MBA MCO101 Unit 5 Lecture 6 200806xx
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MCO 101 • MANAGEMENTUnit 5: Organisational Structure and
Strategy
MANAGEMENT 2MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Managing Expectations
LEARNING OUTCOMES:
At the end of the course, students will be able to:
• Explain fundamental concepts and principles of management including the basic roles, skills, and functions of management
• Discuss the knowledgeable of historical development, theoretical aspects and practice application of managerial process
• Examine the environment, technology, human resources, and organisations in order to achieve high performance
• Discuss the ethical dilemmas faced by managers and the social responsibilities of businesses.
MANAGEMENT 3MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Managing Expectations
SUBJECTS DISCUSSED:
1. Management, Managers and evolution of Management theory
2. Personality traits and diversity3. Organisation, Globalisation and the resulting
environments4. Decision-making and Planning5. Structure and Strategy6. Executing and Controlling7. Human Resources Management as a function8. Motivation, Leadership, Groups and Teams9. Communication, conflicts and politics10. Operations Management. Entrepreneurship. Innovation
MANAGEMENT 4MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Managing Expectations
TOPIC DETAILS:
After going through UNIT 5, you should be able to:
1. describe the departmentalisation approach to organisational structure.
2. explain organizational authority.3. discuss the different methods for job design.4. explain the methods that companies are using to redesign
international organisational processes (intra-organisational processes).
5. describe the methods that companies are using to redesign external organisational processes (inter-organisational processes).
6. indicate the components of sustainable competitive advantage and explain why it is important.
7. describe the steps involved in the strategy-making process.8. explain the different kinds of corporate-level strategies. 9. describe the different kinds of industry-level strategies.10. explain the components and kinds of firm-level strategies.
MANAGEMENT 5MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Organisational Structure
Organisational Structure
The vertical and horizontal configuration of departments, authority, and jobs within a company.
Organisational Process
The collection of activities that transform inputs into outputs that customers value.
a
b c d
MANAGEMENT 6MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Designing Organisational Structures
CustomerCustomer GeographicGeographic MatrixMatrix
FunctionalFunctional ProductProduct
MANAGEMENT 7MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
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Organisational Authority
Delegationof Authority
Degree ofCentralisation
Chain ofCommand
Line versusStaff Authority
The vertical line of authority in an organisation
•Clarifies who reports to whom•Unity of command•workers report to only one boss•matrix organisations violate this principle
Line authority: the right to command immediate subordinates in the chain of command
Staff authority: the right to advise but not command others
Delegation of Authority: The assignment of direct authority and responsibility to a subordinate to complete tasks for which the manager is normally responsible.
[R.A.A]
Centralisation of authority: primary authority is held by upper management
Decentralisation: significant authority is found in lower levels of the organisation
Standardisation: solving problems by applying rules, procedures, and processes
MANAGEMENT 8MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Why study job design?
Every manager must know the relationship between how organisation being structured, the job within and the linkages to organisational processes
MANAGEMENT 9MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Job design
SpecialisedJobs
Job Rotation, Enlargement,
Enrichment
JobCharacteristics
Model
A job that is a small part of a larger task or process Jobs are simple, easy to learn, and economical Can lead to low satisfaction, high absenteeism, &
employee turnover
Job Rotation: periodically moving workers from one specialised job to another
Job Enlargement: increasing the number of tasks performed by a worker
Job Enrichment: adding more tasks and authority to an employee’s job
A job redesign approach: that seeks to increase employee motivation
Emphasizes internal motivation: experience work as meaningful, experience responsibility for work outcomes, knowledge of results
MANAGEMENT 10MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Job Characteristics Model
MANAGEMENT 11MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Intra-organisational Processes
Reengineering
Empowerment
BehaviouralInformality
MANAGEMENT 12MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Intra-organisational Processes
Reengineering
The fundamental rethinking and radical redesign of business processes
Intended to achieve dramatic improvements in performance
Change the orientation from vertical to horizontal
Changes task interdependence
MANAGEMENT 13MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Intra-organisational Processes
EmpowermentEmpowerment: Permanently passing decision-making authority and responsibilities from managers to workers by giving them the information and resources they need to make good decisions
A feeling of intrinsic motivationWorkers perceive meaning in their workEmployees are capable of self-
determination
MANAGEMENT 14MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
BehaviouralInformality
Intra-organisational Processes
Behavioural InformalitySpontaneityCasualness Interpersonal
familiarity
Behavioural FormalityRoutine & regimenSpecific behaviour
rules Impersonal
detachment
Casual dress code Open Offices
Popular ways to increase behavioral informality
MANAGEMENT 15MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Inter-organisational Processes
ModularOrganisations
VirtualOrganisations
MANAGEMENT 16MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Inter-organisational Processes
ModularOrganisations
MANAGEMENT 17MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Inter-organisational Processes
ModularOrganisations
Advantages:
•can cost less to run than traditional organisations
•lets organisations focus on core competencies
Disadvantages:
•loss of control from outsourcing•may reduce their competitive
advantage
MANAGEMENT 18MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
VirtualOrganisations
Inter-organisational Processes
MANAGEMENT 19MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
VirtualOrganisations
Inter-organisational Processes
Advantages:
•let companies share costs•fast and flexible•being the “best” should provide
better products
Disadvantages:
•difficult to control the quality of partners
•requires tremendous management skills
Case study: http://www.digiport.org/SHARED/MAJ_EDITORIAL/Pdf/2004/net2004/Atelier_5_E-pme/University_de_Daejon_Coree.pdf
MANAGEMENT 20MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
What Would You Do?
Where do you start to fix a company that has a $100 million loss, falling ad sales, plummeting stock prices, and an unmanageable organisational structure? LELC has done a poor job in establishing relationships with customers
What structure should LELC adopt? How can better decisions be made for the company?
MANAGEMENT 21MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Basics of Organisational Strategy
ResourcesThe assets, capabilities, processes,information, and knowledge that theorganization controls
Competitive Advantage
Providing greater value for customersthan competitors can
SustainableCompetitiveAdvantage
A competitive advantage that othercompanies have tried unsuccessfullyto duplicate
MANAGEMENT 22MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Requirements for Sustainable Competitive Advantage
SustainableCompetitiveAdvantage
ValuableResources
Non-Substitutable
Resources
ImperfectlyImitable
Resources
RareResources
MANAGEMENT 23MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
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Strategy-Making Process
Assess need for
strategic change
Conduct aSituational
Analysis
ChooseStrategic
Alternatives
MANAGEMENT 24MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Assessing the Need for Strategic Change
Avoid Competitive Inertia
a reluctance to change strategies or competitive practices that have been successful in the past
Look for Strategic Dissonance
a discrepancy between a company’s intended strategy and the strategic actions managers take when implementing that strategy
Assess need forstrategic change
MANAGEMENT 25MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Situational Analysis
Conduct a Situational Analysis
Strengths
Weaknesses
•Distinctive Competence
•Core Capability
INTERNAL
Opportunities
Threats
•Environmental Scanning
•Strategic Groups
•Shadow-Strategy Task Force
EXTERNAL
MANAGEMENT 26MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Choosing Strategic Alternatives
Risk-Avoiding Strategy: protect an existing competitive advantage
Risk-Seeking Strategy: extend or create a sustainable competitive advantage
Strategic Reference Points: targets used by managers to determine if the firm has developed the core competencies it needs to achieve a sustainable competitive advantage
Choose Strategic Alternatives
MANAGEMENT 27MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Strategic Reference Points
Choose Strategic Alternatives
Choose Strategic Alternatives
MANAGEMENT 28MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Corporate-Level Strategies
Corporate-LevelStrategy
The overall organizational strategy that addresses the question “What business(es) are we in or should we be in?”
Acquisitions, unrelated diversification, related diversification, single businesses
BCG MatrixStarsQuestion marksCash cowsDogs
PORTFOLIO STRATEGY
Growth
Stability
Retrenchment/recovery
GRAND STRATEGIES
MANAGEMENT 29MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Corporate-Level StrategiesBGC Matrix
Relative Market Share
Mar
ket
Gro
wth
Small Large
Low
HighStars
companies with a large share of a fast-growing market
Dogscompanies with a small share
of a slow-growing market
Cash Cowscompanies with a large share
of a slow-growing market
Question Markscompanies with a small share
of a fast-growing market
MANAGEMENT 30MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Corporate-Level StrategiesDiversification & Risk
Ris
k
Low
High
SingleBusiness
RelatedDiversification
UnrelatedDiversification
Relationship BetweenDiversification and Risk
MANAGEMENT 31MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Corporate-Level StrategiesPortfolio Strategy
Problems with Portfolio Strategy
• Unrelated diversification does not reduce risk.
• Present performance is used to predict future performance.
• Cash cows fail to aggressively pursue opportunities and defend themselves from threats.
• Being labeled a “cash cow” can hurt employee morale.
• Companies often overpay to acquire stars.
• Acquiring firms often treat stars as “conquered foes.”
MANAGEMENT 32MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Corporate-Level Strategies Grand Strategies
GrowthStrategy
focuses on increasing profits, revenues, market share, or numberof places to do business
StabilityStrategy
focuses on improving the way in whichthe company sells the same productsor services to the same customers
RetrenchmentStrategy
focuses on turning around very poorcompany performance by shrinkingthe size or scope of the business
MANAGEMENT 33MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Industry-Level Strategies
Five Industry Forces
Five Industry Forces Positioning
Strategies
PositioningStrategies Adaptive
Strategies
AdaptiveStrategies
MANAGEMENT 34MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Industry-Level Strategies
BargainingPower ofSuppliers
BargainingPower ofBuyers
Threat ofSubstitutes
Threats ofNew Entrants
Character of
Rivalry
Porter’s Five Industry Forces
MANAGEMENT 35MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Focus StrategyFocus Strategy
Industry-Level Strategies
Positioning Strategies
Cost LeadershipCost Leadership DifferentiationDifferentiation
MANAGEMENT 36MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Industry-Level Strategies
Adaptive Strategies
Defenders
seek moderate growth
retain customers
Prospectors
seek fast growth
emphasise risk taking innovation
Analysers
blend of defender &prospector strategies
imitate other’s successes
Reactors
use an inconsistent strategy
respond to changes
MANAGEMENT 37MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Firm-Level Strategies
DIRECTCOMPETITION
Market commonality
Resource similarity
STRATEGICMOVES OF
DIRECT COMP.
Attack
Response
ENTREPRENEURIALINTRAPRENEURIAL
ORIENTATION
Autonomy
Innovativeness
Risk taking
Proactiveness
Competitive Aggressiveness
MANAGEMENT 38MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Firm-Level Strategies
Market CommonalityResource Similarity
Entering market is most forceful attack.Exiting market is clear defensive signal of retreat.Entrepreneurship is strategy of entering established markets or developing new market.
Firm A Firm B
Attack
Response
Response: A competitive countermove, prompted by a rival’s attack, to defend or improve a company’s market share or profit.
•Match or mirror your competitor’s move.
•Respond along a different dimension from your competitor’s move or attack.
Attack: A competitive move designed to reduce a rival’s market share or profits.
MANAGEMENT 39MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Strategic Moves of Direct Competition
Competitor AnalysisInterfirm Rivalry:
Action & Response
Strong Market Commonality
Less Likelihood of an Attack
Weak Market Commonality
Greater Likelihood of an Attack
Strong Resource Commonality
Less Likelihood of a Response
Low Resource Commonality
Greater Likelihood of a Response
MANAGEMENT 40MCO 101Issue date: 15 June 2008 Source: by South-Western, a division of Thomson Learning. All rights
reserved
Entrepreneurship and Intrapreneurship
Entrepreneurship: the process of entering new or established markets with new goods or services.
Intrapreneurship: entrepreneurship within an existing organisation.
Entrepreneurial orientation: the set of processes, practices, and decision-making activities that lead to new entry
Key Dimensions of Entrepreneurial Orientation
Risk Taking
Autonomy
Innovativeness
Proactiveness
Competitive Aggressiveness