Session I_ModellingSC1.ppt

Session I
Modeling Strategic Change
Prof. Sushil
Department of Management Studies
Indian Institute of Technology Delhi
Hauz Khas, New Delhi – 110 016
profsushil@gmail.com

Modeling Strategic Change
Sushil/IIT Delhi/2021
External Forces
Trigger Change
Inertial Forces
Retard Change
Managers Decipher
Their Environments
Revise Their Firms’
Strategic Postures
And Energize
Strategic Change
Phase 1:
Phase 2:
Phase 3:

Types of Strategic Change
Strategy
Business - level
Corporate - level
Collective - level
Change in configuration
To alter competitive advantage
To extend core capability
To broaden network of alliances

Producing Change
Implement change in:
Conduct
Capabilities
Controls
Culture
In order to:
Redefine vision
Reallocate resources
Modify systems
General commitment

External Triggers of Change
Environmental
sector
External trigger Pressure on firms on:
Economic  High rate of innovation Efficiency
 Linked global markets
Technological  Computerization Entrepreneurship
 Telecommunications
Social  Global demographics Ethics
 Moral/ecological damage
Political  Deregulation Equity
 Distribution of wealth

The Internal Features of Firms
Culture
Controls
Capabilities
Conduct

Culture
Controls
Capabilities
How Inertia and Momentum Crystallize
As corporate cultures As community-wide cultures
In structures and systems In professional rules and codes
In human skills and equipment As technological standards
In Single Firms In Business Communities

Why Firms Fail
Prior
Internal
Commitments
Prior
Strategic
Commitments
Strategic
Trajectory
Inertia Momentum
Social, Political,
Institutional
Pressures

Discerning and Interpreting Trends
Features of
Environments
Affect How
We Notice
Trends
Explain How We
Define Business
Competition
Explain How We
View Corporate
Synergy
Explain How We
Choose to Act
Collectively
Affect How
We Interpret
Trends
Characteristics
of Firms
Types of Top
Managers
Explain How
We Assess Our
Environments

Changes in Business Strategy
Firms competing through:
Timing
First mover
Imitator
Differentiation
Price
Quality
Responsiveness
Scope
Segmentation
Customization
Experiencing pressure to:
Protect R&D
Organize a more rapid response
Control costs
Improve quality and service
Show social and environmental awareness
Target narrower markets
Mass-customize

Fortress and Alliance Strategies
Key factors
Rate of environmental
change
Prevailing standards
Cost of capital
Corporate strategy
Business strategy
R&D capability
Fortress strategy
Low/moderate
Extensive
Low
Related
Innovation
High
Alliance strategy
High
Few
High
Unrelated
Imitation
Low

Strategic Decision Making
Leadership
Middle managers
Employees
Stakeholders
In stable environments
Dictatorial
Complaint
Obedient
Negotiated
In changing environments
Transformational
Empowered
Participative
Collaborative

Corporate Management Function
Corporate management function
Allocating resources
Planning
Control
Building strategic similarity in:
Time spans of projects
Sources of risk
Management skills required
Key success factors
Stage of industry life cycle
Competitive positions
Performance variables
Time horizons of targets
Measurement systems

Types of Collective Strategies
Capabilities
Controls
Culture
Strategic
targeting
Contributions
and donations
Interlocking
boards and trade
associations
Lobbying and
propaganda
Strategic
coordination
Intelligence
gathering
Contracts and
exchanges
Similarity of
backgrounds
Strategic
alliances
Licenses and
contracts
Shared equity
and joint
ventures
Consortia and
cartels

Strategic Alliances
License
Horizontal Shared Equity
Joint Venture Consortium
Vertical
Form of
Interdependence
Bilateral Multilateral
Form of Alliance

Determinants of a Company’s Culture
Characteristics of
Society
Type of Business
Community
Corporate Controls
and Capabilities
Company’s
Culture

Types of Corporate Culture
Reward
Systems
Educational
Systems
Socialization
Systems
Thin culture
Mostly $$$
Tied to bottom-line
No job security
Limited technical
training, mostly on the job
Limited social interaction
Low integration of work
with family and leisure
Thick culture
Extensive social support
Tied to core competencies
and to seniority
Extensive training and
communication
Emphasis on shared values
Extensive interaction
Psychological contract

Strategy, Culture, and Controls
Type of Strategy
Business Strategy:
Timing
Differentiation
Segmentation
Corporate Strategy:
Related
Unrelated
Collective Strategy:
Alliance
Fortress
Core
capability
Innovation
Value
Targeting
Synergy
Risk
Cooperation
Independence
Rewards
based on
Speed
Market Share
Profits
Reputation
Growth
Meet goals
Profits
Education
emphasizes
Research
Engineering
Marketing
Management
Finance
Negotiation
Planning
Socialization
encourages
Creativity
Productivity
Entrepreneurship
Integration
Control
Compromise
Conformity

Environmental Change and Structure
Environmental
trigger
Efficiency
Customer
Responsiveness
Technological
Change
Pressure to
improve:
Timing and
Productivity
Quality and
Service
Innovation
and Speed
Capabilities
Automate
Just-in-Time
Customize
Differentiate
Build Skills
Invest in R&D
Controls
Centralize
Specialize
Networking
De-layering
Flatten Pyramid
Decentralize

Changing Business-unit Structures
If business strategy is to:
Innovate
Differentiate
Customize
Pressure is to:
Decentralize Decisions
Encourage Networks
Centralize Decisions
Develop Specialists
Make Team Decisions
Remove Management Layers

Industry Globalisation Drivers
Market Drivers
Homogeneous Customer Needs - Understanding which aspects can be standardized
and which could be customized in the key.
Global Customers - buy on a centralized or coordinated basis for decentralized use
(e.g. National defence agencies).
Having a single global account manager make it easier for global customer for
single global price - the lowest price.
Global Channels - Global channels are rare - but region wide channels are
increasing.
(e.g. European grocery distribution and retailing)
Transferable Marketing - Brand names and advertising may be requiring little local
adaptation.

Cost Drivers
Economics of Scale and Scope - corresponding risks are rigidity and
vulnerability to disruption.
Electronics Industry
Cost of circuits have decreased - advantage goes to companies that can produce lowest
cost components. Size has become a major asset.
Thomson (France) - 1987 increased in operating scale and global coverage by acquiring
RCA television business from GE.
Learning and Experience - The steeper the learning and experience curves
greater the potential benefit.
Sourcing Efficiencies - Centralized purchasing
Contd…..

Himont - Global Polypropylene Market
Global coordination among manufacturing facilities in purchase of key raw material -
monomer
Favourable Logistics - A favourable ratio of sales value to transportation cost
enhances the ability to concentrate production. Other logistical factors are
non perishability
absence of time urgency
little need for location close to customer facilities.
Differences in Country Costs and Skills
Concentration in low-cost or high-skill countries - increase productivity and
reduce cost.
The danger is of training future offshore competitors.
Contd…..

Contd…..
Volkswagen
Hourly Labour cost Germany DM 40
Spain DM 20
Moved production of Polos from Wolfbury to Spain.
Product Development Costs - Developing few global or regional products
Ford Motor Company
Centres of Excellence program - to reduce duplication
Ford of Europe - Common platform for all compacts
Ford of NA - replacement of midsized Taurus and Sable

Governmental Drivers
Favourable Trade Policies - Import tariffs and quotas, non tariff barriers, export
subsidies, local content requirements, currency and capital flow restrictions,
requirements on technology transfer.
European Community - Banking and Financial Services
Decision to permit free flow of capital along member countries
Deutsche Bank had only 15 offices outside Germany - established major presence in
French market.
1987 - moved to Italian market by acquiring Bank of America’s 100 branches.
J.P. Morgan - US, Swiss Bank Corporation and SP Warburg Group - Britain - increased
their participation in major European markets.
Contd…..

Contd…..
Compatible Technical Standards - often standards are set with protectionism in
mind
(e.g. Motorola - electronics products excluded from Japanese market -
operated at a higher frequency than was permitted in Japan).
Common Marketing Regulations - Certain type of media may be prohibited or
restricted
(e.g. - US is for more liberal than Europe about advertising claims on TV.
British TV do not allow scenes of children pestering their parents to buy a
product).

Competitive Drivers
Inter dependence of Countries - When activities are shared among countries a
competitor’s market share in one country affects its scale and overall cost
position in the shared activities.
(e.g. companies promote product as “the leading brand in US”.)
Automobile Industry
Ford and Volkswagen- concentrate production and more competitive
Toyota - pressured to enter more markets to reach the volume. 1984-87 doubled
the number of cars for German market.
Contd…..

Contd…..
Globalized competitors - The need to preempt a global competitor can spur increased
market participation.
Unilever - European Consumer Product
Launched a hostile take over bid for Richardson - Vicks Inc.
Global archrival P&G saw the threat on its home turf and out bid Unilever.
With Richardson - Vicks European system P&G strengthened the European position.
Changes Over Time
European Major Appliance Industry
Globalisation forces seem to have reversed
1960s and 70s - regional standardization strategy was successful
1980s - the most successful strategies seem to be national

More than One Strategy is Viable
Industries vary across drivers
Hotel industry provides examples of successful global and successful local competitors.
Global effects are incremental
The appropriate use of strategy levers adds competitive advantage to existing sources
(e.g. technology).
Business and parent company position and resources are crucial
High initial investments are required to expand within or into major markets to develop
standardized products, to relocate value activities, to create global brands, to create new
organization units or coordination processes, and to implement other aspects.
(Chrysler - delocalize by selling of most of its international automotive business to
avoid bankruptcy)
Organizations have limitations
Organization structure, management processes, people and culture affect how well a
global strategy can be implemented.

Session I_ModellingSC1.ppt

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