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Final Exam Notes

Ch 04, Ch 05 & Ch 07
Lec : 06 Ch 04 "Internal Assesment"
Internal Organization from within --- Distinctive competences
Core Cometenc! "istincti#e cometenc!
A thing that organization is doing
exceedingly well
$ uch as:
R&D !eams commitment
customer care distri"ution
As the core competency # "etter
than others
$ %rm strength that cannot "e
matched or imitated "y
() *eritage
+) ,erger & ac-uisition
.) strategic alliance
/mpirical Indicators:
() Rare
+) *ard to imitate
3. 0ot easily su"stituta"le
%r&ani'ational $(ccess 1!wo dimensions 'chools1
- IO 2industrial organization perspective& 3 external is more important
- R45 2Resource "ased view& 3 internal is more important
/xternal 2IO& Internal 2R45& 6
+78 978
'ources of Distinctive :ompetency
- ;hysical
- Organizational
- *R
)ra*itional $o(rces are the +ollo,in&:
-. /ro*(ct 0 ser#ice:
;roduct life cycle "ecame very short need for creativity new ideas 2*R&
1. )echnolo&!:
,4A - 'trategic ,anagement :ourse 0otes
Ahmed ,) *assan
Low Distinctive Competency High Distinctive Competency
Easy Hard
!hose who sell the technology for you also sell it for your competitors
0ew !echnology =ho will operate>
=ho will maintain>
=ho will develop>
!echnology advancement re-uire new s?ills 2intellectual capital&
2. Economies o+ $cale:
- 4efore 1,ass production1 @ one %ts all
- 0ow 1,ass customization1 @ one on one
- 'pecial 0eeds for intellectual capital
4. /rotecte* 3ar4ets:
- 0o protected mar?ets any more
- 4orderless mar?ets
- '?y is open need for the culture of competition 2*R&
Assets make things possible, People make things happenA
'ee Internal Bactors /valuation 2IB/& example for Cateway computers in slide D EFGit
is very nice
=e have three main elements in organization
- ;eople
- ;roduct
- ;rocess
Well done is better than well said
$(ccess +actor o+ or&ani'ations
/xternal Bactors Internal Bactors
IO R45
/Hectiveness /Iciency 2outputinputs&
Distinctive :ompetency
2"e diHerent from
#ve or -ve
:ulture De%nition J !he way we do things around here 2what is rightwrong&
:ulture J cultivate 2proper place to grow things&
!here are three ways to do things around here:
() !he right way
+) !he wrong way
.) Our way 2the company way
"Culture is acquired not inherited"
E&!tian C(lt(re nee*s:
- :ulture of completion
- Bocus on -uality
- /ncourage ethical practice
- ;ersonal accounta"ility
Drivers 2,otives& ;eople human resources 4ehavior
$If you want to change the 5eha#ior change the *ri#ersA)
"ri#ers can 5e:
- Reward systems
- *ow we de%ne and treat losers winners
- =ho are the role models>
- !he structure
- Bear and freedom
Lec : 06 & 07: Ch 05 "$trate&ies in
3o#er A*#anta&e
- !he %rst "ird ta?es the worm) !he second mouse ta?es the cheese
- In :hessK the %rst mover forces the competitor to react to his moves 2reactive&)
6ran* strate&ies 72 "irection 3o*el8
- Crowth
- 'ta"ility
- Retrenchment
6ro,th $ta5ilit! 9etrenchment
Adding new
,aintain increase ,L! share :ut into pieces
2cut drop
,ar?et still "ooming 2not
0ew product 'ame product
0ew mar?et 'ame mar?et
*igh R&D Blat R&D
*igh Investment Blat investment
*igh competition 'ta"le environment
,&AK IntegrationK
'trategic AlliancesK
Moint ventures
mar?et penetration 4an?ruptcyK sell outK
divestK li-uidation
$(mmar! o+ "$trate&ies :s< Cate&ories"
I Inte&ration 24uy ,anufacture sell&
- Borward 2distri"ution&
- *orizontal 2:ompetitors&
- 4ac?ward 2suppliers&
- 'ee? a strategic %t J (#(N + synergy 2OPQR STU VQW XR &
- Anti-trust laws JJ Against monopoly
II Intensi#e $trate&ies
- ,ar?et penetration --- more considered to "e sta"ility strategy
- ,ar?et development --- 4orderless mar?ets
- ;roduct Development --- 'hort ;roduct Yife :ycle 2;Y:&
III "i#ersi=cation $trate&ies
20ew prodK new ,L!& Do not put all eggs in one "as?et:
- :oncentric Diversi%cation --- 2expanding in the same line of "usiness&
- :onglomerate Diversi%cation --- 2holding company&
- *orizontal Diversi%cation --- new unrelated to same customers
I:"e+ensi#e $trate&ies
- Retrenchment --- :ost and asset reduction to reverse declining pro%ts 2wor?
outJ loosing fat&
- Divestiture ---- use Mac? =elsh ,atrix 2C/&
- Yi-uidation ---- 'elling company assets in parts
"etails o+ "$trate&ies :s< Cate&ories"
:ertical Inte&ration $trate&ies 2Cain :ontrol Over: Distri"utorsK 'uppliersK and
1. For,ar* Inte&ration 76ain Control %#er ..."istri5(tors, 9etailers8
o :urrent distri"utors 3 expensive or unrelia"le
o Availa"ility of -uality distri"utors 3 limited
o Birm competes in industry expected to grow mar?edly
o Birm has "oth capital & *R to manage new "usiness of distri"ution
o :urrent distri"utors have high pro%t margins
1< >ac4,ar* Inte&ration 7%,nershi or Control .. Firm?s s(liers8
o :urrent suppliers 3 expensive or unrelia"le
o D of suppliers is smallZ D competitors is large
o *igh growth in industry sector
o Birm has "oth capital & *R to manage new "usiness
o 'ta"le prices are important
o :urrent suppliers have high pro%t margins
2< @ori'ontal Inte&ration 7%,nershi or Control ..Firm?s cometitors8
o Cain monopolistic characteristics wo federal government challenge
o :ompetes in growing industry
o Increased economies of scale 3 ma[or competitive advantages
o Baltering due to lac? of managerial expertise or need for particular

Intensi#e $trate&ies: Improve competitive position with existing products

-< 3ar4et /enetration 7Increase* 3ar4et $hare8
- ;resent productsservices
- ;resent mar?ets
- Creater mar?eting eHorts
o :urrent mar?ets not saturated
o \sage rate of present customers can "e increased signi%cantly
o 'hares of competitors decliningZ industry sales increasing
o Increased economies of scale provide ma[or competitive advantage
1< 3ar4et "e#eloment 7Ne, 3ar4ets .. /resent ro*(cts0ser#ices to ne,
&eo&rahic areas8
o 0ew channels of distri"ution 3 relia"leK inexpensiveK good -uality
o Birm is successful at what it does
o \ntappedunsaturated mar?ets
o /xcess production capacity
o 4asic industry rapidly "ecoming glo"al
2< /ro*(ct "e#eloment7Increase* $ales .. Imro#in& resent
ro*(cts0ser#ices, "e#eloin& ne, ro*(cts0ser#ices8
o ;roducts in maturity stage of life cycle
o Industry characterized "y rapid technological development
o :ompetitors oHer "etter--uality products ] compara"le prices
o :ompete in high-growth industry
o 'trong R&D capa"ilities
"i#ersi=cation $trate&ies 2Yess ;opular -- ,ore diIcult to manage diverse
"usiness activities&
-< Concentric "i#ersi=cation 7Ne, & relate* ro*(cts0ser#ices8
o :ompete in noslow growth industry
o 0ew & related products increases sales of current products
o 0ew & related products oHered at competitive prices
o :urrent productsGdecline stage of product life cycle
o 'trong management team
2. Con&lomerate "i#ersi=cation 7Ne, & (nrelate* ro*(cts0ser#ices8
o Declining annual sales & pro%ts
o :apital & managerial a"ility to compete in new industry
o Binancial synergy "etween ac-uired and ac-uiring %rms
o :urrent mar?ets for present products 3 saturated
3. @ori'ontal "i#ersi=cation 7Ne, & (nrelate* ro*(cts0ser#ices +or c(rrent
o Adding new productsservices would signi%cantly increase revenues
o *ighly competitive andor no-growth industryZ low margins & returns
o :urrent distri"ution channels can "e used
o 0ew products have counter cyclical sales patterns
"e+ensi#e $trate&ies
-< 9etrenchment 79e&ro(in& , Cost & asset re*(ction to re#erse *eclinin&
sales & ro=t8
o Bailed to meet o"[ectives & goals consistencyZ has distinctive competencies
o Birm is one of wea?er competitors
o IneIciencyK low pro%ta"ilityK poor employee moraleK pressure for
o 'trategic managers have failed
o Rapid growth in sizeZ ma[or internal reorganization necessary
1< "i#estit(re 7$ellin& a *i#ision or art o+ an or&ani'ation8
o Retrenchment failed to attain improvements
o Division needs more resources than are availa"le
o Division responsi"le for %rm^s overall poor performance
o Division is a mis-%t with organization
o Yarge amount of cash is needed and cannot "e raised through other sources
2< LiA(i*ation 7$ellin& , Coman!?s assets, in arts, +or their tan&i5le
o Retrenchment & divestiture failed
o Only alternative is "an?ruptcy
o ,inimize stoc?holder loss "y selling %rm^s assets
Lec : 0B Ch 07 "Imlementin&
$trate&ies: 3ana&ement & %erations Iss(es"
Chan&es in $trate&! %+ten 9eA(ire Chan&es in $tr(ct(re
() :hanges in strategy often re-uire changes in the way an organization is
structured for two ma[or reasons:
a) FirstK structure largely dictates how o"[ectives and policies will "e
esta"lished) Bor exampleK o"[ectives and policies esta"lished under a
geographic organizational structure are couched in geographic terms)
O"[ectives and policies are stated largely in terms of products in an
organization whose structure is "ased on product groups) !he structural
formula for developing o"[ectives and policies can signi%cantly impact all
other strategy-implementation issues)
") $econ* ma[or reason why changes in strategy often re-uire changes in
structure is that structure dictates how resources will "e allocated)
+) :hanges in strategy lead to changes in organizational structure) 'tructure
should "e designed to facilitate the strategic pursuit of a %rm andK thereforeK
follow strategy) !he "elow illustrates a structure se-uence repeated as
organizations grow and change over time)
.) !here is not [ust one optimal organizational design or structure for a given
strategy or type of organization)
)he F(nctional $tr(ct(re
() !he most widely used structure is the functional or centralized type "ecause
this structure is the simplest and least expensive of the seven alternatives)
2. A functional structure group_s tas?s and activities "y "usiness function such as
productoperationsK mar?etingK %nanceaccountingK R&DK and computer
information systems)
a. Advantages: 4esides "eing simple and inexpensiveK a functional structure
also promotes specialization of la"orK encourages eIciencyK minimizes
the need for an ela"orate control systemK and allows rapid decision-
#. Disadvantages: 'ome disadvantages of a functional structure are that it
forces accounta"ility to the topK minimizes career development
opportunitiesK and is sometimes characterized "y low employee morale)
)he "i#isional $tr(ct(re
() !he divisional or decentralized structure is the second most common type used
"y American "usinesses)
+) !he divisional structure can "e organized in one of four ways: "y geographic
areaK product or serviceK customerK or process) =ith a divisional structureK
functional activities are performed "oth centrally and in each separate division)
a) Advantages: A divisional structure has some clear advantages) BirstK and
perhaps foremostK is accounta"ility) Other advantages of the divisional
structure are that it creates career development opportunities for
managersK allows local control of local situationsK leads to a competitive
climate within an organizationK and allows new "usinesses and products
to "e added easily)
") Disadvantages: ;erhaps the most important limitation is that a divisional
structure is costly)
.) A divisional structure "y geographic area is appropriate for organizations whose
strategies need to "e tailored to %t the particular needs and characteristics of
customers in diHerent geographic regions)
<) A division structure "y product is most eHective for implementing strategies
when speci%c products or services need special emphasis)
`) A division structure "y process is similar to a functional structureK "ecause
activities are organized according to the way wor? is actually performed)
)he $trate&ic >(siness Cnit 7$>C8 $tr(ct(re
1. !he '4\ structure group_s similar divisions into strategic "usiness units and
delegate authority and responsi"ility for each unit to a senior executive who
reports directly to the :/O)
a) Advantages: !his change in structure can facilitate strategy
implementation "y improving coordination "etween similar divisions and
channeling accounta"ility to distinct "usiness units)
") Disadvantages: !wo disadvantages of an '4\ structure are that it re-uires
an additional layer of managementK which increases salary expensesK and
the role of the group vice president is often am"iguous)
)he 3atrix $tr(ct(re
() It is the most complex of all designs "ecause it depends upon "oth vertical
and horizontal aows of authority and communication)
a) It can result in higher overhead "ecause it creates more managerial
") It also creates dual lines of "udget authorityK dual sources of reward and
punishmentK shared authorityK and dual reporting channels)
c. Advantages are that pro[ect o"[ectives are clearK there are many channels
of communicationK wor?ers can see visi"le results of wor?K and pro[ects
can "e shut down easily)
9estr(ct(rin&, 9een&ineerin&
9eshain& Cororate Lan*scae
() RestructuringK also called downsizingK rightsizingK or
delayeringK involves reducing the size of the %rm in
terms of num"er of employeesK divisions or unitsK
and hierarchical levels in the %rm^s organizational
+) !he Internet is ushering in a new wave of "usiness transformations)
.) Reengineering is concerned more with employee and customer well-"eing
than with shareholder well-"eing)
() Birms often employ restructuring when various ratios appear out of line with
competitorsK as determined through "enchmar?ing exercises)
a) !he primary "ene%t sought from restructuring is cost reduction) !he
downside of restructuring can "e reduced employee commitmentK
creativityK and innovation that accompanies the uncertainty and trauma
associated with pending and actual employee layoHs)
() In reengineeringK a %rm uses information technology to "rea? down
functional "arriers and create a wor? system "ased on "usiness processesK
productsK or outputs rather than on functions or inputs)
+) A "ene%t of reengineering is that it oHers employees the opportunity to see
more clearly how their particular [o"s impact the %nal product or service
"eing mar?eted "y the %rm)
.) ReengineeringK also called process managementK process innovationK or
process redesignK involves recon%guring or redesigning wor?K [o"sK and
processes for the purpose of improving costK -ualityK serviceK and speed)
3ana&in& resistance to chan&e
9esistance to Chan&e
() Resistance to change can "e considered the single
greatest threat to successful strategy implementation)
+) It may ta?e on such forms as sa"otaging production
machinesK a"senteeismK %ling unfounded grievancesK
and unwillingness to cooperate)
.) Resistance to change can emerge at any stage or level of the strategy-
implementation process)
<) !here are three commonly used strategies for implementing change:
a& Borce change strategy
"& /ducative change strategy
c& 'elf-interest change strategy
`) ;eople resist change "ecause of their fear of economic lossK inconvenienceK
uncertainties and disruption of normal interaction patterns
b) It represents ma[or threat to strategy implementationK it could "e in the form
of sa"otaging machinesK a"senteeismK %ling unfounded grievancesK and
unwillingness to cooperate eHectively
E) !husK successful strategy implementation must provide accurate information
to employees and hinges around developing a climate conductive to change)
9) 'ingle greatest threat to successful strategy implementation
F) Raises anxietyZ fear concerning
a& /conomic loss
"& Inconvenience
c& \ncertainty
d& 4rea? in status--uo