of support that comes with going solo. 2. Marketing and Sales Issues ↳Ineffective marketing: Small companies—especially new small companies—face a tremendous challenge getting recognition in crowded markets. ↳Uncontrolled growth: Company may add customers faster than it can handle them, leading to chaos, or may even “grow its way into bankruptcy” if it spends wildly to capture and support customers. ↳Overreliance on a single Customer: One huge customer can disappear overnight, leaving the company in dire straits. 3. Financial Issues ↳Inadequate financing: Being undercapitalized can prevent a company from building the scale required to be successful or sustaining operations until sales revenues increase enough for the firm to be self-funding. ↳Poor cash management: A company may spend too much on nonessentials, fail to balance expenditures with incoming revenues, fail to use loan or investment funds wisely, or fail to budget enough to pay its bills. ↳Too much overhead: Company creates too many fixed expenses that aren’t directly related to creating or selling products, leaving it vulnerable to any slowdown in the economy.  4. Systems and Facilities Issues ↳Poor location: Being in the wrong place will doom a retail operation and can raise costs for other types of business as well. ↳Poor inventory control: Company may produce or buy too much inventory, raising costs too high— or it may do the opposite and be unable to satisfy demand Business incubators are facilities that house small businesses and provide support services during the company’s early growth phases Financing options for small businesses 1. Seed money ↳The first infusion of capital used to get a business started 2. Micro lenders ↳Organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans 3. Venture capitalists ↳Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit 4. Angel investors ↳Private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest or banks are willing to lend 5. Initial public offering (IPO) ↳ A corporation’s first offering of shares to the public 6. Crowdfunding ↳Soliciting project funds, business investment, or business loans from members of the public Franchise A business arrangement in which one company (the franchisee) obtains the rights to sell the products and use various elements of a business system of another company (the franchisor) Franchisee A business owner who pays for the rights to sell the products and use the business system of a franchisor Franchisor A company that licences elements of its business system to other companies (franchisees) - initial financial outlay varies widely  - Franchisee most likely can’t buy the franchise with borrow money, so they must have their own capital - More franchisors require rigid adherence to company policies and processes - Main advantage is that it comes with an established business system and brand recognition - Franchise company specifies which suppliers a franchise can use - The workforce much be hired, but the franchisor usually provides training or training support Seminar 2 Stakeholders, what do they do? Drivers of success 1. Desirability 2. Feasibility 3. Sustainability 4. Viability Stakeholder any group or individual who can affect or is affected by the achievement of the organisation’s objectives Shareholder is an individual or identity that owns units of shares of a corporation Shareholders focus mainly on the financial return on their investments (in the form of dividends or stock appreciation). Stakeholders focus on the company’s overall performance, how it treats customers, partners, and employees, and how it impacts the community, among other things Stakeholder management process 1. Stakeholder identification 2. Stakeholder analysis 3. Strategy and priority 4. Engaging with stakeholders 5. Monitoring and reporting Stakeholder categories Internal stakeholders those within the organisation, who are directly and/or financially involved in the operational process and have an interest in its success, since they may be rewarded accordingly Connected stakeholders those, who by virtue or their contractual or commercial relationships with the organisation, have a significant stake in its activity External stakeholders those, from outside, that are affected by the outcomes of the organisation's activity and who can exercise different types of power over the organisation and influence its decisions through economic and political pressure Stakeholder mapping is the process of drawing a visual representation of the various people involved in or affected by the project. ↳Stakeholder maps should provide a clear picture of who the various stakeholder groups are, as well as their motives and interests. They are designed to facilitate the evaluation of your environment, by highlighting the powers at play. This tool can help you: - Identify the key players at a glance, meaning you know who to target, monitor or inform at each stage of the project - Make decisions quickly without overlooking important stakeholders - Assess the power and understand the interests of each stakeholder to define strategies accordingly Lecture 3 Conducting an industry analysis: structure, 5-forces, and competitive environment Business environment Layers of the business environment ↳These environments is what gives organisations their means of survival It creates opportunities and threats Entrepreneurs and managers try monitoring them to identify any changes - The macro-environment is the highest layer, this consists of broad environmental factors that impact to a greater or lesser extent on almost all organisations - Industry is a group of firms producing products and services which are essentially the same - A sector is a broad industry group (e.g. health) - Market is a group of customer for specific products or services that are essentially the same PESTLE Political ↳ government stability, taxation policy, foreign trade regulations, social welfare policy Economic ↳ business cycles, GNP tendencies, interest rates, supply of money, inflation, growth, unemployment, disposable income levels Socio-cultural ↳ demographics, income distribution, social mobility, lifestyle, work vs leisure, education Technological ↳ innovation, technology transfer, dynamic of obsolescence, R&D efforts, industry spending on R&D, government spending on R&D Environmental ↳ energy consumption, waste, ‘green’ aspects Legal ↳ competition law, procurement law, health policy, safety regulation, labour market related laws Political factors - Look at the direct role of the state Economic factors - Refer to macroeconomic factors such as exchange rates, business cycles and economic growth rates around the world Socio-cultural factors - Demographic shifts - such as age, gender, ethnicity, and marital status - and changing values can signal opportunities for businesses Technological - Can create opportunities for some businesses, while challenging traditional stores Environmental - Could directly impact an entire industry - Could increase costs - Or can be an opportunity Legal - Legislative and regulatory constraints and changes - Influences marketing The forces of demand and supply Demand buyers’ willingness and ability to purchase products at various price points Supply a specific quantity of a product that a seller is able and willing to provide at various prices Demand curve a graph of the quantities of a product that are purchased at various prices Supply curve a graph of the quantities of a product that a seller will offer for sale, regardless of demand, at various prices Equilibrium point the point at which quantity supplied equals quantity demanded ↳ because the supply and demand curves are dynamic, so is the equilibrium As variables affecting supply and demand change, so will the equilibrium point Competition in a free-market system Competition rivalry among businesses for the same customers - Pure competition: a situation in which so many buyers and sellers exist that no single buyer or seller can individually influence market princes - Monopolistic competition: A situation in which many sellers differentiate their products from those of competitors in at least some small ways - Oligopoly: A market situation in which a very small number of suppliers, sometimes only two (duopoly), provide a particular good or service - Pure monopoly: A situation in which one company dominates a market to the degree that it can control prices - Regulated monopoly Factors influencing profit earning - The value of the product/service to customers - The intensity of competition - The relative bargaining power at different levels in the production process Porter’s 5 forces ↳help provide the framework to analyse the influences on the attractiveness of an industry 1. Threat of entry - Barriers to entry are the factors that need to be overcome by new entrants if they are to complete. The threat of entry is low when the barriers to entry are high and vice versa - The main barriers to entry are: - economies of scale/high fixed costs - experience and learning - access to supply and distribution channels - differentiation and market penetration costs  - legislation or government restrictions (e.g. licensing) - expected retaliation from incumbents 2. Threat of substitute - Substitutes are products or services that offer a similar benefit to an industry’s products or services, but have a different nature, e.g. they are from outside the industry - Customers will switch to alternatives (and thus the threat increases) if: - the price/performance ratio of the substitute is superior (e.g. aluminium is more expensive than steel but it is more weight efficient for car parts) -the substitute benefits from an innovation that improves customer satisfaction (e.g. high speed trains can be quicker than airlines from city centre to city centre on short haul routes) 3. Bargaining power of buyer - Buyers are the organisation’s immediate customers, not necessarily the ultimate consumer - If buyers are powerful, then they can demand cheap prices or product/service improvements to reduce profits - Buyer power is likely to be high when: - buyers are concentrated - buyers have low switching costs - buyers can supply their own inputs (backward vertical integration) 4. Bargaining power of suppliers - Suppliers are those who supply what organisations need to produce the product or service. Powerful suppliers can reduce an organisation’s profit - Supplier power is likely to be high when: - the suppliers are concentrated (there are few of them) - suppliers provide a specialist or rare input - switching costs are high (it is distributive or expensive to change suppliers) - suppliers can integrate forward (e.g. low-cost airlines cut out the use of travel agents) 5. Rivalry between competitors - Competitive rivals are organisations with similar products and services aimed at the same customer group and are direct competitors in the same industry/market (distinct from substitutes) - The degree of rivalry increases when: -competitors are roughly equal size -competitors are aggressive in seeking leadership -the market is mature or declining  -there are high fixed costs -the exit barriers are high -there is a low level of differentiation Implications of five forces analysis - Which industries/markets to enter or leave - What influence can be exerted - The forces may have a different impact on different organisations (e.g. large firms can deal with barriers to entry better than smaller firms) Issues in five force analysis - Defining the ‘right’ industry - applying the model at the most appropriate level - not necessarily the whole industry, e.g. the european low-cost airline industry rather than airlines globally - Converging industries - particularly in the high tech arenas - where industries overlap (e.g. digital industries - mobile phones/cameras/mp3 players) - Considered a static model versus rapid changes enabled by technology - Competition versus cooperation, partnership and complementary organisations which enables the attractiveness of a business to customers or suppliers, e.g. Microsoft Windows and McAfee computer security systems are complementors The value net is a map of organisations in a business environment demonstrating opportunities for value-creating cooperation as well as competition ↳an organisation is a complementor if: - Customers value your product more when they have the other organisation’s product than when they have your product alone - It is more attractive for suppliers to provide resources to you when it is also supplying the other organisation than when it is supplying you alone The product life cycle Lecture 4 Resources and Capabilities, Introduction to the Resource-based view of Organisations System is an interconnected and coordinated set of elements and processes that converts inputs into outputs. The resources and capabilities of an organisation also called core competences, they support the generation and preservation of sustainable competitive advantage over time. Resources are the assets that organisations have or can call upon, e.g. from suppliers, that is ‘what we have’ ↳ tangible resources: - Physical resources (machines, plants, etc.) - Financial resources (capital, cash flow, revenue, etc.) - Human resources (skills) - Intellectual capital (patents, brands, database, etc.) ↳ intangible resources: - Knowledge, information - Reputation Capabilities (or competence) are the ways those assets are used or deployed that is, ‘what we do well’ ↳ physical competence: ways of achieving utilisation of plant, efficiency, productivity, flexibility, marketing ↳ financial competence: ability to raise funds and manage cash flow, debtors, creditors, etc. ↳ human competence: how people gain and use experience, skills, knowledge, build relationships, motivate others and innovate Core competencies to achieve competitive advantage 1. Value - Take advantage of opportunities and neutralise threats - Provide value to consumers - Are provided at a cost that will allow organisations to make an acceptable return 2. Rarity - Rare capabilities are those possessed uniquely by 1 organisation or only a few, e.g. company may have patent products, talented people - Rarity could be temporary, e.g. patents expires, key individual leaves 3. Inimitability - Inimitable capabilities are those that competitors find difficult and costly to imitate, obtain or substitute  - Competitive advantage can be built on unique resources but these may not always be sustainable - Sustainable advantage is more often found in competencies and how they are linked 4. Robust - The organisation must be suitably organised to support the valuable, rare and inimitable capabilities it has. This includes appropriate processes and systems 5. Non-substitutable - There’s no strategically equivalent resources available that can be exploited by a competitor firm, e.g. a unique top management team - The sustainable competitive advantage does not reside in a firm’s products, but in its dynamic capabilities and core competencies ↳ the dynamic capabilities represent the core competences in motion, over time ↳ core competences are the real sources of advantage, they are to be found in the management’s ability to consolidate corporate-wide core competences into competencies that empower the business to adapt quickly to changing opportunities Dynamic capabilities focus on the dynamics of combining, developing and reconfiguring old and new knowledge in order to adapt to the environment, and to the evolution of market forces. Dynamic capabilities focus on the adaptation to change ↳ the incapacity to change and adapt over time associates with rigidities (organisational, cultural, etc.), impacting with the survival of the organisation Dynamic capabilities attributes  1. Sensing capabilities: constantly scanning and exploring new opportunities across markets and technologies (e.g. R&D and market research) 2. Seizing capabilities: addressing opportunities through new products, processes and activities 3. Re-configuring capabilities: new products and processes may require renewal and re-configuration of capabilities and investment in new technologies Threshold capabilities are those needed for an organisation to meet the necessary requirements to compete in a given market and achieve parity with competitors in the market Distinctive capabilities are required to achieve competitive advantage. These are dependent on an organisation having distinctive or unique capabilities that are of value to customers and which competitors find difficult to imitate Organisational knowledge Organisational knowledge is organisation-specific, collective intelligence, accumulated through both formal systems and people’s shared experience ‘Explicit’ knowledge or ‘objective’ knowledge is transmitted in formal systematic ways, e.g. systems manuals or market research ‘Tacit’ knowledge is more personal, context-specific, hard to formalise and communicate and is difficult to imitate, e.g. the knowledge and relationship in a top R&D team Benchmarking is a means of understanding how an organisation compares with others - typically competitors Two approaches to benchmarking: 1. Industry/sector benchmarking: comparing performance against other organisations in the same industry/sector against a set of performance indicators ↳ however, in both the private and public sector, the whole industry could be performing badly or losing out competitively to other industries 2. Best-in-class benchmarking: comparing an organisation’s performance or capabilities against ‘best-in-class’ performance - whenever that is found even in a very different industry, e.g. BA benchmarked its refuelling operations against Formula 1 ↳ however, surface comparisons, it is limited to comparing outputs, which does not directly identity the reasons for relative performance in terms of underlying capabilities. Another disadvantage is that the best performance that can be expected out of this exercise is to achieve threshold capabilities and/or competitive parity. SWOT provides a general summary of - Strengths and weaknesses explored in an analysis core competencies capabilities - Opportunities and threats explored in an analysis of the environment SWOT can be used to examine strengths, weaknesses, in relation to competitors Focus on strengths and weaknesses that differ in relative terms compared to competitors and leave out areas where the organisation is at par with competitors Focus on opportunities and threats that are directly relevant for the specific organisation and industry and leave out general and broad factors The TOWS matrix: each box can be used to identity options that address a different combination of the internal factors and the external factors SWOT and TOWS are both strategic analysis tools, but they differ in focus and application: - SWOT Analysis: Starts by identifying the internal Strengths and Weaknesses, and then examines external Opportunities and Threats. The idea is to understand the current situation of the organisation. - TOWS Analysis: Takes the reverse approach by first considering external Threats and Opportunities and then addressing internal Weaknesses and Strengths. This helps in formulating strategies by leveraging external factors to address internal issues. Dangers in a SWOT analysis - Long lists with no attempt at prioritisation - Overgeneralization: sweeping statements often based on biassed and unsupported opinions - It is a substitute for analysis: it should result from detailed analysis using frameworks - SWOT is not used to guide strategy: it is seen as an end in itself Lecture 5 Developing Competitive Advantages Strategy is the direction and scope of an organisation over the long term, which achieves advantages in a changing environment through its configuration of resources and competencies with the aim of fulfilling the stakeholder’s expectations A goal is a broad long range target or aim, a long range accomplishment that the organisation wants to attain An objective is a specific short term target or aim, it is designed to help achieve the goal The strategic management process 1. The strategic position: ↳the environment - This refers to the external context in which an organisation operates. The environment includes PESTLE factors. Understanding these external forces is essential as they impact the organisation's operations, opportunities, and threats. - Organisations must conduct an environmental scan to assess market trends, competition, customer preferences, and potential risks. The insights gained help shape strategic decisions and ensure the business stays competitive and adaptive to external changes. ↳strategic capability  - Strategic capability refers to the internal resources and competencies an organisation possesses that give it a competitive advantage. This includes human resources, financial resources, technology, brand reputation, and organisational processes. - Organisations need to evaluate their strengths and weaknesses in terms of resources and capabilities to understand what they can leverage and where improvements are necessary. Strategic capability is critical in determining how effectively the company can execute its strategies and compete in the market. ↳expectations and purposes - This factor refers to the stakeholder expectations and the underlying purpose or mission of the organisation. It includes understanding the goals, values, and interests of key stakeholders such as shareholders, employees, customers, and society. - The organisation's strategic direction should align with its mission, vision, and ethical values while also addressing the expectations of stakeholders. Managing these expectations is crucial for long-term success, as conflicting interests can affect strategic decisions and overall organisational effectiveness. 2. Strategic choices ↳business-level strategies - Business-level strategies are concerned with how a business competes within a specific industry or market. The main goal is to achieve a competitive advantage by offering unique value to customers. ↳corporate-level and international - Corporate-level strategies define the overall direction and scope of the organisation across various businesses and markets. These strategies decide how the organisation will grow, diversify, and operate at a larger scale. ↳development directions and methods - This refers to how an organisation plans to grow and develop over time, whether through organic growth, mergers, acquisitions, or partnerships. 3. Strategy into action ↳organising - Organising refers to aligning the organisation’s structure, resources, and capabilities with the strategy to ensure efficient execution. ↳enabling  - Enabling is about empowering the organisation to carry out the strategy successfully by developing capabilities, leadership, and culture. ↳managing change - Managing change involves guiding the organisation through transitions and ensuring that changes are embraced by employees, minimising resistance, and maintaining momentum. Elements of strategic management Strategic decisions are about: 1. Long term direction of a firm 2. The scope of an organisation's activities 3. Gaining advantage over competitors 4. Addressing changes in the 5. Building on resources and competencies 6. Values and expectations of stakeholders Therefore they are likely to: 1. Be complex in nature 2. Be made in situations of uncertainty 3. Aect decisions  4. Require an approach (both inside and outside the firm) 5. Involve considerable A brief history: conceptual framework for corporate strategy Components of a competitive advantage 1. Structural sources - Something that a company has that doesn’t let other players enter its competition effectively - Examples: proprietary technology, access to vital resources, superior scale economies, low cost manufacturing facilities, strong brand name and large customer base 2. Insight/foresight - Possession of unique knowledge or insight (scientific or technical expertise, creativity, or the ability to recognise patterns and trends) - Examples: insight- Amazon frequently bought together, foresight- Madonna 3. Execution - By consistently outperforming their competitors in the execution of their day-to-day business - Examples: McDonald’s overall organisational efficiency, GE Capital’s superior execution of certain critical activities Corporate culture are the attitudes, values, beliefs, norms and customs of an organisation may drive the performance of an organisation by creating sources in the three previous types Managing the competitive advantage  - A company brings value to the customer, the value perceived by the customer is subjective - Having feedback from the field is important in understanding the customers’ perceptions - Customers compare performance and price between competitors against their expectations - On the other side, the company can assess their performance, performance is the efficiency of their process and operations - The price is the price for which the business will sell the good or service for, which allows them to make a profit - Companies such as Apple can compare themselves to other companies in the same industry by looking at their price or cost advantage Competitive advantage categories 1. Cost leadership - Similar pricing - Different cost structure - Advantage derived from cost 2. Differentiation - Different pricing - Similar cost structure - Advantage derived from pricing 3. Hybrid - Different pricing - Different cost structure - Advantage derived from both pricing and cost structure Three generic strategies - Porter believed that there are two fundamental means for achieving competitive advantage ↳ Cost leadership - Involves becoming the lowest-cost organisation in a domain or activity - Four key drivers that can help deliver cost leadership: ❖ Lower input costs ❖ Economies of scale ❖ Experience, learning curve ❖ Product/process design ↳ Differentiation - Uniqueness along some dimension that is sufficiently valued by customers to allow a price premium - The key drivers of differentiation are: ❖ Product and service attributes – providing better or unique features (e.g. Apple or Dyson) ❖ Customer relationships, customer service and responsiveness (e.g. Zappos); customisation (e.g. SAP) or marketing and reputation (e.g. Coca Cola). ❖ Complements – building on linkages with other products/services (Apple and iTunes)  - He believed that businesses can choose to focus on narrower customer segments (e.g. a demographic group) or alternatively they can adopt a broader customer group, targeting customers across a broader range of characteristics such as age, gender and wealth Focus/niche strategy lever ↳ targets a narrow segment or domain activity and tailors its products or services to the needs of that specific segment to the exclusion of others - Two types of focus strategies: 1. Cost focus strategy 2. Differentiation focus strategy - Successful focus strategies depend on at least one of the three key factors: 1. Distinct segment needs 2. Distinct segment value chains 3. Viable segment economies - According to Michael Porter, it is best to adopt a generic strategy and stick rigorously to it. Failure to do this leads to a danger - “being stuck in the middle” e.g. following no strategy. - The argument for pure generic strategies is controversial. Even porter acknowledges that strategies can be combined e.g. with joint considerations about costs and uniqueness Combining Generic Strategies - a company can create separate strategic business units each pursuing different generic strategies and with different cost structures. - Technological or managerial innovation where both cost efficiency and quality are improved. - Competitive failures - if rivals are similarly “stuck in the middle” or if there is no significant competition then middle strategies may work. - Hybrid strategies combine different generic strategies. - E.g. Southwest Airlines famously pioneered low cost airfares but also sought to differentiate on convenience, frequency departures and friendly service. In other cases, all competitors are “stuck in the middle” and no significant (dis)advantages impact competition. Business strategy determines operations capabilities A business delivers products and services to the end customers. ↳This relies on operations. Operations Capability (production capability) - is a special ability that production does especially well to outperform the competition. Excellent firms learn overtime how to achieve more than one competence to contribute to competitive advantage.  If the customers value: Operations will need to excel at: Low price Cost High quality Quality Fast delivery Speed Reliable delivery Dependability Innovate products and services Flexibility (products and services) Wide range of products and services Flexibility (mix) Ability to change the timing or quantity of products and services Flexibility (volume and/or delivery) Generic dimensions of ‘capabilities’ Quality advantages “doing things right” – refers both to the level of performance of the product/service and to the level of conformance to the specifications Speed advantages “doing things fast” – It generally refers to the elapsed time between the beginning of an operation process and its end. It includes the actual time to produce the product/service plus other time components like the time to clarify the customers’ needs, the “queuing” time, the delivery time etc. Dependability advantages “doing things on-time” – It means honouring the delivery time given to the customers. Dependability = due delivery time – actual delivery time Flexibility advantages “being able to change what you do” – It relates to the capability to change the range, the mix, the volume and the delivery of the product/service, but also to the responsiveness (the time necessary for the change) Cost advantages “doing things productively” – It refers to any financial inputs to the operations that enables it to produce its product/service. Those inputs can be Operating Expenditure, Capital Expenditure, Working Capital Lecture 6 Developing a business through a successful product portfolio strategy (Ansoff, BCG and McKinsey Matrix) A strategic business unit (SBU) supplies goods or services for a distinct domain of activity - A small business has just one SBU - A large diversified corporation is made up of multiple businesses (SBUs) - SBUs can be called divisions or profit centres - SBUs can be identified by: - market based criteria (similar customers, channels and competitors) - capabilities-based criteria (similar strategic capabilities) Bowman’s strategy clock 1. Low price and low utility 2. Low price 3. Hybrid 4. Differentiation 5. Focused differentiation 6. High margins (standard product) 7. Monopoly pricing 8. Low utility and standard pricing 1-5 are successful strategies, 6-8 are failure strategies Three horizon model Strategies are normally long term, as the business grows overtime there are three horizon option/strategies Strategy happens at different levels 1. Corporate level strategy - Determines the overall scope of the organisation - Adds value to different business units - Meets the stakeholder expectations 2. Business level strategy - How to compete successfully in specific markets 3. Operational strategy - How the operational parts of the organisation implement and strategy and deliver the outcome expected by stakeholders The Ansoff Matrix Corporate strategy framework for generating 4 directions for organisational growth Market penetration - existing product, in an existing market ↳ increasing share of current markets with the current product range - Builds on established strategic capabilities - Means the organisation’s scope is unchanged  - Leads to greater market share and increased power vis-à-vis buyers and suppliers - Provides greater economies of scale and experience curve benefits - Retaliation from competitors e.g. price wars - Legal constraints e.g. restrictions imposed by regulators (mergers and acquisitions) In a severe market downturn, retrenchment may be a better option than market penetration. Retrenchment refers to a strategy of withdrawal from marginal activities in order to concentrate on the most valuable segments and products within their existing business Market development - existing product, in a new market - Involves offering existing products to new markets - Product development (e.g. packaging or services) - New users (e.g. extending the use of aluminium to the automobile industry) - New geographies (e.g. extending the market to new areas - international markets being the most important) - Meeting the critical success factors of the market - New strategic capabilities (e.g. in marketing) Product development - new product, in an existing market - Is where an organisation delivers modified or new products (or services) to existing markets - Involves varying degrees of related diversification (in terms of products) - Can be expensive and high risk - May require new strategic capabilities - Typically involves project management risks Diversification - new product, in a new market - Involves increasing the range of products or markets served by an organisation - Related diversification involves diversifying into products or services with relationships to the existing business - Conglomerate (unrelated) diversification involves diversifying into products or services with no relationship to the existing business ↳takes the organisation beyond both its existing markets and its existing products and radically increases the organisational scope ↳ potential benefits to an acquired business is that it gains from the reputation of the group and potentially lowers financing costs ↳ potential costs arise because there are no obvious ways to generate additional value ↳ potential costs arise also from bureaucratic cost of the managers at headquarters Critical success factor (CSFs) are those factors that either are particularly valued by customers (e.g. strategic customers) or provide a significant advantage in terms of cost  - CSFs are therefore likely to be an important source of competitive advantage or disadvantage Why diversification? 1. Exploiting economies of scope Efficiency gains through applying the organisation’s existing resources or competences to new markets or services 2. Stretching corporate management competences ‘Dominant logics. It’s the set of corporate-level managerial competences applied across a portfolio of businesses 3. Exploiting superior internal processes 4. Increasing market power via mutual forbearance or cross-subsidisation Synergy refers to the benefits gained where activities or assets complement each other so that their combined effect is greater than the sum of the parts 2 +2 = 5 Negative synergy - Diversification may also involve value destruction. 3 potentially value-destroying drivers are: 1. Responding to market decline, e.g. Kodak spent billions on diversification acquisitions to compensate market decline 2. Spreading risk 3. Managerial ambition Forward integration refers to development into activities concerned with the outputs of a company’s current business Vertical integration means entering activities where the organisation is its own supplier or customer Backward integration refers to development into activities concerned with the inputs into the company’s current business Outsourcing is the process by which activities previously carried out internally are subcontracted to external suppliers. - Examples include: Subcontracting the manufacture of components to a specialist supplier Outsourcing non-core activities to a cheaper location (e.g. call centres) Outsourcing to a specialist supplier (e.g. IT). The decision to integrate or subcontract rests on the balance between two distinct factors: - Relative strategic capabilities: Does the subcontractor have the potential to do the work significantly better? - Risk of opportunism: Is the subcontractor likely to take advantage of the relationship over time? Value adding activities - Corporate parents need to demonstrate they create more value than they cost, e.g. they have a parenting advantage (similar principle of SBU with their competitive advantage) Five types of value adding activities: 1. Envisioning Clear overall vision or strategic intent for its BUs 2. Providing central services and resources 3. Facilitating synergies Cooperation and sharing across BUs 4. Intervening Control, improve, challenge, develop 5. Coaching Develop strategic capabilities (management) Lecture 7 Market types, differentiation, and (re)positioning Marketing is the process of creating value for customers and building relationships with those customers in order to capture value back from them OR Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners and society at large What can be marketed? - Goods - Services - Events - Experiences - People - Places - Properties - Organisations - Information - Ideas History of marketing - Marketing concept exists since the very first transaction human made and continues to evolve through centuries - Marketing as a discipline is born when marketing courses appeared in universities (around 1910) 4 eras of marketing 1. Production era, up to 1930 - Mass production with development of new mechanical processes - Companies concentrated on producing one single item - Business held the position of power over the customer 2. Sales era, 1930-1950 - Sales campaigns persuade customers of the advantages of the specific product over other - This era saw the advent of personal selling, print, radio and TV advertising 3. Marketing era, 1950-1960 - Marketing era saw the advent of a marketing department within the organisation - The focus is made on the customer, who is placed at the centre of the business operations 4. Relationship era, after 1960 - Relationship era is also known as the value-based era - Relationship marketing became common marketing practice Focus on the last twenty years - Internet - Big data - Social media - Mass customisation Challenges for tomorrow - New marketing concepts always emerge as a reaction to the changing business environment - The new marketing embraces technology and digital tools, as well as the development of new ethical practice - Media, whether traditional or online, are numerous, therefore there is a war for consumer attention - Meeting the expectations of customers (more than ever) in real and virtual world is very difficult so firms need to go further or offer more transparency/authenticity if they want customers to trust them (e.g. through blockchain) - Businesses need to be adaptable, agile and understand technological evolution - Privacy concerns - Emergency of a societal marketing concept Needs are a state of felt deprivation - Human needs are the basic requirements and include food, clothing and shelter Wants are the form human needs takes as they are shaped by culture and individual personality Demands are human wants that are backed by buying power Customer perceived value (CPV) is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives - Perceived benefits - Product benefits - Service benefits - Relational benefits - Image benefits - Perceived costs - Monetary costs - Time costs - Energy costs - Psychological costs Utilitarian value relates to a product’s/service’s basic functionalities Hedonic value relates to the product’s ability in creating experiences (sensorial, emotional, etc.) Symbolic value is what a product/service can tell you about others Psychological value is what a product/service can do to comfort the customer from external or internal threats The marketing planning process - The central instrument for directing and coordinating the marketing effort - It operates both a strategic and a tactical level Value point of view - Understanding customer value = market research + analysis of data - Creating customer value = strategy formulation (STP) - Delivering customer value = marketing mix 1. Market research and analysis - Is the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation the company is facing - Market research provides relevant data to help solve marketing challenges - Primary data is information you collect yourself by going directly to a source, for example a survey or focus group - Secondary data includes reports and studies by government agencies, trade associations or other businesses within your industry - Once the data has been collected, the next step is analysis, often starting with a SWOT  2. Crafting a marketing strategy - An overall plan for marketing a product - Includes the identification of target market segments, a positioning strategy and a marketing mix - The right moment to elaborate a marketing strategy is usually when planning to launch a new product, establishing the company’s annual plans and budgets, new competitors appear or when results are below the objectives or forecasts - The STP process - Segmenting the market - Selecting target market - Crafting a unique positioning strategy - This can help build brand loyalty Segmentation - Market: a group of customers who need or want a particular product and have the money to buy iy - Market segmentation: the division of a diverse market into smaller, relatively homogeneous groups with similar needs, wants and purchasing behaviour Segmentation process Types of segmentation - Demographics: statistical analysis of a population, e.g. age, gender, income, education, social status, family, life stage cycle  - Psychographics: classification of customers on the basis of their psychological makeup, interests and lifestyles - Geographic: categorisation of customers according to their geographical location, e.g. country, city, density, language, climate, area, population - Behavioural: categorisation of customers according to their relationship with products or response to product characteristics, e.g. benefits sought, purchase, usage, occasion, buyer stage, user status, engagement The second step of STP is targeting, a target market is a specific customer group or segment to whom a company wants to sell a particular product Targeting - The process of evaluating each market segment’s attractiveness and selecting one or more segment to enter - For market segments to be attractive, certain criteria have to be fulfilled - An organisation/marketer could target certain segments if these are deemed to be: - Differentiable (e.g. homogenous inside and heterogenous from other segments) - Measurable (e.g. easy to describe in terms of segmentation bases) - Substantial (e.g. profitable for the size of the marketer) - Accessible and actionable (e.g. develop an effective marketing mix) Positioning - Act of designing the company’s offering and image to occupy a distinctive place in the minds of the target market - A strong positioning is the way you differentiate yourself from your competitors - It is expressed with a positioning statement, which helps to make this perception clear and positive in the minds of the customer Criteria for a strong positioning 1. Focused 2. Believable 3. Benefit driven 4. Differentiating 5. Communicable 6. Enduring Positioning statement is a brief description of of a product or service and target market, and how the product or service fulls a particular need of the target market - It is used as an internal tool to align market efforts with the brand and value proposition - Translates for the consumer into a promise The marketing mix is the tactical part of the marketing strategy - It is a set of controllable tactical marketing tools - the 4Ps - that the business blends into a coordinates program, designed to achieve the company’s marketing objectives The 4Ps - Product: the good or service a firm is offering to its target market - Price: the amount of monet consumers pay to buy the product - Place: all the activities that move a firm’s product from its place of origin to the consumer - Promotion: the activities the firm takes to communicate the merits of its products to its target market Unique selling point (USP) - Marketers can achieve a strong USP by adjusting the marketing mix as well as company’s brand name - Other bases for differentiating can include - Personnel service (experience) - Additional service (service, atmospheric, various add-ons) Lecture 8 Innovation in the Organisation Why would a business need to innovate? - Businesses design strategies to maintain a sustainable business development - They look at three horizons - The environments companies are working in are changing, for reasons such as technological evolution, new competition and price wars ↳ These forces erode competitive advantage over time - The five components (lecture 4): value, rarity, imitable, robustness and non-substitutable ↳ are the core competencies that a business requires to maintain competitive advantage - Small businesses and start-ups are more agile than large companies to identify an opportunity and to exploit it with new products and services ↳ the reason they start their business is to innovate/bring something new, or different to the market and respond to consumer needs Invention ≠ innovation - An invention is the creation of something new (e.g. flying car) - Innovation is a new way of doing things that are commercialised - in a business context are not unique Different types of innovation - Creative destruction involves the replacement of older less efficient processes, products, services or organisational practices with newer more efficient ones ↳ e.g Netflix started its business with DVD rentals in 1997, where the value proposition was to deliver the DVD at your doorstep. While Blockbusters, the leaders of video rentals at the time ignored the  discussion and was sure that the business’s competitive advantage would prevail. Ultimately, they ended up filing for bankruptcy in 2010. 1. Radical innovation - Changes what is being offered - Technological improvements such as tape recordings vs DVD is an example - This lead to consumer habits changing, service offerings were changed and the delivery processes - The risk when leading the change is that the business gets locked in the new technology, because the business would have developed its ideas and capabilities so it will be difficult to change over time - When streaming technologies emerged, Netflix was able to integrate a new round of creative destruction, by integrating the changes within its own organisation by going from DVD delivery to online streaming - This involves new skill sets (training existing employees or hiring new people), changes in the organisation and developing new capabilities in operations 2. Incremental innovation - Making small or continuous improvements to an existing offering. Introducing difference is the key ingredient - For example, a vacuum cleaner. The first vacuum cleaner replaced carpet sweepers by adding an electric motor and suction. What changed over time was the size of the appliance and the noise of the motor. These are all improvements, but it didn’t change the way consumers used it 3. Product innovation - Relates to the final product (or service) to be sold, especially with regards to its features - Tablets are an example in response to how consumers use their computer. Compared to the first version, manufacturers worked on the glass and the body durability to better respond to everyday usage, especially if it were to fall on the floor. They integrated new technology for things like 4K movie streaming and faster network capabilities 4. Process innovation - Relates to the way in which a product is produced and distributed, especially with regard to improvements in cost or reliability - DELL used process innovation by focusing on direct sales and no retail shop. This makes DELL successful in the B2B market and the B2C market Product or process innovation? - New developing industries favour product innovations  - Maturing industries favour process innovation - Small new entrants have greatest opportunities in the early stages of an industry - Large incumbent firms have advantages in later stages Open or closed innovation? - Closed innovation relies on internal resources - Its own R&D labs - Protect IP - Secrecy - Avoid competitors free-riding on their ideas - Open innovation has increased in the digital era and involves - Deliberate import and export of knowledge - Exchanging ideas openly to accelerate and enhance its innovation - Produce better products more quickly The balance between open and closed innovation depends on: - Competitive rivalry: if it is intense, closed innovation is better - ‘One-shot’ or continuous innovation: open innovation is best where innovation is continuous (encouraging reciprocal behaviour) - Complex and tight-linked innovation: closed innovation is best in order to avoid inconsistent elements in development Platform leadership is a base upon which other applications, processes or technologies can be developed. It is an evolving ecosystem that is created from many interconnected pieces Innovator’s dilemma describes companies whose successes and capabilities can become obstacles in the face of changing markets and technologies The pace of diffusion - The graph shows when customers will buy products/services and adopt new innovations. It depends on: 1. The supply side - Degree of improvement - Compatibility - Complexity - Experimentation - Relationship management 2. The demand side - Market awareness - Network effect: the more people using a product increases the value of it, the more people on a network the more exchange of information about it - Customer prosperity to adopt The pace of diffusion (continued) - The S-curve shows how a new product or idea spreads over time: 1. Introduction: Slow adoption by early users. 2. Growth: Rapid adoption as more people join in.  3. Maturity: Adoption slows as the market saturates. Decision points are: - Timing of the tipping point: where demand for a product or service suddenly takes off, with explosive growth - Timing of the plateau - Extent of diffusion - Timing of the ‘tripping’ point: the opposite of the tipping, when demand collapses, sometimes drastically but often more gradually Innovation is NOT limited to only technology Business model innovation looks at the value chain to new combination of elements of a business - Change the way you do marketing - Change the way you sell, the way revenue is generated, changing selling/distribution activities - Change your product - Redefine the product or service and how it is produced Innovation sources - Techno push approach: R&D, research - Design led approach: design thinking/mindset - Market pull: lead users, consumer needs (more incremental innovation) Be the innovator or be the follower? First-mover advantage exists where an organisation is better off than its competitors as a result of being first to market with a new product, process or service - Experiment curve benefits - Scale benefits - Preemption of scarce resources - Reputation - Buyer switching cost Late-mover advantage - Free-riding imitating pioneer’s strategy but more cheaply - Learning from the mistakes made by pioneers Should you be the innovator (First mover) or the Imitator (Late mover) - 1. In radical innovation, a fast second strategy may be the right choice. But you need to consider many factors i. Capacity for profit capture - is the innovation easy to imitate? Is intellectual property weak? ii. Complementary assets - do you have resources to scale up?  iii. Fast moving arenas - can you establish a durable competitive advantage? Strategy statements - Have three main themes: 1. The fundamental goals that the organisation seeks, which draws on the stated mission, vision and objectives 2. The scope or domain of the organisation’s activities 3. The particular advantage or capabilities it has to deliver all these Mission statement aims to provide employees and stakeholders with clarity about what the organisation is fundamentally there to do. Vision statement is concerned with the future the organisation seeks to create. Statement of corporate values should communicate the underlying and enduring core ‘principles’ that guide an organisation’s strategy and define the way that the organisation should operate. Such core values should remain intact whatever the circumstances and constraints faced by the organisation. Pricing Strategy Price the value that customers give up to exchange to obtain a desired product or service. Price and value are related to opportunity cost. This also affects the “price” in a consumer’s mind via psychological comparisons, e.g., the cost of subscribing to an utility company is not just the money paid but includes the opportunity cost of investing that money in an alternative energy provider. Fixed costs - Business costs that remain constant regardless of the number of units produced Variable costs - Business costs that increase with the number of units produced Break-even analysis - A method of calculating the minimum volume of sales needed at a given price to cover all costs Break-even point - Sales volume at a given price that will cover all of a company’s costs Pricing methods - Cost-based pricing - A method of setting prices based on production and marketing costs, rather than conditions in the marketplace - A good starting point but suboptimal - Value-based pricing - A method of setting prices based on customer perception of value - A better option, consider competitors’ price too - Markup pricing - Add a standard markup to the product’s cost - Optimal pricing - A computer-based pricing method that creates a demand curve for every product to help managers select a price that meets specific marketing objectives - Price skimming - Charging a high price for a new product during the introductory stage and lowering the price later - Penetration pricing - Introducing a new product at a low price in hopes to building sales volume quickly - Loss leader pricing - Selling one product at a loss as a way to entice customers to consider other products - Auction pricing - The seller doesn’t set a firm price but allows buyers to competitively bid on the products being sold - Participative pricing - Allowing customers to pay the amount they think the product is worth  - Freemium pricing - A hybrid pricing strategy (free+premium) of offering some products for free while charging for others, or offering a product for free to some customers while charging others for it Price adjustment tactics - Discounts - Temporary price reductions to stimulate sales or lower prices to encourage certain behaviours such as paying with cash - Bundling - Offering several products for a single price that is presumably lower than the total the products’ individual price - Dynamic pricing - Continually adjusting prices to reflect changes in supply and demand Lecture 9 Organisational Design, Structure, and Dynamics; Management Roles and Skills; Leading the Organisation through Organisational Change PART 1: Management, Management roles, Management skills Management is the process of planning, organising, leading and controlling to meet organisational goals A manager’s role ↳ Managers don’t usually do the hands-on work in an organisation, they create the environment and provide the resources that give the employees the opportunity to excel in their work ↳ Managerial role involves behavioural patterns and activities involved in carrying out the functions of management; include interpersonal, informational, and decision making roles: 1. Interpersonal role Providing leadership to employees, acting as a liaison between groups, networking, and fostering relationships 2. Informational role Gathering information from inside and outside the organisation, sharing information 3. Decisional role Facing an endless stream of decisions, some which need to be made on the spot However, the risk here is that they could be disconnected from what is happening on the front lines where the day-to-day operations of the organisation is performed Managers use every form of communication to connect them with they employees Management is the process of planning, organising, leading and controlling to meet organisational goals The Planning function Planning involves establishing objectives and goals for an organisation and determining the best way to accomplish them Strategic plans are plans that establish the actions and the resource allocation required to accomplish strategic goals - Usually defined for periods of two to five years and developed by top managers 1. Defining mission, vision, and values Mission statement - A brief statement of why an organisation exists; in other words, what the organisation aims to accomplish for customers, investors, and other stakeholders. Vision statement - A brief and inspirational expression of what a company aspires to be. Values statement - A brief articulation of the principles that guide a company’s decisions and behaviours 2. Perform SWOT analysis Comparing a firm’s position to competitors: Benchmarking is a means of understanding how an organisation compares with others – typically competitors. Two approaches to benchmarking: Industry/sector benchmarking – comparing performance against other organisations in the same industry/sector against a set of performance indicators Best-in-class benchmarking – comparing an organisation's performance or capabilities against ‘best-in-class’ performance – wherever that is found even in a very different industry. (E.g. BA benchmarked its re-fueling operations against Formula 1.) 3. Develop forecasts Quantitative forecasts - Typically based on historical data or tests and often involve complex statistical computations. Qualitative forecasts - Based on intuitive judgments. Deriving forecast estimates: A System 4. Analyse the competition SWOT and market mapping (price and quality) can be used to compare an organisation to its competitors - Poor quality and high price is not the place to be when competitors are doing much better  - That representation helps strategic position and choices in terms of capability and competitive advantage in order to develop 5. Establishing goals and objectives Goal is a broad, long-range target or aim. Objective is a specific, short-range target or aim. Goals and Objectives are SMART: Specific Measurable Attainable Relevant Time limited 6. Develop action plans Plans are often organised in a hierarchy, reflecting the firm’s hierarchy - Split into functional areas and how they will reach their strategic goals and objectives Management is the process of planning, organising, leading and controlling to meet organisational goals Organising ↳is the process of arranging resources to carry out the organisation’s plans Management pyramid is an organisational structure divided into top, middle and first-line management Top managers - Responsible for setting strategic goals; they have the most power and responsibility in the organisation Middle managers - They develop plans to implement the goals of top managers and coordinate the works of the first-line managers First-line managers - They supervise operating employees and implement plans set at the higher management levels Management is the process of planning, organising, leading and controlling to meet organisational goals Leading - Process of guiding and motivating people to work toward organisational goals Good leaders possess: Cognitive intelligence - Involves reasoning, problem solving, memorization, and other rational skills. Emotional intelligence - Measure of a person’s awareness of and ability to manage his or her own emotions. Social intelligence - Involves looking outward to understand the dynamics of social situations and the emotions of other people, in addition to your own. Leadership styles: 1. Autocratic leadership is when managers make the decisions and issue directives down the chain of command; subordinates have little or no freedom to make decisions, deviate from plans or provide contrary input 2. Democratic leadership is when managers share decision-making authority, seeking input and inviting subordinates to participate in a coordinated planning process 3. Laissez-faire leadership is when managers act as advisors and supporters, offering input when asked but generally letting subordinates chart and adjust their own course towards meeting agreed-upon goals and objectives Coaching - Helping employees reach their highest potential by meeting with them, discussing problems that hinder their ability to work effectively, and offering suggestions and encouragement to overcome these problems. Mentoring - A process in which experienced managers guide less-experienced colleagues in the nuances of office politics, serving as a role model for appropriate business behaviour, and helping to negotiate the corporate structure. Management is the process of planning, organising, leading and controlling to meet organisational goals Controlling The process of measuring progress against goals and objectives, and correcting deviations if results are not as expected The Control Cycle: - Establish strategic goal - Establish performance standards - Performance is measured against the criteria/standards Standards are criteria against which performance is measured Benchmarking is collecting and comparing processes and performance data from other companies Essential marketing skills 1. Interpersonal skills Skills required to understand other people and to interact effectively with them. 2. Technical skills The ability and knowledge to perform the mechanics of a particular job. 3. Administrative skills Technical skills in information gathering, data analysis, planning, organising, and other aspects of managerial work. 4. Conceptual skills The ability to understand the relationship of parts to the whole.  5. Decision-making skills The ability to define problems and opportunities and select the best course of action. To ensure thoughtful decision making, managers can follow a formal process, such as the six steps highlighted in the exhibit. Thriving in the Digital Enterprise: Cognitive automation AI technology that aims to help professionals and managers with complex questions that present some of the most difficult or routine decision scenarios. PART 2: Organisational Structure(s) Unstructured Organisations Organisation structure - A framework that enables managers to divide responsibilities, ensure employee accountability, and distribute the decision-making authority Organisation chart - A diagram that shows how employees and taste are grouped and where the lines of communication and authority flow Agile organisation - A company whose structure, policies, and capabilities allow employees to respond quickly to customer needs and changes in the business environment Identifying Core Competencies & Job Responsibilities Core competencies are activities that a company considers central and vital to its business. Work specialisation is specialisation in or responsibility for some portion of an organisation’s overall work tasks. Also called division of labour. Chain of Command ↳A pathway for the flow of authority from one management level to the next. Line organisation A chain of command system that establishes a clear line of authority flowing from the top down. Line-and-staff organisation An organisation system that has a clear chain of command but that also includes functional groups of people who provide advice and specialised services. Span of management The number of people under one manager’s control Also known as the span of control Span of control is the number of subordinates a manager can efficiently and effectively direct Wider spans of management increase organisational efficiency  Narrow span drawbacks: - Expense of additional layers of management - Increased complexity of vertical communication - Encouragement of overly tight supervision - Discouragement of employee autonomy Centralisation versus Decentralisation Centralisation Concentration of decision-making authority at the top of an organisation. Decentralisation Delegation of decision-making authority to employees in lower-level positions Flattening an organisation - To reduce decision making time many companies are not flattening their organisations - This involves removing layers of management and pushing responsibility and authority to lower levels - This puts senior executives in closer contact with customers and the daily actions of the business Organising the workforce Departmentalisation involves grouping people within an organisation according to: 1. Function Grouping workers according to the similarity in their skills, resource use, and expertise. Good for economies of scale, specialisation but bad because they are isolated in their functional areas and no cross functional communication  2. Division Grouping departments according to similarities in product, process, customers, or geography React quick to change, better service to customers but may be expensive if each division needs their own HR department 3. Matrix A structure in which employees are assigned to both a functional group and a project team (thus using functional and divisional patterns simultaneously) Cross functional, knowledge sharing, flexible, good for international companies, but it may bring conflicts, decisions made slower, more communication and coordination required  4. Network A structure in which individual companies are connected electronically to perform selected tasks for a small headquarters organisation. Also called virtual organisation Clearer focus, lower costs, flexibility, but there is lack of secrecy, loss of control, sacrificing of profit Unstructured organisation An organisation that doesn't have a conventional structure but instead assembles talent as needed from the open market, the virtual and network organisational concepts taken to the extreme ✓ lower fixed costs x control issues ✓ flexibility x lack of accountability ✓ freedom x diminishing loyalty PART 3: Organisational Culture Managing Organisational Change Organisational Culture ↳A set of shared values and norms that support the management system and that guide management and employee behaviour Dominant Culture Expresses the core values that are shared by a majority of the organisation’s members. Subcultures Mini-cultures within an organisation, typically defined by department designations and geographical separation. Core Values The primary or dominant values that are accepted throughout the organisation. Strong Culture A culture in which the core values are intensely held and widely shared. What do cultures do? Organisational Culture Functions 1. Defines the boundary between one organisation and others 2. Conveys a sense of identity for its members 3. Facilitates the generation of commitment to something larger than self-interest 4. Serves as a sense-making and control mechanism for fitting employees in the organisation. How culture begins Stems from the actions of the founders: 1. Founders hire and keep only employees who think and feel the same way they do 2. Founders indoctrinate and socialise these employees to their way of thinking and feeling 3. The founders’ own behaviour acts as a role model that encourages employees to identify with them and thereby internalise their beliefs, values, and assumptions. Keeping culture alive Selection Concerned with how well the candidates will fit into the organisation Provides information to candidates about the organisation Top Management Senior executives help establish behavioural norms that are adopted by the organisation Socialisation The process that helps new employees adapt to the organisation’s culture How employees “learn” culture 1. Stories: anchor the present into the past and provide explanations and legitimacy for current practices. 2. Rituals: repetitive sequences of activities that express and reinforce the key values of the organisation. 3. Material Symbols: acceptable attire, office size, opulence of the office furnishings, and executive perks that convey to employees who are important in the organisation. 4. Language: jargon and special ways of expressing one’s self to indicate membership in the organisation Culture as a liability Barrier to change Occurs when culture’s values are not aligned with the values necessary for rapid change. Barrier to diversity Strong cultures put considerable pressure on employees to conform, which may lead to institutionalised bias. Barrier to acquisitions and mergers Incompatible cultures can destroy an otherwise successful merger. Culture is difficult to change Sources of resistance to change Individual Habit, security, economic factors, fear of the unknown, and selective information processing. Organisational Formalised regulations, limited focus of change, group may resist, threat to expertise, threat to established power relationships and resource allocations. Who is responsible for managing change? Manager, consultant? Which one is better to manage change and why? Managing change 1. Identify everything that needs to change. 2. Identify the forces acting for and against a change. 3. Choose the approach best suited to the situation. 4. Reinforce changed behaviour and monitor continued progress (Roberto and Levesque ) Kotter (1995) Tactics for overcoming resistance to change Education and communication: show those affected the logic behind the change Participation in the decision process lessens resistance Building support and commitment: counselling, therapy, or new-skills training Implementing change fairly: be consistent and procedurally fair Selecting people who accept change: hire people who enjoy change in the first place Coercion: direct threats and force such as demotion, transfer, negative performance evaluations, poor letter of recommendation