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SIM336 Strategic Management

Lecture 1 -The Strategy Labyrinth

Sunderland Business School

Personally I'm always ready to learn, although I do not always like being taught. Sir Winston Churchill, British politician (1874 - 1965)

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Management History

Development of Major Management Theories

Historical Background of Management

• Ancient Management– Egypt (pyramids) and China (Great Wall)– Venetians (floating warship assembly lines)

• Adam Smith– Published “The Wealth of Nations” in 1776– Advocated the division of labor (job specialization)

to increase the productivity of workers• Industrial Revolution

– Substituted machine power for human labor– Created large organizations in need of

management

How pyramids were built

• http://www.youtube.com/watch?v=MpR7AKKN87E

• http://www.youtube.com/watch?v=Z4t4qHOeilo

• http://www.youtube.com/watch?v=5wwohIUxals

• http://www.youtube.com/watch?v=uQ5j058avZg

The Great Wall

• http://www.youtube.com/watch?v=1feTm36eMUU

• http://www.youtube.com/watch?v=HRmSFlQgINQ

• http://www.youtube.com/watch?v=Hxa0k6jWsxo

• http://www.youtube.com/watch?v=0ghGZSdKcCw

• http://www.youtube.com/watch?v=4YJlLwNh1Ys

Industrial Revolution

• http://www.youtube.com/watch?v=zhL5DCizj5c

• http://www.youtube.com/watch?v=d4joqYycnqM

Group Discussion

• Choose one historical event from this century and do some research on it.

• Describe the impact that this event might be having or has had on how workplaces are managed.

Activity

• Choose an organization with which you are familiar and describe the job specialization used there.

• Is it efficient and effective? Why or why not?

• How could it be improved?

Major Approaches to Management

• Scientific Management• General Administrative Theory• Quantitative Management• Organizational Behavior• Systems Approach• Contingency Approach

Scientific Management• Fredrick Winslow Taylor

– The “father” of scientific management– Published Principles of Scientific Management (1911)– The theory of scientific management

– Using scientific methods to define the “one best way” for a job to be done:

• Putting the right person on the job with the correct tools and equipment.

• Having a standardized method of doing the job.

• Providing an economic incentive to the worker.

Taylor’s Five Principles of Management

1. Develop a science for each element of an individual’s work, which will replace the old rule-of-thumb method.

2. Scientifically select and then train, teach, and develop the worker.

3. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed.

4. Divide work and responsibility almost equally between management and workers.

5. Management takes over all work for which it is better fitted than the workers.

Scientific Management (cont’d)

• How Do Today’s Managers Use Scientific Management?– Use time and motion studies to increase

productivity– Hire the best qualified employees– Design incentive systems based on output

Activity

• Can scientific management principles help you be more effective?

• Choose a task that you do regularly (e.g. laundry, fixing dinner, grocery shopping, studying for exams, etc.).

• Analyze it by writing down the steps involved in completing that task.

• See if there are activities that could be combined or eliminated.

• Find the “one best way” to do this task.

General Administrative Theorists

• Henri Fayol– Believed that the practice of management was

distinct from other organizational functions – Developed fourteen principles of management

that applied to all organizational situations

Fayol’s 14 Principles of Management

1. Division of work.

2. Authority.

3. Discipline.

4. Unity of command.

5. Unity of direction.

6. Subordination of individual interest to the interests of the organization.

7. Remuneration.

8. Centralization.

9. Scalar chain.

10. Order.

11. Equity.

12. Stability of tenure of personnel.

13. Initiative.

14. Esprit de corps.

Fayol’s 14 Principles of Management

• Division of Work – When employees are specialized, output can increase because they become increasingly skilled and efficient.

• Authority – Managers must have the authority to give orders, but they must also keep in mind that with authority comes responsibility.

• Discipline – Discipline must be upheld in organizations, but methods for doing so can vary.

Fayol’s 14 Principles of Management

• Unity of Command – Employees should have only one direct supervisor.

• Unity of Direction – Teams with the same objective should be working under the direction of one manager, using one plan. This will ensure that action is properly coordinated.

• Subordination of Individual Interests to the General Interest – The interests of one employee should not be allowed to become more important than those of the group. This includes managers.

Fayol’s 14 Principles of Management

• Remuneration – Employee satisfaction depends on fair remuneration for everyone. This includes financial and non-financial compensation.

• Centralization – This principle refers to how close employees are to the decision-making process. It is important to aim for an appropriate balance.

• Scalar Chain – Employees should be aware of where they stand in the organization's hierarchy, or chain of command.

• Order – The workplace facilities must be clean, tidy and safe for employees. Everything should have its place.

Fayol’s 14 Principles of Management

• Equity – Managers should be fair to staff at all times, both maintaining discipline as necessary and acting with kindness where appropriate.

• Stability of Tenure of Personnel – Managers should strive to minimize employee turnover. Personnel planning should be a priority.

• Initiative – Employees should be given the necessary level of freedom to create and carry out plans.

• Esprit de Corps – Organizations should strive to promote team spirit and unity.

???

• Do you think do Vietnamese managers adapt the 14 principles in their businesses?

• Which ones are usually appreciated and emphasized more or less?

• Discuss with your classmates

General Administrative Theorists

• Max Weber– Developed a theory of authority based on an ideal

type of organization (bureaucracy)– Emphasized rationality, predictability,

impersonality, technical competence, and authoritarianism

Weber’s Ideal Bureaucracy

Quantitative Approach to Management

• Quantitative Approach– Also called operations research or

management science– Evolved from mathematical and statistical

methods developed to solve WWII military logistics and quality control problems

– Focuses on improving managerial decision making by applying:

– Statistics, optimization models, information models, and computer simulations

Video

• Joy of Stats• Miracle of Laundry Machine

What is Quality Management?

• Intense focus on the customer• Concern for continual improvement• Process focused• Improvement in the quality of

everything the organization does• Accurate measurement• Empowerment of employees

???

• Is Quality Management expensive for business?

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Discussion

• Discuss whether the following organizations are adapting the quality management philosophy based on the previous slides.– Vietnam Airline– CGV – Tous Les Jours– Phong Vu Computer– MOF– Or find a good example

Understanding Organizational Behavior

• Organizational Behavior (OB)– The study of the actions of people at

work; people are the most important asset of an organization

The Hawthorne & Mayo’s Studies

• Initially the Hawthorne studies were designed to examine the effect of various lighting levels on worker productivity. – “something else” might affect the productivity

level– Different role and its impact in organization

• Mayo studied about the redesign of jobs, changes in workday and workweek length, introduction of rest periods, and individual versus group wage plans.– Significance of group factors and standards

???

• What is a system?• Give some examples of System• How does it work?

The Systems Approach• System Defined

– A set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

• Basic Types of Systems– Closed systems

– Are not influenced by and do not interact with their environment (all system input and output is internal).

– Open systems– Dynamically interact to their environments by

taking in inputs and transforming them into outputs that are distributed into their environments.

The Organization as an Open System

???

• So, what is the environment we concern in business?

Activity

• Analyze an organization you are familiar with by Open System in a group

Implications of the Systems Approach

• Coordination of the organization’s parts is essential for proper functioning of the entire organization.

• Decisions and actions taken in one area of the organization will have an effect in other areas of the organization.

• Organizations are not self-contained and, therefore, must adapt to changes in their external environment.

The Contingency Approach

• Contingency Approach Defined

– Also sometimes called the situational approach.

– There is no one universally applicable set of management principles (rules) by which to manage organizations.

– Organizations are individually different, face different situations (contingency variables), and require different ways of managing.

WHAT IS STRATEGY?

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Activity

• Read the extract of Sun Tzu’s strategy• Try to compare between Sun Tzu’s and

contemporary business strategies.• Is there any similarity or difference?

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Approach

• Most of the approaches to strategy are based on Hegel’s model of :-

Thesis, antithesis, synthesisWhich can become…..

– Where are we now?– Where do we want to be?– How do we get there?

ExternalAudit

InternalAudit

Long-TermObjectives

Generate,Evaluate,

SelectStrategies

ImplementStrategies:

Mgmt Issues

ImplementStrategies:Marketing,Fin/Acct,R&D, CIS

Measure &Evaluate

Performance

Vision&

Mission

Comprehensive strategic management model

5757

StrategicDirection

Strategy Formulation(corporate and business level)

Strategy Implementationand Control

Strategic Restructuring

Internal and External Analysis

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THE DESIGN SCHOOL

THE PLANNING

SCHOOL

THE POSITIONING

SCHOOL

THE ENTREPRENEURIAL

SCHOOL

THE COGNITIVE

SCHOOL

THE LEARNING

SCHOOL

THE POWER SCHOOL

THE CULTURAL

SCHOOL

THE ENVIRONMENTAL

SCHOOL

Strategy - Some of the Schools of thought

THE CONFIGURATION

SCHOOL

Source: Adapted from Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited;

Many more Schools….

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Voluntarism or Determinism?

• Do these influence strategy?– Voluntarism

• Create own destiny• Free will• “Predict and prepare” (Ackoff, 1983:59)

– Determinism• Destiny “In the hands of the Gods”• All events and human actions & choices are fully

determined by preceding events• Freedom of choice is an illusion

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The Battle of Waterloo• Size of the armies:

– 23,000 British troops with 44,000 allied troops and 160 guns

– against 74,000 French troops and 250 guns • Voluntarism -Was it a campaign classic of

brilliant military strategy by the Duke of Wellington?

• Was it because it rained heavily on the night of the 17th June 1815 forcing Napoleon to delay the action of the superior French artillery until 11 am that morning?

• Determinism or Voluntarism?– Was Wellington a formidable strategist / commander?– Was Wellington - In the hands of the Gods (it rained..)

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Voluntarism?• Food Retailers very powerful last ten years – Tesco,

Asda, Sainsbury…Very profitable….– Buy One Get One Free (BOGOF) - generally the food

manufacturer actual pays for this & not the food retailer!

• Are the Food Retailers operating in a Voluntarist mode?

• Supply Chain - Food manufacturer - SME– Small Medium sized Enterprise (SME) under constant price

(reduction) pressure from the Food Retailers – SME under price pressure from the raw materials’ suppliers for

price increases - Flour etc..– Major impact upon food manufacturers

Source Derek Harwood

Determinism?• What strategic choices do these particular SMEs have?

– Very High portion of their food output sold to Food Retailers– High manufacturing equipment costs– High energy costs ….ovens– High switching costs

• So are the Food manufacturers operating in a Deterministic mode?

• Jan 2010 UK Government approves Food Ombudsman to review the industry.

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Competition Commission

Source, Market investigation into the supply of groceries in the U.K., Competition Commission, Page 5, 31 Oct 07

Discussion

• Shrimp Farming in Vietnam– Demand – Price– Global Market

• What would you do for the crisis?

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Strategy?

• There are many schools of thought with regard to strategy

“This has most likely reflected the influence of academic writers and the consultants. It is they who have been driving the thinking in this field. Like butchers they chop up reality for their convenience, in some cases using one part of the beast while ignoring the rest, just as poachers grab the tusks of the elephant and leave the carcass to rot”

Source: Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited, p382.

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The Strategy Labyrinth• “…the greatest failings of strategic management have

occurred when managers took one point of view (with regard to schools of thought) too seriously”

• So are you able to find your way through the labyrinth of strategy?

• Have you learnt about strategy formation?

• “We shall never find it, never really see it all. But we can certainly see it better”

Source: Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited, p382

Source: Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited, p396.

Seminar 1 and 2

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