Transcript Principles of Management - Harford Community College

Certification Study Group
Managing Change
The Nature of Organization
Change

Organization Change

Any substantive modification to some part
of the organization (e.g., work schedules,
machinery, employees).
 Forces of Change

External and Internal
The Nature of Organization
Change

Forces for Change


External forces in the organization’s
general and task environments that force
the organization to alter the way in which
it competes.
Internal forces inside the organization that
cause it to change its structure and
strategy; some internal forces are
responses to external pressures.
The Nature of Organization
Change
 Planned Change

Change which is designed and
implemented in an orderly and timely
fashion in anticipation of future events
 Reactive Change

Change which is a piecemeal response to
circumstances as they develop
Managing Change in
Organizations

Steps in the Change Process (Lewin Model)


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Unfreezing – Individuals must be shown why the
change is necessary.
Implementing change – The change itself is
implemented
Refreezing – Involves reinforcing and
supporting the change so
that it becomes a permanent
part of the system.
Recognition of the need for change
Establishment of goals for the change
Steps in
the
Change
Process
A Comprehensive
Approach to Change
Diagnosis of relevant variables
Selection of appropriate change technique
Planning for implementation of the change
Actual implementation
Evaluation and follow-up
Reasons for Resistance to
Change
Barney, Jay B. and
Ricky W. Griffin, The
Management of
Organizations.
Copyright © 1992 by
Houghton Mifflin
Company. Used with
permissions.
Resistance to Change
 Uncertainty about the extent and
effects of change.
 Threats to self-interests, power, and
influence.
 Different perceptions of change effects
and outcomes.
 Feelings of loss in disrupted social
networks, power, security, and
familiarity with existing procedures.
Overcoming
Resistance to
Change in
Organizations
Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by
Houghton Mifflin Company. Used with permissions.
Overcoming Resistance to
Change



Encourage active participation in the
change process.
Provide education and communication
about the change process.
Facilitate the change process by making
only necessary changes, announcing
changes in advance, and allowing time
to adapt to change.
Overcoming Resistance to
Change

Force-field analysis, in which the forces
for and against the change are
delineated and the forces against the
change are minimized, can be used to
reduce resistance to change.
Overcoming Resistance to
Change

Force-Field Analysis for Plant Closing at
General Motors
Reasons for Closing
Reasons Against Closing
Need to cut costs
Resistance from unions
Plant
Excess capacity
Outmoded production facilities
closing
Concern about worker welfare
Possible future needs
Figure 7.2
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Logical Thinking Patters
Characteristics of Inductive
Reasoning

Unlike deductive reasoning, Inductive
reasoning is not designed to produce
mathematical certainty. Induction occurs
when we gather bits of specific information
together and use our own knowledge and
experience in order to make an observation
about what must be true. Inductive reasoning
does not use syllogisms, but series of
observations, in order to reach a conclusion.
Characteristics of Inductive
Reasoning
Consider the following chains of observations:
Observation: John came to class late this
morning.

Observation: John’s hair was uncombed.
Prior experience: John is very fussy about
his hair.
Conclusion: John overslept
Characteristics of Deductive
Reasoning

A deductive argument offers two or
more assertions that lead automatically
to a conclusion. Though they are not
always phrased in syllogistic form,
deductive arguments can usually be
phrased as "syllogisms," or as brief,
mathematical statements in which the
premises lead inexorably to the
conclusion. The following is an example
of a sound deductive sullogism.
Characteristics of Deductive
Reasoning


Premise: All dogs have four legs.
Premise: Rover is a dog,
Conclusion: Rover has four legs.
Characteristics of Deductive
Reasoning

As long as the first two sentences in this argument
are true, there can be no doubt that the final
statement is correct--it is a matter of mathematical
certainty. Deductive arguments are not spoken of as
"true" or "false," but as "sound" or "unsound." A
sound argument is one in which the premises
guarantee the conclusions, and an unsound
argument is one in which the premises do not
guarantee the conclusions. A deduction can be
completely true, yet unsound. It can also be sound,
yet demonstrably untrue.
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Organizational Planning
Plans

By Level



Strategic
Tactical
Operational
Planning by Organizational
Level
Strategic
President and CEO
Tactical
Operational
Vice President
Operations
Vice President
Marketing
Vice President
Finance
Manager
Operations
Director
Advertising
Manager
Accounting
Time Frames for Planning

The Time Dimension of Planning




is based on the principle of commitment.
Planning must provide sufficient time to
fulfill the managerial commitments
involved.
Long-range Plans
Intermediate Plans
Short-range Plans
The Nature of Strategic
Management

Strategy


A comprehensive plan for accomplishing an
organization’s goals.
Strategic Management


A way of approaching business
opportunities and challenges
A comprehensive and ongoing
management process aimed at formulating
and implementing effective strategies.
The Components of Strategy

Distinctive Competence


Resource Deployment


Something an organization does exceptionally well.
How an organization will distribute
its resources across the areas in
which it competes.
Scope

Specifies the range of markets in which an
organization will compete.
Types of Strategic Alternatives
 Business-level Strategy

How the organization conducts business in
a particular industry.
 Corporate-level Strategy

The set of strategic alternatives that an
organization chooses from as it manages
its operations simultaneously across
several industries and several markets.
Types of Strategic Alternatives

Strategy Formulation


The set of processes involved in creating or
determining the organization’s strategies; it
focuses on the content of strategies.
Strategy Implementation

The methods by which strategies are
operationalized or executed within the
organization; it focuses on the processes
through which strategies
are achieved.
Formulation and Implementation
Across Strategic Alternatives
Corporate Strategy
Formulation
Decisions about which
markets to compete in
Business Strategy
Formulation
Decisions about how to
compete in each market
Functional Strategy
Formulation
Decisions about how to
address each function
within the organization
Implementation
Competing in the markets
via existing operations,
mergers, acquisitions, new
ventures, divestitures
Implementation
Carrying out the businesslevel strategies chosen for
each business
Implementation
Carrying out the functionallevel strategies chosen
for each business function
Mission
An organization’s fundamental purpose
SWOT Analysis
SWOT
Analysis
To formulate strategies that support the mission
Internal Analysis
Strengths
(distinctive
competencies)
External Analysis
Opportunities
Weaknesses
Strengths
 Weaknesses
 Opportunities
 Threats

Threats
Best Strategies
Those that support the mission and
• exploit opportunities and strengths
• neutralize threats
• avoid (or correct) weaknesses
Using SWOT Analysis to
Formulate Strategy

Evaluating Organizational Strengths

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Organizational strengths
Distinctive competencies
Sustained competitive advantage
Evaluating Organizational Weaknesses


Organizational weaknesses
Competitive disadvantage
Using SWOT Analysis to
Formulate Strategy

Evaluating an Organization’s
Opportunities and Threats

Organizational opportunities
are areas in the organization’s
environment that may generate
high performance.
Organizational threats are
areas in the organizations
environment that make it
difficult for the organization to
achieve high performance
Using a SWOT Analysis to
Formulate Strategy … An Example
Environmental
Analysis
Organizational
Analysis
Opportunities
Strengths
High growth in market
for low-cost lodging
Solid hotel business
Solid food services
Threats
Low growth in the
market for highcost lodging
Weaknesses
Poor performance in
cruise ship, travel
agency, and theme
parks
Weak cash position
Porter’s Generic Strategies



Differentiation strategy
Overall cost leadership strategy
Focus strategy
Porter’s Generic Strategies …
Examples
 Differentiation

Nordstrom’s
 Overall Cost Leadership

Wal-Mart
 Focus

Gucci
Strategies Based on Product
Life Cycle

The Product Life Cycle
High
Stages
Growth
Maturity
Decline
Sales Volume
Introduction
Low
Time
Figure 3.3
Strategies Based on the
Product Life Cycle

Product life cycle: a model that portrays
how sales volume for products changes
over the life of products.

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Introduction Stage
Growth Stage
Mature Stage
Decline Stage
Formulating Corporate – Level
Strategies – Base Concepts
Each business or set of businesses
within such a firm is frequently
referred to as a strategic business unit,
or SBU.
 Diversification



The number of businesses an
organization is engaged in
The extent to which these businesses are
related to one another
Formulating Corporate – Level
Strategies

Single Product Strategy


No diversification involved
Organization sells one product/service in
a single market
Formulating Corporate – Level
Strategies

Related Diversification

A strategy in which an organization operates in
several different businesses, industries, or
markets that are somehow linked.
Related Diversification

Bases of relatedness — bases include
common technology, common distribution
networks, common marketing skills,
common brand names and reputation, and
common customers.
Basis of Relatedness
Examples
Similar technology
Phillips, Boeing, Westinghouse, Compaq
Common distribution and marketing skills
RJR Nabisco, Phillip Morris, Procter & Gamble
Common name brand and reputation
Disney, Universal
Common customers
Merck, IBM, AMF-Head
Related Diversification

Advantages of Related Diversification


Reduces organization’s dependence on any
one of its business activities and thus
reduces economic risk.
Reduces overhead costs associated with
managing any one business through
economies of scale and economies of
scope.
Related Diversification

Advantages of Related Diversification


Allows an organization to exploit its
strengths and capabilities in more than one
business.
Synergy exists among a set of businesses
when the businesses’ value together is
greater than their economic value
separately.
Formulating Strategy Unrelated Diversification
 Unrelated Diversification

When an organization operates several
businesses that are not associated
 Advantages



Stable performance over time
Resource allocation spread over more than
one industry
Reduced business cycle risk
Formulating Strategy
Unrelated Diversification
 Disadvantages
 Strategy does not usually lead to high
performance due to the complexity of
managing a diversity of businesses
 Firms with unrelated strategies fail to exploit
important synergies, thus are at a competitive
disadvantage to firms with related
diversification strategies
 Most organizations have now abandoned
this strategy
Managing Diversification

Major Tools for Managing Diversification

Portfolio management techniques


Methods that diversified organizations use to
make decisions about what businesses to
engage in and how to manage these multiple
businesses to maximize corporate performance.
Two important portfolio management
techniques


The BCG Matrix
The GE Business Screen
BCG Matrix



Provides a framework for evaluating the
relative performance of businesses in
which a diversified organization
operates.
Uses two factors to evaluate a firm’s set
of businesses: market growth rate and
market share.
The matrix classifies the types of
businesses that a diversified firm can
engage in.
BCG Matrix



It helps managers to develop a better
understanding of how different strategic
business units contribute to the overall
organization.
By assessing each SBU on the basis of its
market growth rate and relative market
share, managers can make decisions about
whether to commit further financial resources
to the SBU or to sell or liquidate it.
SBU stands for …………………………….
The BCG Matrix
Market growth rate
High
Stars
Question
marks
Cash cows
Dogs
Low
High
Relative market share
Low
Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970.
BCG Matrix
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Dogs are businesses that have a very small
share of a market that is not expected to
grow.
Cash cows are businesses that have a large
share of a market that is not expected to
grow substantially.
Question marks are businesses that have only
a small share of a quickly growing market.
Stars are businesses that have the largest
share of a rapidly growing market.
GE Business Screen

A method of evaluating businesses
along two dimensions:



(1) industry attractiveness and
(2) competitive position
The GE Business Screen is a more
sophisticated approach to portfolio
management than the BCG Matrix
GE Business Screen

A method of evaluating business in a
diversified portfolio along two dimensions,
each of which contains multiple factors:



Industry attractiveness.
Competitive position (strength) of each firm in the
portfolio.
In general, the more attractive the industry
and the more competitive a business is, the
more resources an organization should
invest in that business.
Industry growth rate
The GE Business Screen
High
Winner
Winner
Question
mark
Medium
Winner
Average
business
Loser
Profit
producer
Loser
Loser
Good
Medium
Poor
Low
In general, the more
attractive the
industry and the
more competitive the
position, the more an
organization should
invest in a business.
Competitive position
Competitive position
Industry attractiveness
1. Market share
2. Technological know-how
3. Product quality
4. Service network
5. Price competitiveness
6. Operating costs
1. Market growth
2. Market size
3. Capital requirements
4. Competitive intensity
Tactical Planning
 An organized sequence of steps
designed to execute strategic plans
 Tactical plans are to battles what
strategy is to a war
 Strategy focuses on resources,
environment, and mission, whereas
tactics focus primarily on people and
action
Tactical Planning

Developing and Executing Tactical Plans
Developing tactical plans
Executing tactical plans
• Recognize and understand
• Evaluate each course of action
overarching strategic plans
and tactical goals
• Specify relevant resource and
time issues
• Recognize and identify human
resource commitments
in light of its goal
• Obtain and distribute
information and resources
• Monitor horizontal and vertical
communication and integration
of activities
• Monitor ongoing activities for
goal achievement
Operational Planning
 Single Use Plans – A plan that is not likely
to be used again in the near future.


Program plan
Project plan
 Standing Plans - a plan for activities that
recur regularly over a period of time



Policy
Standard Operating Procedure
Rules and Regulations
Contingency Planning
 The determination of alternative
courses of action to be taken if an
intended plan is unexpectedly
disrupted or rendered inappropriate.
The Contingency Planning
Process - An Ongoing Process
Action Point 1:
Develop plans, considering
contingency events
Action Point 2:
Implement plans and formally
identify contingency events
Action Point 3:
Specify contingency event
indicators and develop plans for
each event
Action Point 4:
Successfully complete each plan or
contingency plan