Strategic Choice

Strategic Choice
Selection of the Best Strategy ±
Ability of the proposed strategy to deal with strategic factors developed earlier in SWOT analysis. Ability of each alternative to satisfy agreed-on objectives with the least resources and the fewest negative side affects. 

Strategic choice 

Strategic choice is evaluation of alternative strategies and selection of the best alternative. The best strategic decisions are not arrived at through consensus. They actually involve a certain amount of heated disagreement and even conflict. 

Process of Strategic Choice .

Should dominant-product/service businesses diversify to build value and competitive advantage? What grand strategies are most appropriate? . What strategies are most effective at building sustainable competitive advantages for single business units? 2.Key Issues: Strategic Choice in Single Businesses 1.

Prominent Sources of Competitive Advantage (Porter·s 3 Generic Strategies) Cost leadership Differentiation Speed Market focus 6 Sources of competitive advantage .

7 Evaluating A Business·s Cost Leadership Opportunities A. Organizational Requirements Supporting Cost Leadership ‡ Tight cost control ‡ Frequent. Skills and Resources Fostering Cost Leadership ‡ Sustained capital investment and access to capital ‡ Process engineering skills ‡ Intense supervision of labor or core technical operations ‡ Products or services designed for ease of manufacture or delivery ‡ Low-cost distribution system B. usually quantitative targets . detailed control reports ‡ Continuous improvement and benchmarking orientation ‡ Structured organization and responsibilities ‡ Incentives based on meeting strict.

integrated information General administration cuts corporate overhead system reduces errors and costs Favorable long-term contracts. downtime. and accidents Reduced levels of management Computerized. online suppliers provide automatic restocking of orders based on sales Inbound logistics Procurement Subcontracted service technicians repair product correctly first time or bear costs Economy of scale in plant reduces equipment costs and depreciation Computerized routing lowers transportation expense Cooperative advertising with distributors creates local cost advantage in buying media space and time Marketing & sales Operations Outbound logistics . captive suppliers or key customer for supplier Global.8 Evaluating A Business·s Cost Leadership Opportunities -C. Examples of Ways Businesses Achieve Competitive Advantage Process innovations lowering production costs Product redesign to reduce number of components Technology development Human resource management Safety training for all employees reduces absenteeism.

9 Advantages of a Cost Leadership Strategy Low-cost advantages reduce likelihood of pricing pressure from buyers Sustained low-cost advantages may push rivals into other areas. lessening price competition New entrants must face an entrenched cost leader without experience to replicate cost advantages Low-cost advantages should lessen attractiveness of substitutes Higher margins allow low-cost producers to withstand supplier cost increases .

10 Key Risks of Cost Leadership Many cost-saving activities are easily duplicated Exclusive cost leadership can become a trap Obsessive cost cutting can shrink other competitive advantages involving key product attributes Cost differences often decline over time .

and creative people ‡ Tradition of closeness to key customers ‡ Some personnel skilled in sales and operations . Skills and Resources Fostering Differentiation ‡ ‡ ‡ ‡ ‡ ‡ ‡ Strong marketing abilities Product engineering Creative talent and flair Strong capabilities in basic research Corporate reputation for quality or technological leadership Long tradition in an industry or unique combination of skills Strong cooperation from channels and suppliers of major components B.technical and marketing .11 Evaluating A Business·s Differentiation Opportunities A. and marketing ‡ Subjective measurement and incentives instead of quantitative measures ‡ Amenities to attract highly skilled labor. product development. scientists. Organizational Requirements Supporting Differentiation ‡ Strong coordination among functions in R&D.

raising quality and image of final products Inbound logistics Careful inspection of products at each step in production to improve performance and lower defect rates Operations JIT coordination with buyers. work with suppliers¶ new product development activities Purchase superior quality. and replaced administration Quality control presence at key supplier facilities. wellknown components.12 Evaluating A Business·s Differentiation Opportunities -C. informative advertising and promotion to build brand image Procurement Allowing service personnel considerable discretion to credit customers for repairs Marketing & sales . serviced. personalized database to build knowledge of customers General to be used in customizing how products are sold. Examples of Ways Businesses Achieve Competitive Advantage Cutting edge production technology and product features to maintain a distinct image and actual product Programs to ensure technical competence of sales staff and marketing orientation of service personnel Technology development Human resource management Comprehensive. use of own or captive transportation service to ensure timeliness Outbound logistics Expensive.

13 Advantages of a Differentiation Strategy Rivalry is reduced when a business successful differentiates itself Buyers are less sensitive to prices for effectively differentiated products Brand loyalty is hard for new entrants to overcome .

rendering differentiation meaningless Technological changes that nullify past investments or learning Cost difference between low-cost competitors and the differentiated business becomes too great for differentiation to hold brand loyalty .14 Key Risks of Differentiation Imitation narrows perceived differentiation.

Creating a Competitive Advantage Based on Speed  15 Has become a major source of competitive advantage for many firms Involves the availability of a rapid response to customers by Providing current products quicker Accelerating new product development or improvement Quickly adjusting production processes Making decisions quickly  .

Organizational Requirements Supporting Rapid Response ‡ Strong coordination among functions in R&D. and marketing ‡ Major emphasis on customer satisfaction in incentive programs ‡ Strong delegation to operating personnel ‡ Tradition of closeness to key customers ‡ Some personnel skilled in sales and operations . product development.16 Evaluating A Business·s Rapid Response Opportunities A.technical and marketing ‡ Empowered customer service personnel . Skills and Resources Fostering Speed ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Process engineering skills Excellent inbound and outbound logistics Technical people in sales and customer service High levels of automation Corporate reputation for quality or technical leadership Flexible manufacturing capabilities Strong downstream partners Strong cooperation from suppliers of major components B.

17 Evaluating A Business·s Rapid Response Opportunities -C. include major buyers in the systems on a real-time basis Pre-approved. and production equipment to allow quick changeover to new or special orders Operations JIT delivery plus partnering with express mail services to ensure very rapid delivery Outbound logistics Use of laptops linked directly to operations to speed the order process and shorten the sales cycle Marketing & sales Procurement Locate service technicians at customer facilities that are geographically close . Examples of Ways Businesses Achieve Competitive Advantage Use of companywide technology sharing activities and autonomous product development teams to speed new product development Technology development Human resource management General administration Develop self-managed work teams and decision making at lowest levels to increase responsiveness Highly automated and integrated information processing system. online suppliers integrated into production Working very closely with suppliers to include their choice of warehouse location to minimize delivery time Inbound logistics Standardize dies. components.

or enhance its¶ position relative to its buyers Generates cooperation and concessions from suppliers since they benefit from increased revenues Substitutes and new entrants are trying to keep up with the rapid changes rather than introducing them . engender loyalty.18 Advantages of a Speed-Based Strategy SpeedCreates a way to lessen rivalry because firm has the availability of something a rival may not Allows firm to charge buyers more.

may not offer much advantage to a firm introducing some forms of rapid response . reorganization.stable. and/or reengineering Some industries . mature ones .19 Key Risks of a Speed-Based Strategy SpeedSpeeding up activities that have not been conducted in a fashion prioritizing rapid response should only be done after attention to training.

.Service Blueprinting It is a picture or a map that accurately portrays the service system so that different people involved in providing it can understand and deal with it objectively regardless of their roles from their individual point of view.

PROCESS SERVICE BLUEPRINT CONTACT PTS. and the evidence of service from the point of view of the customer. the points of customer contacts.Service Blueprinting It is a tool for simultaneously depicting the service process. EVIDENCE .

Service Blueprint of Luxury Hotel 4-22 .

Industry Environments and Strategy Choices 23 Emerging Industries Growth Industries Mature Industries Declining Industries Fragmented Industries Global Industries .

Ability to forecast future competitors . Ability to shape industry¶s structure 2. Ability to rapidly improve product quality 3.24 Strategic Options for Emerging Industries 1. Establish favorable relations with key suppliers 4. Acquire a core group of loyal customers 6. Ability to establish technology as dominant force 5.

Expand internationally 25 . Emphasize process innovation 3. Focus on selecting loyal buyers 5. Pursue horizontal integration 6. Prune the product line 2.Strategic Options for Maturing Industries 1. Emphasize cost reductions 4.

Emphasize product innovation and quality improvement 3. Gradually harvest the business 26 .Strategic Options for Mature/Declining Industries 1. Focus on key market segments offering growth opportunities 2. Emphasize production and distribution efficiency 4.

Formula facilities .27 Strategic Options for Fragmented Industries 1. type of order. customer type. low-cost facilities at multiple locations 3. local autonomy 2. Tightly managed decentralization .Standardized. Specialization .Intense low margin competition (low overhead. minimum wages.Product type. high personal service.Intense local coordination. Bare bones/no frills . efficient.Difficult to differentiate products/services 4. tight cost controls) . Increased value added . geographic areas 5.

28 Characteristics of Global Industries  Differences in prices and costs among countries due to Currency exchange fluctuations Differences in wage and inflation rates Other economic factors Differences in buyer needs across countries  Differences in competitors and ways of competing among countries  Differences in trade rules and governmental regulations across countries  .

License foreign firms to produce and distribute a firm¶s products 2. Maintain a domestic production base and export products 3. Establish foreign-based plants and distribution in foreign countries .29 Strategic Options: Pursuing Global Market Coverage 1.

Global focus strategy 3. Protected niche strategy . National focus strategy 4.30 Strategic Options: Choosing a Generic Competitive Strategy 1. Broad-line global competition 2.

31 Grand Strategy Selection Matrix Overcome weaknesses Internal (redirected resources within the firm) Turnaround or retrenchment Divestiture Liquidation Vertical integration Conglomerate diversification External (acquisition I or merger for resource IV capability) Horizontal integration Concentric diversification Joint venture II III Concentrated growth Market development Product development Innovation Maximize strengths .

Conglomerate diversification diversification 4. Concentrated growth 2. Horizontal integration 3. Conglomerate 3.32 Model of Grand Strategy Clusters Rapid market growth 1. Liquidation Strong Weak I II competitive competitive position position IV III 1. Divestiture 3. Turnaround or retrenchment diversification 2. Joint venture 5. Divestiture 4. Concentric 1. Vertical integration 3. Liquidation Slow market growth 1. Concentric diversification 2. Concentric diversification . Reformulation of concentrated growth 2.

and risks of each source of competitive advantage Considering unique effects of the generic industry environment on a firm¶s value chain activities . resources. organizational requirements. consistent commitment Selection of appropriate business strategie(s) involves Weighing skills.33 Conclusion: Selecting a Business Strategy to Achieve a Competitive Advantage Focusing on key sources of competitive advantage requiring total.

Chapter 4 Strategy Implementation .

Inter relationship between strategy formulation and implementation     Some says it is one and same Some says it is distinctive The others says it is inter-related Successful strategy formulation does not guarantee successful strategy implementation   Strategy formulation is similar for different types of organizations but strategy formulation varies among different types & sizes of organizations Strategy formulation affects an organization from top to bottom. it affects all the functional and divisional areas of an organization .

Strategic formulation     It is largely an intellectual process and where as strategic implementation is more operational character (Fred David) Strategic formulation requires good conceptual. integrative and analytical skills but strategy implementation requires special skills in motivating and managing others. Strategy formulation occurs primarily at corporate level of an organisation while strategy implementation is permeates all hierarchical levels. Both are interdependent .

Implementation    Formulation positions forces before the action Implementation manages forces during the action Formulation focuses on effectiveness Implementation focuses on efficiency Formulation is primarily an intellectual process Implementation is primarily an operational process Formulation requires good intuitive and analytical skills Implementation requires special motivational and leadership skills          Formulation requires coordination among a few individuals => Implementation requires coordination among many individuals  .Nature of Strategy Implementation Formulation vs.

Nature of Strategy Implementation Examples of implementation activities        Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Modifying advertising strategies Building new facilities .

Nature of Strategy Implementation Management Perspectives  Shift in responsibility Division or Functional Managers Strategists .

and insurance  Sam Walton opens first WalMart with focus on low-prices Diz zyin g gro wth  Perfects model. driven by endbased locations and companycontrolled factories Experts believe Sears way was the only way to compete ³The paragon of retailers´   Financial trouble. Sam Walton  Invests $500 million in inventory management technology . investments. grows. expands into new markets (international) and store concepts (Sam¶s clubs)  1962 1970   1980  2000  30 stores located in ³one-horse towns which everybody else was ignoring´. real estate services. sells off all non-retail businesses  Acquired by KMart 1970  1891  1924  1960  1980  1990  2000 2005  A Firm¶s performanc e is directly related to the quality of its strategy and its competency in implementin g it  Moves into onpremise retailing/General Robert Wood takes over   Expands into banking.A TALE OF TWO STORES   Sears launch es catalog busine ss   Takes control of production and distribution Rapid growth.

lowSears initiated restructuring in 1992 after losing $3. and Kids-R-Us took market share.8 billion. KSpecialty retailers (focused differentiators) such as The Gap. The Limited. Toys-R-Us. . ToysKidsSears was outperformed by both low-cost and focused differentiators. Sears retail unit fell to #3 behind low-cost providers (Walmart lowand K-Mart).Strategy Implementation Sears example In 1983 Sears implements one-stop shopping banking-financial onebankingservices power.

Strategy Implementation
Sears example What happened? Why did Sears fail so dramatically? - Lost ability to control core business (too diversified). - Resources were taken from retail and given to new ventures. - Managers spent too much time on diversified businesses. - Managed retail segment using financial controls. - Sears suffered from post-merger drift. post- Lost operational understanding of the competitive dynamics in the retail industry.

TWO RETAILERS AT A GLANCE  

Sears
1891  

Wal-Mart
1962 600 5289 $1,643 million $285,222 million $55 M(3.3% return on sales) $10,267 M (3.6% return on sales) USD 1 billion USD 200.2 billion

Year founded  

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Stores 1980 Stores 2004 Revenues 1980 Revenues 2004 Net profits 1980 Net profits 2004 

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864 2026 $25,194 million $36,100 million 606M (2.4% return on sales) 507M (-1.4% return on sales) 

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‡ 

‡ 

‡ 

‡

‡

‡ ‡ 
 

‡

Market capitalization 1980 Market capitalization 2004 



USD 4.8 billion USD 12.2 billion

A TALE OF TWO RETAILERS ² PERFORMANCE MEASURES 

USD millions

the formulation of a good strategy and its implementation should be inextricably connected Z To  Strategic leadership is responsible for making substantive resource allocation decisions and developing keystakeholder support of the strategy   leadership is essential if a firm is able to both formulate and imple-ment strategies that create value Strategic  We need to see a firm¶s competitive position. but as an ongoing movie . not as a snapshot. yet many managers give too little thought to implementation X and industries are dynamic in nature Firms succeed.THREE OVERARCHING THEMES Y  Implementing a good strategy is at least as important as creating one.

STRATEGY  Strategos: ³the general¶s view´  General  Holistic ³big picture´  Lower officer (e.. heavy armored vehicles)  Tactical details .g. supply logistics infantry.

integrated.THE STRATEGIC MANAGEMENT PROCESS  Strategic analyses Internal External  Strategy Arenas Vehicles Differentiators Staging Economic logic  Vision and mission Fundamenta l organization al purpose   Implementat ion levers  and Organizatio nal values The central. externally oriented concept of how a firm will achieve its objectives  Strategic leadership .

QUESTIONS OF CORPORATE-LEVEL AND BUSINESS-LEVEL STRATEGY Unit of measure  Corporate-level strategy should ask In which markets do we compete today? In which markets do we want to compete tomorrow? How does our ownership of a business ensure its competitiveness today and in the future? ? Business-level strategy should ask` How do we compete in this market today? How will we compete in this market in the future? ? .

systems.STRATEGY AND IMPLEMENTATION ITERATE   WAL-MART EXAMPLE  Strategy : The process of deciding what to do  Compete as discount retailer in rural markets  Leverage inventory and sourcing systems to be lowcost leader  Implementati on: The process of performing all the activities necessary to do what has been planned   Invest heavily in organizational structure. and processes .

RandomAccess Memory Chips (DRAM)    Focus on microprocessor segment By 1984.UNPLANNED ACTIONS CAN DRIVE STRATEGY  Intel¶s original focus (1970s & 1980s) Design and manufacture of Dynamic. a Japanese calculator maker . 95% of Intel revenue came from the microprocess or segment  Unplanned experimenta l venture to make microproces sors for Busicom.

BUSINESS STRATEGY DIAMOND  Arenas Where will we be active? ( and with how much emphasis?)   Arenas       Staging What will be our speed and sequence of moves?   Which product categories? Which channels? Which market segments? Which geographic areas? Which core technologies Which value-creation strategies?    Staging Economic logic  Vehicles Vehicles How will we get there?     Speed of expansion? Sequence of initiatives  Economic logic How will returns be obtained?   Differentiators   Internal development? Joint ventures? Licensing/franchising? Experimentation? Acquisitions? Differentiators How will we win?          Lowest costs through scale advantages? Lowest costs through scope and replication advantages Premium prices due to unmatchable service? Premium prices due to proprietary product features? Image? Customization? Price? Styling? Product reliability? Speed to market? .

satellite TV) Differentiators  Strategy Grow from one route between two cities to serving 20 cities in just 3 years Economic logic Secure cost advantage by being willing and able to perform key tasks differently    One type of plan JFK home base Secondary location ..e.. leather seating. do not purchase a regional airline) Objective To ³bring Humanity back to air travel´ High level of service compared to low fare competitors (e.g.JET BLUE STRATEGY Low fare commercial air carrier Underserved but over-priced US cities  Arenas  Vehicles Start from scratch and achieve all growth internally (i.

GOALS OF STRATEGY IMPLEMENTATION 1 To make sure strategy formulation is comprehensive and well informed translate good ideas into actions that can be executed (and sometimes to use execution to generate or identify good ideas) 2 To .

IMPORTANCE OF EXECUTION  ³The important decisions. the decisions that really matter. . are strategic . [But] more important and more difficult is to make effective the course of action decided upon. .´  ± Peter Drucker .

and resource-allocation decisions Decision support among stakeholders .FRAMEWORK FOR STRATEGY IMPLEMENTATION  Key Factors  of Strategy Implementation Realized  and Emergent Strategies Implementation levers Organizational structure Systems and processes    Intended Strategy  People and rewards   Strategic leadership Lever.

It includes the organization¶s authority structure. Competitive advantage is generally tied to your human resources. and distribution The people and rewards lever points to the importance of using all organization members to implement a strategy. and people are organized. rewards ± how you pay your people ± can accelerate the implementation of your strategy or undermine it  and processes Systems  People and rewards . budgeting. resource-allocation procedures. tasks. Successful implementation depends on having the right people and then developing and training them in ways that support the firm¶s strategy. divisions. hierarchy. and coordinating mechanisms Systems are all the organizational processes and procedures used In daily operations.IMPLEMENTATION LEVERS Implementation levers  Organizational Description structure Structure is the manner in which responsibilities. information systems. units. These include control and incentive systems. In addition.

COMPETITIVE ADVANTAGE  Competitive Advantage: a Firm¶s ability to create value in a way that its rivals cannot  Key question: how do Firms create sustained aboveaverage returns? .

Companies should therefore either (1) position themselves to compete in attractive industries or (2) adopt strategies that will make their current industries more attractive Suggests that in dynamic. rapidly changing markets. This advantage makes it relatively easier to achieve consistently higher levels of performance Also called the ³positional view´. a firm¶s current market position is not an accurate prediction of future performance. contends that variations in a firm¶s competitive advantage and performance are primarily a function of industry attractiveness.THREE PERSPECTIVES OF COMPETITIVE ADVANTAGE  Internal   External   Dynamic  Often called the ³resource view´. Instead. contends that firms are heterogeneous bundles of resources and capabilities and firms with superior resources and capabilities enjoy competitive advantage over other firms. we look at the past for clues about how the firm arrived at its current position and to future trends ± both internal and external ± in an effort to predict the future landscape .

1 Understand what a strategy is and identify the difference between business-level and corporate-level strategy the relationship between strategy formulation and implementation Understand Describe 2 3 the determinants of competitive advantage 4 Recognize the difference between a fundamental and a dynamic competitive advantage why we study strategic management 5 Understand ..So«.

Management Issues Annual Objectives Policies Resources Management Issues Organizational structure Restructuring Rewards/Incentives .

division.Directly involve all managers in the organization Purpose of Annual Objectives -Basis for resource allocation Mechanism for management evaluation Metric for gauging progress on long-term objectives Establish priorities (organizational. & departmental) .Management Issues: Annual objectives -.Decentralized activity -.

Management Issues Annual objectives Issues: Consistency of Annual Objectives -- Across hierarchical levels Horizontally consistent Vertically consistent .

Management Issues Annual objectives Issues: Requirements of Annual Objectives: Measurable Consistent Reasonable Challenging Clear Understood Timely Annual Objectives Should State: Quantity Quality Cost Time Be Verifiable .

Management Issues (cont¶d) Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources Management Issues .

Management Issues: Structure Matching Structure with Strategy Changes in strategy = Changes in structure  Structure dictates how objectives & policies will be established  Structure dictates how resources will be allocated .

Chandler¶s Strategy-Structure Relationship New strategy Is formulated New administrative problems emerge Organizational performance declines Organizational performance improves New organizational structure is established .

Management Issues: Structure Basic Forms of Structure  Functional Structure  Divisional Structure  Strategic Business Unit Structure (SBU)  Matrix Structure .

Advantages: Employees . Few rules.Rapid product introduction .Few coordination problems .Strategy Implementation  Organization Structures Simple Structure President OwnerOwner-manager makes decisions.Provides high flexibility . Little specialization of tasks. little formalization.

 Organization structure Functional structure President Accounting Legal Affairs HRM Finance Marketing R&D Production .

Enhances operating efficiency where tasks are routine Disadvantages .Promotes in-depth functional expertise in.Functional coordination problems .Hinders development of cross-functional experience cross.Strategy Implementation  Organization structure Functional structure Advantages .Overspecialization and narrow viewpoints .Inter-functional rivalry Inter.Centralized control of operations .Slower to respond in turbulent environments .

 Organization structure ProductProduct-divisional structure President Government Affairs Corporate Human Resources Legal Affairs Corporate R&D Lab Strategic Planning Corporate Marketing Corporate Finance Product Division Product Division Product Division Product Division Product Division .

Strategy Implementation  Organization structure ProductProduct-divisional structure Organization based on products versus functions Each division is a separate business in which day-to-day day-todecisions are delegated to divisional managers. Overdiversification leads to inability to process detailed information and a reliance on financial controls to evaluate managers. Divisions are managed using strategic controls detailed knowledge of firm operations allows managers to remain actively involved. .

Facilitates rapid response to environmental changes .May lead to costly duplication of functions .Puts profit/loss accountability on managers .Allows efficient management of a large number of units Disadvantages .Inter-divisional rivalry Inter.Each business is organized around products .Corporate managers may lose in-depth understanding in- .Strategy Implementation  Organization structure ProductProduct-divisional structure Advantages .Decentralized decision making .

Matrix Structure President R&D Production Marketing Finance Business Project Business Project Business Project Specialists Specialists Specialists Specialists Specialists Specialists Specialists Specialists Specialists Specialists Specialists Specialists .

Strategy Implementation  Organization structure Matrix structure Contains aspects of both functional and product-divisional productstructures.Difficult to respond rapidly . .May promote bureaucracy and reduce innovation (in large firms).Encourages cooperation and consensus building Disadvantages: . Advantages: .Shared authority increases communication time .Promotes holistic view of the firm .Creates checks and balances between competing viewpoints .Very complex and costly .

Asymmetric information . Advantages: .Very flexible .Asset hold-up hold- Partner Partner .Trustworthiness of partners .Technology expropriation .Rapid response time Partner Partner Focal Firm .Firm s emphasize their own core competencies .Strategy Implementation Network structure Group of firms combine resources to achieve together what they can t achieve alone.Reduces capital intensity Disadvantages .

Management Issues Annual Objectives Policies Resources Organizational structure Restructuring Rewards/Incentives Management Issues .

divisions and/or units. number of employees. and the number of hierarchical levels Downsizing Rightsizing Delayering .Management Issues: Restructuring Restructuring often involves reducing the size of the firm.

Management Issues: Restructuring Reengineering: Reconfiguring or redesigning work. jobs. and speed Process management Process innovation Process redesign . and processes to improve cost. service. quality.

Management Issues Annual Objectives Policies Resources Organizational structure Restructuring Rewards/Incentives Management Issues .

Management Issues: Pay/performance linkage Linking Pay/Performance to Strategies involves the question: how can an organization¶s reward system be more closely linked to performance? Dual bonus systems: short-/long-term Profit sharing systems: direct linkage to profitability Gain sharing systems: linkage to achievement of targets and/or exceeding them .

Tests for Performance-Pay Plans Does the plan capture attention? Do employees understand the plan? Is the plan improving communication? Does the plan pay out when it should? Is the company or unit performing better? 82 .

Management Issues (cont¶d) Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources Management Issues .

Management Issues: managing resistance to change Resistance to change is the single greatest threat to successful strategy implementation Change raises anxiety or fear concerning: Economic loss Inconvenience Uncertainty Break in status-quo .

Management Issues managing Issues: resistance to change Change Strategies Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy .

Management Issues (cont¶d) Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources Management Issues .

Management Issues: Natural environment -.Wide appreciation for firms that ³mend´ rather than ³harm´ the environment Natural Environment ± Environmental Strategies: Develop/acquire ³green´ businesses Divesting environmental-damaging business Low-cost producer through waste minimization & energy conservation .

Management Issues (cont¶d)
Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources

Management Issues

Management Issues
Strategy-Supportive Culture

Preserve, emphasize, and build upon aspects of existing culture that support new strategies

Management Issues: Supportive culture
Elements linking culture to strategy:
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Formal statements of philosophy, charters, etc. used for recruitment and selection, socialization Designing of physical spaces, facades, buildings Deliberate role modeling, teaching and coaching Explicit reward and status system, promotion criteria Stories, legends, myths about key people and events What leaders pay attention to, measure and control Leader reactions to critical incidents and crises How the organization is designed and structured Organizational systems and procedures Criteria used for recruitment, selection, promotion, retirement

90

Management Issues (cont¶d) Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources Management Issues .

Management Issues: Production/operations concerns Production processes typically constitute more than 70% of firm¶s total assets Production/Operations Decisions: Plant size Inventory/Inventory control Quality control Cost control Technological innovation .

Management Issues (cont¶d) Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources Management Issues .

outsource.Management Issues Human Resource Concerns HR manager position has strategic responsibility and has changed dramatically as companies continue to reorganize. . etc.

Management Issues Human Resource Strategic Responsibilities Assessing staffing needs/costs Developing performance incentives ESOP¶s Child-care policies Work-life balance issues .

Benefits of a Diverse Workforce              Improves corporate culture Improves employee morale Leads to a higher retention of employees Leads to easier recruitment of employees Decreases complaints and litigation Increases creativity Decreases interpersonal conflict Enables the organization to move into emerging markets Improves client relations Increases productivity Improves the bottom line Maximizes brand identity Reduces training costs .

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