Organization Development and Change

Chapter Nineteen: Competitive and Collaborative Strategies

Thomas G. Cummings Christopher G. Worley

Learning Objectives for Chapter Nineteen

To compare and contrast two different classes of strategic interventions: competitive and collaborative To describe two competitive strategy interventions: integrated strategic change and merger and acquisition integration To describe two collaborative interventions: forming alliances and developing networks
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-2

Organizational Environments
General Environment
Social, Technological, Economic, Ecological, and political forces

Task Environment
Customer and buyer power, rivalry among competitors, substitute products/services, and potential new entrants

Enacted Environment
Managerial perceptions and representations of the environment
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-3

Environmental Dimensions
Dynamism - the extent to which the environment changes unpredictably Complexity - the number of significant elements the organization must monitor Information Uncertainty - the extent to which environmental information is ambiguous Resource Dependence - the degree to which an organization relies on other organizations for resources
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-4

Environmental Dimensions and Organizational Transactions

Low Low Resource Dependence High
Minimal environmental constraint and need to be responsive to environment

Moderate constraint and responsiveness to environment

Information Uncertainty
Moderate constraint and responsiveness to environment Maximal environmental constraint and need to be responsive to environment
19-5

High
Cummings & Worley, 8e (c)2005 Thomson/South-Western

Competitive Strategies
Uniqueness
All organizations possess unique bundles of resources and processes that represent the source of competitive advantage

Value
Organizations that arrange their unique resources and processes to produce products or services that have value (low cost, desirable features)

Difficult to Imitate
Competitive advantage is sustainable when it is difficult to duplicate
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-6

Integrated Strategic Change (ISC)

Strategic Analysis Strategic Choice Designing the Strategic Change Plan Implementing the Strategic Change Plan

Cummings & Worley, 8e (c)2005 Thomson/South-Western

19-7

The Integrated Strategic Change Process

Strategy S1 Strategic Change Plan Implementation Strategy S2

Organization O1

Organization O2

Strategic Analysis
Cummings & Worley, 8e (c)2005 Thomson/South-Western

Strategic Choice
19-8

ISC Application Stages

Strategic Analysis
Assess the readiness for change and top managements ability to carry out change Diagnose the Current Strategic Orientation

Strategic Choice
Top management determines the content of the strategic change

Designing the Strategic Change Plan

Development of a comprehensive agenda to achieve the change

Implementing the Strategic Change Plan

Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-9

Mergers and Acquisitions

Merger - the integration of two previously independent organizations into a completely new organization Acquisition - the purchase of one organization by another for integration into the acquiring organization. Distinct from strategies for collaboration, such as alliances and networks, because at least one of the organizations ceases to exist.
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-10

Merger and Acquisition Rationale

Diversification Vertical integration Gaining access to global markets, technology, or other resources Achieving operational efficiencies, improved innovation, or resource sharing
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-11

Merger and Acquisition Application Stages

Pre-combination Phase
The organization must identify a candidate organization, work with it to gather information about each other, and plan the implementation and integration activities

Legal Combination Phase

The two organizations settle on the terms of the deal, gain approval from regulatory agencies and shareholders, and file appropriate legal documents

Operational Combination Phase

Implementing the operational, technical and cultural integration activities
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-12

Collaborative Strategies
Involve two or more organizations who agree to work together to achieve their objectives Align and coordinate organization strategies, goals, structures, and processes as they become interdependent Allow organizations to perform tasks that are too costly and complicated for single organizations to perform Also known as transorganizational systems, including alliances and networks
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-13

Alliance Interventions
When two organizations formally agree to pursue a set of goals There is sharing of resources, intellectual property, people, capital, technology, capabilities or physical assets Common alliances are licensing agreements, franchises, long-term contracts, and joint ventures
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-14

Alliance Intervention Application Stages

Alliance Strategy Formulation
Clarify the business strategy and why an alliance is needed

Partner Selection
Leverage similarities and differences to create competitive advantage

Alliance Structuring and Start-up

Build and leverage trust in the relationship

Alliance Operation and Adjustment

Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-15

Network Interventions
Involves three or more companies joined together for a common purpose Each organization in the network has goals related to the network as well as those focused on selfinterest Characterized by two types of change: creating the initial network (transorganizational development) and managing change within an established network
Cummings & Worley, 8e (c)2005 Thomson/South-Western 19-16

Application Stages for Transorganizational Development

Identification
Who should belong to the transorganizational System (TS)? Relevant skills, knowledge, and resources Key stakeholders Convention Should a TS be created? Costs and benefits Task perceptions Organization
How to organize for task performance? Communication Leadership Policies and procedures

Evaluation
How is the TS performing? Performance outcomes Quality of interaction Member satisfaction

Cummings & Worley, 8e (c)2005 Thomson/South-Western

19-17

Managing Network Change

Create instability in the network Manage the tipping point
The Law of the Few Stickiness The Power of Context

Rely on self-organization

Cummings & Worley, 8e (c)2005 Thomson/South-Western

19-18