mba mco101 unit 5 lecture 6 200806xx

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

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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.


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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


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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.


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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


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Designing Organisational Structures

CustomerCustomer GeographicGeographic MatrixMatrix

FunctionalFunctional ProductProduct


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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


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Why study job design?

Every manager must know the relationship between how organisation being structured, the job within and the linkages to organisational processes


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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


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Job Characteristics Model


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Intra-organisational Processes

Reengineering

Empowerment

BehaviouralInformality


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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


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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


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BehaviouralInformality


Behavioural InformalitySpontaneityCasualness Interpersonal

familiarity

Behavioural FormalityRoutine & regimenSpecific behaviour

rules Impersonal

detachment

Casual dress code Open Offices

Popular ways to increase behavioral informality


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Inter-organisational Processes

ModularOrganisations

VirtualOrganisations


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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


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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


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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?


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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


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Requirements for Sustainable Competitive Advantage

SustainableCompetitiveAdvantage

ValuableResources

Non-Substitutable

Resources

ImperfectlyImitable

Resources

RareResources


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Strategy-Making Process

Assess need for

strategic change

Conduct aSituational

Analysis

ChooseStrategic

Alternatives


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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


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Situational Analysis

Conduct a Situational Analysis

Strengths

Weaknesses

•Distinctive Competence

•Core Capability

INTERNAL

Opportunities

Threats

•Environmental Scanning

•Strategic Groups

•Shadow-Strategy Task Force

EXTERNAL


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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


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Strategic Reference Points




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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


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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


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Corporate-Level StrategiesDiversification & Risk

Ris

k

Low

High

SingleBusiness

RelatedDiversification

UnrelatedDiversification

Relationship BetweenDiversification and Risk


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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.”


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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


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Industry-Level Strategies

Five Industry Forces

Five Industry Forces Positioning

Strategies

PositioningStrategies Adaptive

Strategies

AdaptiveStrategies


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BargainingPower ofSuppliers

BargainingPower ofBuyers

Threat ofSubstitutes

Threats ofNew Entrants

Character of

Rivalry

Porter’s Five Industry Forces


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Focus StrategyFocus Strategy


Positioning Strategies

Cost LeadershipCost Leadership DifferentiationDifferentiation


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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


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Firm-Level Strategies

DIRECTCOMPETITION

Market commonality

Resource similarity

STRATEGICMOVES OF

DIRECT COMP.

Attack

Response

ENTREPRENEURIALINTRAPRENEURIAL

ORIENTATION

Autonomy

Innovativeness

Risk taking

Proactiveness

Competitive Aggressiveness


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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.


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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


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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

mba mco101 unit 5 lecture 6 200806xx

Business

job enlargement

decisionmaking authority

significant authority

staff authority

primary authority

centralisationof authority

delegationof authority

organizational authority