CHAPTER 18

STRATEGY AND THE GENERAL MANAGER

MUHAMMAD SYUHADASJOBIRIN HASAN

MMUGM AP5 SURABAYA2009

What The Role Of The CEO? Is The CEO A Problem Solver Or A Visionary?

INTRODUCTION

WE BELIEVE THAT A SUCCESSFUL MANAGER MUST BE BOTH.

MANAGERS MUST MANAGE A FIRM'S INTERNAL AND EXTERNAL RELATIONS, NUT MUST ALSO ESTABLISH A

PROFITABLE AND DEFENSIBLE POSITION IN FIERCE MARKETS

As managers became more important, interest in them grew among observers, students, and even critics of business. General management classes in

leadership and business policy have figured prominently in MBA curricula since the first MBA programs were developed shortly after 1900. Classic essays on

the important role of the general manager, by such authors as Chester Barnard, Philip Selznick, Mary Parker Follett, Alfred Sloan, remain in print today. Critics of the large corporation have focused on the increasing power of managers,

coupled with their lack of accountability to sharehoulders, as threats to social and economic stability. The link berween the general manager and the firm's strategy has persisted in current research. This is due in part to the enormous influence of the business policy group at the harvard business school, which

developed the concept of strategy as a "simple practitioner's theory" of general management (i.e., Strategy is synonymous with what general managers do).

A Historical Perspective On The General Manager

In discussing GMs, we assume that general managers control their firms and business units. We do so for analytical simplicity. In reality, top management

teams often perform most of the tasks we ascribe to individual GMs. Employing a top man agement team allows for a full delineation of top management roles without placing all complex top management decisions in a single individual.

Concentrating all decision authority for a complex firm in the hands of a single individual would be highly stress ful for the individual and inefficient for the

firm, whose complexity would overwhelm the abilities of even the most capable managers taken singly. Research on top manage ment teams has been

growing, and its findings parallel those of studies of general managers.10 in addition, understanding top management teams requires understand ing the behavioral processes by which these teams operate, such as dividing up man agerial responsibilities among team members, communicating team results,

settling disputes, and avoiding negative groups dynamics (i.E., "Groupthink").

WHAT DO GENERAL MANAGER DO?

THE GENERAL MANAGER AS ENTREPRENEUR

THE MANAGERIAL ROLE OF DEFINING HOW THE FIRM CREATES AND SUSTAINS VALUE

IS ANALOGOUS TO THE ENTREPRENEURIAL FUNCTION OF MANAGEMENT. JUST AS

ENTREPRENEURS CHOOSE WHERE TO COMMIT THE CAPITAL OF THEIR INVESTORS

AND HOW BEST TO MANAGE THOSE INVESTMENTS, SO GMS CHOOSE HOW BEST TO

COMMIT THE CAPITAL OF OWNERS AND TO POSITION THE FIRM IN ITS PRODUCT

MARKETS TO CREATE VALUE ON A SUSTAINABLE BASIS. THE SHEER SIZE OF LARGE

FIRMS ENSURES THAT GMS WILL MAKE MANY OF THESE IMPORTANT DECISIONS. THE

LARGE AMOUNT OF FIXED STRATEGY-SPECIFIC ASSETS THAT THESE DECISIONS

REQUIRE ENSURES THAT THE DECISIONS MADE BY GMS WILL COMMIT THE FIRM TO A

STRATEGIC POSITION WITH LONG-TERM IMPLICATIONS FOR ITS PERFORMANCE.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS ORGANIZER/IMPLEMENTOR

CHANDLER'S DICTUM THAT STRUCTURE FOLLOWS STRATEGY (DISCUSSED IN

CHAPTER 16) IMPLIES THAT GMS ORGANIZE THEIR FIRMS TO BEST IMPLEMENT THEIR

STRATEGIC CHOICES. AS WE DIS CUSSED IN CHAPTER 11, FOR EXAMPLE, A CHOICE OF

A COMPETITIVE POSITION HIGHLIGHTING COST ADVANTAGE WILL BE ASSOCIATED

WITH SUCH IMPLEMENTATION CHOICES AS STANDARDIZED PRODUCTS, MASS-

PRODUCTION FACILITIES, AND A TRADITIONAL MANAGEMENT STYLE. A POSITION

FAVORING BENEFIT ADVANTAGE, HOWEVER, WILL BE ASSOCIATED WITH

CUSTOMIZED PRODUCTS AND TRADEOFFS BETWEEN SCALE AND FLEXIBILITY IN

PRODUCTION.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS CONTRACTOR

MANAGERS ARE CONTRACTORS, BOTH INSIDE AND OUTSIDE THE FIRM. THE

IMPORTANCE OF EXTERNAL CONTRACTING, SUCH AS WITH SUPPLY CHAIN

PARTNERS, IS CLEAR. AS THE TRANSACTIONS COSTS OF SECURING ACTIVITIES

THROUGH THE MARKET INCREASE, IT BECOMES INCREASINGLY WORTHWHILE TO

INTERNALIZE THESE ACTIVITIES INSIDE THE FIRM.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS POWERHOLDER

AS WE DISCUSSED IN CHAPTER 17, IMPORTANT ACTIVITIES OCCUR WITHIN THE FIRM

FOR WHICH COST-EFFECTIVE CONTRACTS CANNOT BE EASILY DEVELOPED. IN THESE

SITUATIONS, GMS CAN USE THEIR POWER TO COMPLEMENT THEIR FORMAL

AUTHORITY SO AS TO SECURE THE COOPERATION OF ALL THE PARTIES NECESSARY

FOR AN ACTIVITY TO SUCCEED.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS FACILITATOR

GMs often need the cooperation of others, yet they can neither contract for that

cooperation nor bring their power and influence to bear to obtain it. One example would

occur when one manager needs the cooperation of another manager with com-parable

authority in the firm. Other examples would occur when the success of an activity

depends on efforts by crucial employees, but where the manager cannot monitor what the

employees actually do, where the employees can legitimately refuse to provide such

effort, and where the manager cannot provide sufficient tangible incentives to the

employees. In these situations, the GMs role is to persuade and shape the impressions

and preferences of others to increase the chances of obtaining their cooperation.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS COMPETITOR

AS THE MANAGER OF A BUSINESS UNIT THAT COMPETES IN A MARKET, THE GM MUST

TAKE INTO ACCOUNT THE ACTIVITIES OF COMPETITORS WHO ARE TRYING TO GAIN A

COMPETITIVE ADVANTAGE. GMS MUST UNDERSTAND THE NATURE OF COMPETITION

IN THEIR SERVED MARKETS. THEY MUST GATHER AND ANALYZE INFORMATION

ABOUT COMPETITORS, ANTICIPATE THEIR REACTIONS TO POSSI BLE MOVES, AND

DETERMINE HOW BEST TO MODIFY THEIR UNIT'S STRATEGIC ACTIVITIES ON THE

BASIS OF EXPECTED INTERACTIONS.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS ADAPTER

MANAGERS' DECISIONS ARE OFTEN SPECIFIC TO THE BUSINESS CONDITIONS IN

HAND. SIGNIFICANT CHANGES IN THE BUSINESS ENVIRONMENT MAY LEAD GMS

TO REASSESS THEIR BASIC DECISIONS REGARDING THE HORIZONTAL AND

VERTICAL BOUNDARIES OF THE FIRM AND THEIR STRATEGIC POSITION. FOR

EXAMPLE, THIS COULD OCCUR AS MANAGERS IN BASIC METALS INDUSTRIES,

SUCH AS STEEL AND ALUMINUM, DISCOVER THAT THE MARKET CONDITIONS

THAT MADE EXTENSIVE VERTICAL INTE GRATION REASONABLE DURING THE

EARLY HISTORY OF THESE INDUSTRIES HAVE CHANGED. VERTICALLY

INTEGRATED FIRMS MAY NOW BE INERTIAL AND UNRESPONSIVE TO CONDITIONS IN

WORLD METALS MARKETS THAT HAVE BECOME MORE COMPETITIVE.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS AGENT

AS GENERAL MANAGERS PERFORM ALL OF THE AFOREMENTIONED ROLES, THEY ARE

DOING SO ON BEHALF OF SOMEONE ELSE. UNIT AND SUBUNIT MANAGERS REPORT

TO AN OVERALL GM. THAT GM IN TURN REPORTS TO A DIVISION OR GROUP GM. AT

THE TOP OF THE FIRM'S HIERARCHY, THE CEO AND HIS OR HER MANAGEMENT TEAM

ARE RESPONSIBLE TO THE BOARD OF DIRECTORS AND SHAREHOLDERS.

THE ROLES OF THE GENERAL MANAGER

THE GENERAL MANAGER AS ENTREPRENEUR

THE GENERAL MANAGER AS ORGANIZER/IMPLEMENTOR

THE GENERAL MANAGER AS CONTRACTOR

THE GENERAL MANAGER AS POWERHOLDER

THE GENERAL MANAGER AS FACILITATOR

THE GENERAL MANAGER AS COMPETITOR

THE GENERAL MANAGER AS ADAPTER

THE GENERAL MANAGER AS AGENT

THE ROLES OF THE GENERAL MANAGER

CORPORATE-LEVEL GMS FACE THEIR OWN VARIANT OF THIS TENSION WITH THEIR SUBSIDIARY MANAGERS. ON THE ONE HAND, IF THEY FAIL TO INTERVENE WITH DIVISIONS, THEY RISK BEING SEEN AS UNNECESSARY AND INEFFECTIVE. IF DIVISIONS DO NOT NEED CORPORATE GUIDANCE, THEN WHAT PURPOSE DOES CORPORATE MANAGEMENT SERVE? ON THE OTHER HAND, INTERVENING WITH DIV ISION MANAGEMENT MAY HARM CORPORATE PERFORMANCE BY HURTING THE ABILITY OF DIVISIONS TO RESPOND TO MARKETS. CORPORATE GMS ALSO FACE THEIR OWN INTEGRATION PROBLEMS IN GETTING STAFF UNITS TO WORK TOGETHER FOR THE FIRM RATHER THAN TO JUSTIFY PARTICULAR PRO JECTS OR GROUPS.

THE PROBLEM WITH THE TENSION CAUSED BY GMS PERFORMING MULTIPLE TASKS TO DIFFER ENT CONSTITUENCIES IS THAT, WITHOUT CAREFUL MANAGEMENT AND DESIGN IN ADVANCE, THE EFFORT THE GM PROVIDES WILL LIKELY BE A FUNCTION OF THE RELATIVE COSTS AND BENEFITS FOR THE GM OF ATTENDING TO PARTICULAR TASKS.

THE TENSIONS OF MANAGERIAL WORK

THE NATURE OF MANAGERIAL WORK IS DEFINED BY THE NATURE OF THE FIRMS IN WHICH

MANAGERS WORK. SINCE THE NATURE OF THE FIRM HAS CHANGED GREATLY OVER THE

LAST CENTURY, IT IS NOT SURPRISING THAT THE NATURE OF THE GM'S JOB HAS ALSO

CHANGED, NO DOUBT FRUSTRATING THE EFFORTS OF OBSERVERS WHO SEEK TO NEATLY

CHARACTERIZE IT.

AS CONDITIONS CHANGED AGAIN IN THE 1990S, WITH THE GLOBAL EXPANSION OF FIRMS,

THE GENERAL INCREASE IN RIVALRY IN MANY INDUSTRIES, AND CHANGES IN

TELECOMMUNICATIONS AND DATA PROCESSING THAT HAVE MADE IT POSSIBLE TO

COMMUNICATE MORE QUICKLY WITH MORE PEOPLE, THE TASKS OF MANAGERS HAVE

CHANGED FURTHER. CHRISTOPHER BARTLETT AND SUMANTRA GHOSHAL SEE THESE

CHANGES IN TERMS OF A SHIFT FROM CORPORATE STRATEGY TO CORPORATE PUR POSE

CHANGING DEFINITIONS OF MANAGERIAL WORK

The general manager (GM) fulfills an integrative role in making strategic decisions for his or her firm. The GM balances the various decision needs of the firm to decide how a set of decisions should be made together.The general manager is both a problem solver and a visionary. As a problem solver, the GM defines and manages the boundaries of the firm, sets a competitive strategy, and oversees the firm's internal incentives, culture, and structure. As a visionary, the GM identifies a sus tainable position for long-term success.GMs use both formal and informal means to accomplish objectives. While relying on qualitative analyses as much as or more than quantitative analyses, they also rely on formal agendas and information networks.GMs may play one or more of several roles: entrepreneurial, organizer/implementor, contractor, facilitator, competitor, and adapter. Tensions arise when these roles require conflicting actions.General managers have had to change their roles in response to changing technological, regulatory, and competitive conditions.Regardless of their changing and varied roles, GMs remain agents of shareholders, accoun table to them and to other stakeholders for the conduct of the firm's business.

CHAPTER SUMMARY