Certification Study Group Section 2

7/30/2019 Certification Study Group Section 2

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Certification Study Group

Managing Change


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The Nature of Organization

Change Organization Change

Any substantive modification to some part

of the organization (e.g., work schedules,machinery, employees).

Forces of Change

External and Internal


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Change Forces for Change

External forces in the organizations

general and task environments that forcethe organization to alter the way in whichit competes.

Internal forces inside the organization thatcause it to change its structure andstrategy; some internal forces areresponses to external pressures.


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Change Planned Change

Change which is designed and

implemented in an orderly and timelyfashion in anticipation of future events

Reactive Change

Change which is a piecemeal response tocircumstances as they develop


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Managing Change in

Organizations Steps in the Change Process (Lewin Model)

Unfreezing Individuals must be shown why the

change is necessary. Implementing change The change itself is

implemented

Refreezing Involves reinforcing andsupporting the change sothat it becomes a permanentpart of the system.


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Steps in

theChange

Process

Establishment of goals for the change

Recognition of the need for change

Evaluation and follow-up

Diagnosis of relevant variables

Planning for implementation of the change

Selection of appropriate change technique

Actual implementationA ComprehensiveApproach to Change


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Reasons for Resistance to

Change

Barney, Jay B. and

Ricky W. Griffin, The

Management of

Organizations.

Copyright 1992 by

Houghton Mifflin

Company. Used with

permissions.


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Resistance to Change

Uncertainty about the extent andeffects of change.

Threats to self-interests, power, andinfluence.

Different perceptions of change effects

and outcomes. Feelings of loss in disrupted social

networks, power, security, andfamiliarity with existing procedures.


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Overcoming

Resistance toChange inOrganizations

Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright 1992 by

Houghton Mifflin Company. Used with permissions.


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Overcoming Resistance to

Change Encourage active participation in the

change process.

Provide education and communicationabout the change process.

Facilitate the change process by making

only necessary changes, announcingchanges in advance, and allowing timeto adapt to change.


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Change Force-field analysis, in which the forces

for and against the change are

delineated and the forces against thechange are minimized, can be used toreduce resistance to change.


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Change Force-Field Analysis for Plant Closing at

General Motors

Outmoded production facilities

Excess capacity

Need to cut costs

Reasons for Closing

Possible future needs

Concern about worker welfare

Resistance from unions

Plant

closing

Reasons Against Closing

Figure 7.2


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Logical Thinking Patters


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Characteristics of Inductive

Reasoning Unlike deductive reasoning, Inductive

reasoning is not designed to produce

mathematical certainty. Induction occurswhen we gather bits of specific informationtogether and use our own knowledge andexperience in order to make an observation

about what must be true. Inductive reasoningdoes not use syllogisms, but series ofobservations, in order to reach a conclusion.


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Characteristics of Inductive

Reasoning Consider the following chains of observations:Observation: John came to class late this

morning.

Observation: Johns hair was uncombed.

Prior experience: John is very fussy about

his hair.

Conclusion: John overslept


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Characteristics of Deductive

Reasoning A deductive argument offers two or

more assertions that lead automaticallyto a conclusion. Though they are notalways phrased in syllogistic form,deductive arguments can usually bephrased as "syllogisms," or as brief,mathematical statements in which the

premises lead inexorably to theconclusion. The following is an exampleof a sound deductive sullogism.


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Reasoning Premise: All dogs have four legs.

Premise: Rover is a dog,Conclusion: Rover has four legs.


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Reasoning As long as the first two sentences in this argument

are true, there can be no doubt that the finalstatement is correct--it is a matter of mathematical

certainty. Deductive arguments are not spoken of as"true" or "false," but as "sound" or "unsound." Asound argument is one in which the premisesguarantee the conclusions, and an unsoundargument is one in which the premises do not

guarantee the conclusions. A deduction can becompletely true, yet unsound. It can also be sound,yet demonstrably untrue.


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Organizational Planning


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Strategic

Tactical

Operational

ManagerOperations

Vice PresidentOperations

DirectorAdvertising

Vice PresidentMarketing

ManagerAccounting

Vice PresidentFinance

President and CEO

Planning by Organizational

Level


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Time Frames for Planning The Time Dimension of Planning

is based on the principle of commitment.

Planning must provide sufficient time tofulfill the managerial commitmentsinvolved.

Long-range Plans

Intermediate Plans Short-range Plans


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The Nature of Strategic

Management Strategy

A comprehensive plan for accomplishing an

organizations goals.

Strategic Management

A way of approaching business

opportunities and challengesA comprehensive and ongoing

management process aimed at formulatingand implementing effective strategies.


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The Components of Strategy Distinctive Competence

Something an organization does exceptionally well.

Resource Deployment How an organization will distribute

its resources across the areas inwhich it competes.

Scope Specifies the range of markets in which an

organization will compete.


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Types of Strategic Alternatives

Business-level Strategy

How the organization conducts business in

a particular industry.

Corporate-level Strategy

The set of strategic alternatives that an

organization chooses from as it managesits operations simultaneously acrossseveral industries and several markets.


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Types of Strategic Alternatives Strategy Formulation

The set of processes involved in creating or

determining the organizations strategies; itfocuses on the content of strategies.

Strategy Implementation

The methods by which strategies areoperationalized or executed within theorganization; it focuses on the processesthrough which strategies

are achieved.


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Formulation and Implementation

Across Strategic AlternativesCorporate StrategyFormulationDecisions about whichmarkets to compete in

Business StrategyFormulationDecisions about how to

compete in each market

Functional StrategyFormulationDecisions about how toaddress each functionwithin the organization

ImplementationCarrying out the functional-level strategies chosen

for each business function

ImplementationCarrying out the business-level strategies chosen for

each business

ImplementationCompeting in the marketsvia existing operations,

mergers, acquisitions, newventures, divestitures


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SWOT

Analysis

Strengths

Weaknesses

Opportunities

Threats

MissionAn organizations fundamental purpose

Best Strategies

SWOT AnalysisTo formulate strategies that support the mission

Those that support the mission and exploit opportunities and strengths neutralize threats avoid (or correct) weaknesses

Internal Analysis

Strengths(distinctivecompetencies)

Weaknesses Threats

External Analysis

Opportunities


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Using SWOT Analysis toFormulate Strategy

Evaluating Organizational Strengths

Organizational strengths

Distinctive competencies Sustained competitive advantage

Evaluating Organizational Weaknesses

Organizational weaknesses Competitive disadvantage


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Using SWOT Analysis toFormulate Strategy

Evaluating an OrganizationsOpportunities and Threats

Organizational opportunitiesare areas in the organizationsenvironment that may generate

high performance.

Organizational threats areareas in the organizationsenvironment that make itdifficult for the organization to

achieve high performance


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Using a SWOT Analysis to

Formulate Strategy An Example

OpportunitiesHigh growth in marketfor low-cost lodging

StrengthsSolid hotel businessSolid food services

WeaknessesPoor performance incruise ship, travelagency, and themeparks

Weak cash position

ThreatsLow growth in themarket for high-cost lodging

EnvironmentalAnalysis

OrganizationalAnalysis


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Porters Generic Strategies Differentiation strategy

Overall cost leadership strategy

Focus strategy


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Porters Generic Strategies

Examples Differentiation

Nordstroms

Overall Cost Leadership

Wal-Mart

Focus

Gucci


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Strategies Based on Product

Life Cycle The Product Life Cycle

Introduction

Time

Stages

Growth Maturity Decline

High

Low

SalesVolume

Figure 3.3


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Strategies Based on the

Product Life Cycle Product life cycle: a model that portrays

how sales volume for products changes

over the life of products. Introduction Stage

Growth Stage

Mature Stage Decline Stage


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Formulating Corporate Level

Strategies Base Concepts Each business or set of businesses

within such a firm is frequently

referred to as a strategic business unit,or SBU.

Diversification The number of businesses an

organization is engaged in

The extent to which these businesses arerelated to one another


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Strategies Single Product Strategy

No diversification involved

Organization sells one product/service ina single market


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Strategies Related Diversification

A strategy in which an organization operates inseveral different businesses, industries, ormarkets that are somehow linked.


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Related Diversification Bases of relatedness bases include

common technology, common distribution

networks, common marketing skills,common brand names and reputation, andcommon customers.

Basis of Relatedness Examples

Similar technology Phillips, Boeing, Westinghouse, Compaq

Common distribution and marketing skills RJR Nabisco, Phillip Morris, Procter & Gamble

Common name brand and reputation Disney, Universal

Common customers Merck, IBM, AMF-Head


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Related DiversificationAdvantages of Related Diversification

Reduces organizations dependence on any

one of its business activities and thusreduces economic risk.

Reduces overhead costs associated withmanaging any one business througheconomies of scale and economies ofscope.


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Related DiversificationAdvantages of Related Diversification

Allows an organization to exploit its

strengths and capabilities in more than onebusiness.

Synergyexists among a set of businesseswhen the businesses value together isgreater than their economic valueseparately.


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Formulating Strategy -

Unrelated Diversification Unrelated Diversification

When an organization operates several

businesses that are not associatedAdvantages

Stable performance over time

Resource allocation spread over more thanone industry

Reduced business cycle risk


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Formulating Strategy

Unrelated Diversification Disadvantages

Strategy does not usually lead to highperformance due to the complexity of

managing a diversity of businesses Firms with unrelated strategies fail to exploit

important synergies, thus are at a competitivedisadvantage to firms with relateddiversification strategies

Most organizations have now abandonedthis strategy


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Managing Diversification Major Tools for Managing Diversification

Portfolio management techniques

Methods that diversified organizations use tomake decisions about what businesses toengage in and how to manage these multiplebusinesses to maximize corporate performance.

Two important portfolio managementtechniques

The BCG Matrix

The GE Business Screen


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BCG Matrix Provides a framework for evaluating the

relative performance of businesses in

which a diversified organizationoperates.

Uses two factors to evaluate a firms setof businesses: market growth rate and

market share. The matrix classifies the types of

businesses that a diversified firm can

engage in.


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BCG Matrix It helps managers to develop a better

understanding of how different strategicbusiness units contribute to the overallorganization.

By assessing each SBU on the basis of itsmarket growth rate and relative marketshare, managers can make decisions aboutwhether to commit further financial resourcesto the SBU or to sell or liquidate it.

SBU stands for .


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The BCG Matrix

Relative market share

Cash cows Dogs

High

Low

High Low

Question

marks

Stars

Marketgrowth

rate

Source:Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.


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BCG Matrix Dogsare businesses that have a very small

share of a market that is not expected togrow.

Cashcowsare businesses that have a largeshare of a market that is not expected togrow substantially.

Question marksare businesses that have onlya small share of a quickly growing market.

Starsare businesses that have the largestshare of a rapidly growing market.


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GE Business ScreenA method of evaluating businesses

along two dimensions:

(1) industry attractiveness and (2) competitive position

The GE Business Screen is a more

sophisticated approach to portfoliomanagement than the BCG Matrix


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GE Business ScreenA method of evaluating business in a

diversified portfolio along two dimensions,

each of which contains multiple factors: Industry attractiveness.

Competitive position (strength) of each firm in theportfolio.

In general, the more attractive the industryand the more competitive a business is, themore resources an organization should

invest in that business.


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The GE Business Screen

Competitive position

Low

Winner

Medium

High

Good

Competitive position1. Market share

2. Technological know-how

3. Product quality

4. Service network

5. Price competitiveness6. Operating costs

Industry attractiveness1. Market growth

2. Market size

3. Capital requirements

4. Competitive intensity

PoorMedium

Winner

Profit

producer

Winner

Average

business

Loser

Question

mark

Loser

LoserIndustry

growthrate

In general, the moreattractive theindustry and themore competitive theposition, the more anorganization should

invest in a business.


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Tactical Planning

An organized sequence of stepsdesigned to execute strategic plans

Tactical plans are to battles whatstrategy is to a war

Strategy focuses on resources,environment, and mission, whereastactics focus primarily on people andaction


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Tactical Planning Developing and Executing Tactical Plans

Developing tactical plans

Recognize and understand

overarching strategic plans

and tactical goals

Specify relevant resource and

time issues

Recognize and identify human

resource commitments

Executing tactical plans

Evaluate each course of action

in light of its goal

Obtain and distribute

information and resources

Monitor horizontal and vertical

communication and integration

of activities

Monitor ongoing activities for

goal achievement


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Operational Planning

Single Use Plans A plan that is not likelyto be used again in the near future.

Program plan Project plan

Standing Plans - a plan for activities thatrecur regularly over a period of time

Policy

Standard Operating Procedure

Rules and Regulations


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Contingency Planning

The determination of alternativecourses of action to be taken if an

intended plan is unexpectedlydisrupted or rendered inappropriate.


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Action Point 1:

Action Point 2:

Action Point 3:

Action Point 4:

Develop plans, consideringcontingency events

Implement plans and formallyidentify contingency events

Specify contingency event

indicators and develop plans foreach event

Successfully complete each plan orcontingency plan

The Contingency Planning

Process -An Ongoing Process

Certification Study Group Section 2

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