MBA MCO101 Unit 5 Lecture 6 200806xx


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MBA MCO101 Unit 5 Lecture 6 200806xx

  1. 1. Unit 5: Organisational Structure and Strategy
  2. 2. Managing Expectations <ul><li>LEARNING OUTCOMES: </li></ul><ul><li>At the end of the course, students will be able to: </li></ul><ul><ul><li>Explain fundamental concepts and principles of management including the basic roles, skills, and functions of management </li></ul></ul><ul><ul><li>Discuss the knowledgeable of historical development, theoretical aspects and practice application of managerial process </li></ul></ul><ul><ul><li>Examine the environment, technology, human resources, and organisations in order to achieve high performance </li></ul></ul><ul><ul><li>Discuss the ethical dilemmas faced by managers and the social responsibilities of businesses. </li></ul></ul>
  3. 3. Managing Expectations <ul><li>SUBJECTS DISCUSSED: </li></ul><ul><ul><li>Management, Managers and evolution of Management theory </li></ul></ul><ul><ul><li>Personality traits and diversity </li></ul></ul><ul><ul><li>Organisation, Globalisation and the resulting environments </li></ul></ul><ul><ul><li>Decision-making and Planning </li></ul></ul><ul><ul><li>Structure and Strategy </li></ul></ul><ul><ul><li>Executing and Controlling </li></ul></ul><ul><ul><li>Human Resources Management as a function </li></ul></ul><ul><ul><li>Motivation, Leadership, Groups and Teams </li></ul></ul><ul><ul><li>Communication, conflicts and politics </li></ul></ul><ul><ul><li>Operations Management. Entrepreneurship. Innovation </li></ul></ul>
  4. 4. Managing Expectations <ul><li>TOPIC DETAILS: </li></ul><ul><li>After going through UNIT 5, you should be able to: </li></ul><ul><ul><li>describe the departmentalisation approach to organisational structure. </li></ul></ul><ul><ul><li>explain organizational authority. </li></ul></ul><ul><ul><li>discuss the different methods for job design. </li></ul></ul><ul><ul><li>explain the methods that companies are using to redesign international organisational processes (intra-organisational processes). </li></ul></ul><ul><ul><li>describe the methods that companies are using to redesign external organisational processes (inter-organisational processes). </li></ul></ul><ul><ul><li>indicate the components of sustainable competitive advantage and explain why it is important. </li></ul></ul><ul><ul><li>describe the steps involved in the strategy-making process. </li></ul></ul><ul><ul><li>explain the different kinds of corporate-level strategies. </li></ul></ul><ul><ul><li>describe the different kinds of industry-level strategies. </li></ul></ul><ul><ul><li>explain the components and kinds of firm-level strategies. </li></ul></ul>
  5. 5. Organisational Structure <ul><li>Organisational Structure </li></ul><ul><li>The vertical and horizontal configuration of departments, authority, and jobs within a company. </li></ul><ul><li>Organisational Process </li></ul><ul><li>The collection of activities that transform inputs into outputs that customers value. </li></ul>a b c d
  6. 6. Designing Organisational Structures Customer Geographic Matrix Functional Product
  7. 7. Organisational Authority <ul><li>The vertical line of authority in an organisation </li></ul><ul><ul><li>Clarifies who reports to whom </li></ul></ul><ul><ul><li>Unity of command </li></ul></ul><ul><ul><li>workers report to only one boss </li></ul></ul><ul><ul><li>matrix organisations violate this principle </li></ul></ul>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 Delegation of Authority Degree of Centralisation Chain of Command Line versus Staff Authority
  8. 8. Why study job design? Every manager must know the relationship between how organisation being structured, the job within and the linkages to organisational processes
  9. 9. Job design Specialised Jobs Job Rotation, Enlargement, Enrichment Job Characteristics Model <ul><li>A job that is a small part of a larger task or process </li></ul><ul><li>Jobs are simple, easy to learn, and economical </li></ul><ul><li>Can lead to low satisfaction, high absenteeism, & employee turnover </li></ul><ul><li>Job Rotation: periodically moving workers from one specialised job to another </li></ul><ul><li>Job Enlargement: increasing the number of tasks performed by a worker </li></ul><ul><li>Job Enrichment: adding more tasks and authority to an employee’s job </li></ul><ul><li>A job redesign approach: that seeks to increase employee motivation </li></ul><ul><li>Emphasizes internal motivation: experience work as meaningful, experience responsibility for work outcomes, knowledge of results </li></ul>
  10. 10. Job Characteristics Model
  11. 11. Intra-organisational Processes Reengineering Empowerment Behavioural Informality
  12. 12. Intra-organisational Processes Reengineering <ul><li>The fundamental rethinking and radical redesign of business processes </li></ul><ul><li>Intended to achieve dramatic improvements in performance </li></ul><ul><li>Change the orientation from vertical to horizontal </li></ul><ul><li>Changes task interdependence </li></ul>
  13. 13. Intra-organisational Processes Empowerment <ul><li>Empowerment: Permanently passing decision-making authority and responsibilities from managers to workers by giving them the information and resources they need to make good decisions </li></ul><ul><ul><li>A feeling of intrinsic motivation </li></ul></ul><ul><ul><li>Workers perceive meaning in their work </li></ul></ul><ul><ul><li>Employees are capable of self-determination </li></ul></ul>
  14. 14. Intra-organisational Processes Behavioural Informality <ul><li>Behavioural Informality </li></ul><ul><ul><li>Spontaneity </li></ul></ul><ul><ul><li>Casualness </li></ul></ul><ul><ul><li>Interpersonal familiarity </li></ul></ul><ul><li>Behavioural Formality </li></ul><ul><ul><li>Routine & regimen </li></ul></ul><ul><ul><li>Specific behaviour rules </li></ul></ul><ul><ul><li>Impersonal detachment </li></ul></ul>Casual dress code Open Offices Popular ways to increase behavioral informality
  15. 15. Inter-organisational Processes Modular Organisations Virtual Organisations
  16. 16. Inter-organisational Processes Modular Organisations
  17. 17. Inter-organisational Processes Modular Organisations <ul><li>Advantages: </li></ul><ul><ul><li>can cost less to run than traditional organisations </li></ul></ul><ul><ul><li>lets organisations focus on core competencies </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>loss of control from outsourcing </li></ul></ul><ul><ul><li>may reduce their competitive advantage </li></ul></ul>
  18. 18. Inter-organisational Processes Virtual Organisations
  19. 19. Inter-organisational Processes Virtual Organisations <ul><li>Advantages: </li></ul><ul><ul><li>let companies share costs </li></ul></ul><ul><ul><li>fast and flexible </li></ul></ul><ul><ul><li>being the “best” should provide better products </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>difficult to control the quality of partners </li></ul></ul><ul><ul><li>requires tremendous management skills </li></ul></ul>Case study:
  20. 20. 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?
  21. 21. Basics of Organisational Strategy Resources The assets, capabilities, processes, information, and knowledge that the organization controls Competitive Advantage Providing greater value for customers than competitors can Sustainable Competitive Advantage A competitive advantage that other companies have tried unsuccessfully to duplicate
  22. 22. Requirements for Sustainable Competitive Advantage Sustainable Competitive Advantage Valuable Resources Non- Substitutable Resources Imperfectly Imitable Resources Rare Resources
  23. 23. Strategy-Making Process Assess need for strategic change Conduct a Situational Analysis Choose Strategic Alternatives
  24. 24. 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 for strategic change
  25. 25. Situational Analysis Conduct a Situational Analysis Strengths Weaknesses <ul><li>Distinctive Competence </li></ul><ul><li>Core Capability </li></ul>INTERNAL Opportunities Threats <ul><li>Environmental Scanning </li></ul><ul><li>Strategic Groups </li></ul><ul><li>Shadow-Strategy Task Force </li></ul>EXTERNAL
  26. 26. 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
  27. 27. Strategic Reference Points Choose Strategic Alternatives
  28. 28. Corporate-Level Strategies Corporate-Level Strategy The overall organizational strategy that addresses the question “What business(es) are we in or should we be in?” <ul><li>Acquisitions, unrelated diversification, related diversification, single businesses </li></ul><ul><li>BCG Matrix </li></ul><ul><ul><li>Stars </li></ul></ul><ul><ul><li>Question marks </li></ul></ul><ul><ul><li>Cash cows </li></ul></ul><ul><ul><li>Dogs </li></ul></ul>PORTFOLIO STRATEGY <ul><li>Growth </li></ul><ul><li>Stability </li></ul><ul><li>Retrenchment/ recovery </li></ul>GRAND STRATEGIES
  29. 29. Corporate-Level Strategies BGC Matrix Relative Market Share Market Growth Small Large Low High Stars companies with a large share of a fast-growing market Dogs companies with a small share of a slow-growing market Cash Cows companies with a large share of a slow-growing market Question Marks companies with a small share of a fast-growing market
  30. 30. Corporate-Level Strategies Diversification & Risk Risk Low High Single Business Related Diversification Unrelated Diversification Relationship Between Diversification and Risk
  31. 31. Corporate-Level Strategies Portfolio Strategy <ul><li>Problems with Portfolio Strategy </li></ul><ul><li>Unrelated diversification does not reduce risk. </li></ul><ul><li>Present performance is used to predict future performance. </li></ul><ul><li>Cash cows fail to aggressively pursue opportunities and defend themselves from threats. </li></ul><ul><li>Being labeled a “cash cow” can hurt employee morale. </li></ul><ul><li>Companies often overpay to acquire stars. </li></ul><ul><li>Acquiring firms often treat stars as “conquered foes.” </li></ul>
  32. 32. Corporate-Level Strategies Grand Strategies Growth Strategy focuses on increasing profits, revenues, market share, or number of places to do business Stability Strategy focuses on improving the way in which the company sells the same products or services to the same customers Retrenchment Strategy focuses on turning around very poor company performance by shrinking the size or scope of the business
  33. 33. Industry-Level Strategies Five Industry Forces Positioning Strategies Adaptive Strategies
  34. 34. Industry-Level Strategies Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitutes Threats of New Entrants Character of Rivalry Porter’s Five Industry Forces
  35. 35. Industry-Level Strategies Focus Strategy Positioning Strategies Cost Leadership Differentiation
  36. 36. Industry-Level Strategies Adaptive Strategies <ul><li>Defenders </li></ul><ul><li>seek moderate growth </li></ul><ul><li>retain customers </li></ul><ul><li>Prospectors </li></ul><ul><li>seek fast growth </li></ul><ul><li>emphasise risk taking innovation </li></ul><ul><li>Analysers </li></ul><ul><li>blend of defender & prospector strategies </li></ul><ul><li>imitate other’s successes </li></ul><ul><li>Reactors </li></ul><ul><li>use an inconsistent strategy </li></ul><ul><li>respond to changes </li></ul>
  37. 37. Firm-Level Strategies DIRECT COMPETITION Market commonality Resource similarity STRATEGIC MOVES OF DIRECT COMP. Attack Response ENTREPRENEURIAL INTRAPRENEURIAL ORIENTATION Autonomy Innovativeness Risk taking Proactiveness Competitive Aggressiveness
  38. 38. Firm-Level Strategies <ul><li>Response : A competitive countermove, prompted by a rival’s attack, to defend or improve a company’s market share or profit. </li></ul><ul><ul><li>Match or mirror your competitor’s move. </li></ul></ul><ul><ul><li>Respond along a different dimension from your competitor’s move or attack. </li></ul></ul>Attack : A competitive move designed to reduce a rival’s market share or profits. Market Commonality Resource 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
  39. 39. Strategic Moves of Direct Competition Competitor Analysis Interfirm 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
  40. 40. 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