CHAPTER 3:

WHAT IS THE BEST WAY FORWARD

FOR THE ORGANIZATION?
 LEARNING OBJECTIVES

• Asses the options generated for each business in the context of the corporate whole.

• Identify the features of the change option that is proposed and to what extent can the
change be Managed.

• Determine the outlined criteria for the FIRM evaluation.

WHAT IS A FIRM?
 WHAT IS A FIRM?
A FIRM IS A COMMERCIAL
ENTERPRISE THAT BUYS AND SELLS
PRODUCTS OR PROVIDE
PROFESSIONAL SERVICES TO
CONSUMERS WITH THE AIM OF
MAKING PROFIT.
THE FIRM EVALUATION
OF OPTIONS

• Firm
• Impact
• Resources
• Management
 THE FIRM EVALUATION OF
OPTIONS

The F in FIRM: The new initiatives must seek to:

➢ Remove, reduce or compensate for any weaknesses identified in the corporate portfolio and
in individual businesses. For an organization in a declining situation this may be the key
emphasis. If an organization has a lot of weaknesses a turnaround strategy may be an urgent
requirement before any other actions are appropriate.

➢ Build on resource strengths. For example, does the new initiative allow for the sharing of
assets or the transferring of skills in such a way that competitive advantage is gained.
 THE FIRM EVALUATION OF
OPTIONS

The F in FIRM: The new initiatives must seek to:

➢ Lead the organization into developing or acquiring skills that not only allow for the expected
advantages but also lay down foundations for long-term strategic development.

➢ Build on opportunities that allow the organization to exploit its resources vis-a`-vis its
competitors.
 THE FIRM EVALUATION OF
OPTIONS

The F in FIRM: The new initiatives must seek to:

➢ Does the proposed strategy give an opportunity to steal a march on competitors, or is the
opportunity such that a disadvantage will occur if it is not taken? Is the opportunity also a
potential threat?

➢ Seek to minimize threats that already exist in the organization’s environment or reduce the
organization’s exposure co opportunity-taking by competitors
 THE FIRM EVALUATION OF
OPTIONS

The I in FIRM: Will the strategic option have an impact on the organization’s
performance within agreed time frames?
➢ There is no point in pursuing strategies that make little difference to the performance of the
organization in a time scale that is not acceptable to stakeholders. Because of this the returns
from the proposed strategy must be estimated using appropriate techniques.

➢ In ‘for-profit’ organizations the impact of a strategy is usually measured in financial terms.

 THE FIRM EVALUATION OF
OPTIONS

The R in FIRM: Can the resources required to implement the option be

obtained?
➢Since there is little point in developing strategies for which resources cannot be obtained, it is
important that realistic judgements be made on the ability of the organization to acquire such
resources. Resources can include capital to fund acquisition of buildings and equipment, raw
materials, labor, skills, management expertise and sales outlets etc., and frameworks for
assessing resources.
 THE FIRM EVALUATION OF
OPTIONS

The M in FIRM: Can the resources required to implement the option be

obtained?
➢ Writers and researchers on strategy focused their attention on the cognitive nature of
management. Organizations were said to have perspectives, cultural webs and paradigms, and
dominant logics. Consequently, if an organization is in a situation where the world-view of
key managers and staff is at odds with its environment, the likelihood is that the organization
will become dysfunctional.
 THE FIRM EVALUATION OF
OPTIONS
The M in FIRM: Can the resources required to implement the option be
obtained?
Examples of situations where there is the potential for a misalignment of world-view and environment
are:

❖ When an organization diversifies into a new market and the common perspective of the organization
is unable to understand the ‘rules’ of this market.
❖ When an organization’s members lose touch with the needs of their customers because of
complacency.
❖ When an organization is faced with a significant environmental change because of privatization or
regulatory changes.
 Employers must find ways
to positively affect elements of
individual-organization
relationships so that work gets
done.
• EXPECTATION
A concept that has been useful in understanding individuals' relationships with their
employers is the psychological contract, which refers to the unwritten expectations
employees and employers have about the nature of their work relationships.

• PSYCHOLOGICAL CONTRACTS

Psychological contracts are based on developing trust, building commitment, and

improving loyalty with the ultimate goal of meeting both the employer's and employee's
needs.
 EMPLOYERS WILL EMPLOYEES WILL
PROVIDE: CONTRIBUTE

• Competitive compensation and • Skill improvement and increased

benefits productivity
• . Flexibility to balance work and • Reasonable length of service
home life • Extra efforts and results when
• . Career development needed
opportunities
 Psychological contracts can be
strengthened and employee
commitment enhanced when the
organization is involved in a cause that
is important to the employee.
JOHNSON’S (L987) CONCEPT OF THE
ORGANIZATION PARADIGM
SUPPORTED BY A CULTURAL WEB IS
A USEFUL WAY TO OPERATIONALIZE
THE CONCEPT OF AN
ORGANIZATION’S DOMINANT
LOGIC.
FIGURE 3.L EXPRESSES THESE
IDEAS WITHIN A MATRIX.
• Box 1 and Box 3 situations are those where organization members in key
strategic and/or operational positions have world-views/cultural webs that
are not sympathetic to the proposed change.

• Such situations may involve the development of new competencies for

expansion or may be situations where turnaround strategies are necessary
for survival.

• These circumstances are encountered by organizations entering changed

environments either through the incremental growth of competitive action.
• Boxes 2 and 4 illustrate positions where the change to be undertaken does not require a
change in dominant logic. Typically, initiatives like the implementation of total quality
management and business process re-engineering would fit into Box 4.

• In Box 3, changes are more adaptive and are allowed and encouraged to take place over
time, and are exemplified by slowly improving the skills within the workforce, the
development of computer-based inventory control systems, and the development of
modified products to maintain markets.

• Changes in Boxes 3 and 4 are necessary to improve the organization’s performance and
are less likely to meet resistance compared to the changes in Boxes 1 and 3.
ESTIMATIONS OF POWER IN ORGANIZATIONS
ARE AN IMPORTANT STEP FOR CHANGE
MANAGERS, THAT POWER STEMS FROM:

• Control over information

• Control over resources
• Formal authority
POWER–INTEREST MATRIX
OR
POWER / INTEREST
STAKEHOLDERS ANALYSIS
 STAKEHOLDER

is a party that has an interest in a company and

can either affect or be affected by the business.

Internal Stakeholders:
Employees, Owners, Investors

External Stakeholders:
Suppliers, Creditors, Public
 Arowwai Industries
LOW INTEREST AND LOW
POWER
INTEREST
LOW HIGH

Minimal Effort Keep Informed LOW

POWER

Keep Satisfied Key Players HIGH

 Arowwai Industries
HIGH INTEREST BUT LOW
POWER
INTEREST
LOW HIGH

Minimal Effort Keep Informed LOW

POWER

Keep Satisfied Key Players HIGH

 Arowwai Industries
LOW INTEREST BUT HIGH
POWER
INTEREST
LOW HIGH

Minimal Effort Keep Informed LOW

POWER

Keep Satisfied Key Players HIGH

 Arowwai Industries
HIGH INTEREST AND HIGH
POWER
INTEREST
LOW HIGH

Minimal Effort Keep Informed LOW

POWER

Keep Satisfied Key Players HIGH

 OPTIONS ANALYSIS
WITHIN AN
ORGANIZATION

· It is the process of evaluating various

options or alternatives available to
address a particular issue, problem, or
opportunity.
 HOW IMPORTANT IS ASSESSING THE MANAGEABILITY OF
CHANGE WHEN CONSIDERING DIFFERENT OPTIONS WITHIN
AN ORGANIZATION?

· It is essential for organizations to minimize

risks, optimize resource allocation, align
strategies, and resilience in the face of
uncertainty and change.
OPTIONS ANALYSIS PROCEDURE
 THE IMPORTANCE OF CONSIDERING BOTH SHORT AND LONG-
TERM IMPLICATIONS FOR SHAREHOLDER VALUE AND
FUNDING WHEN MAKING STRATEGIC DECISIONS WITHIN A
CORPORATION.

• Analysts can gain a more comprehensive understanding of the

potential outcomes of their actions.
• It allows for better risk assessment and management.
• It ensures that strategic decisions contribute to the sustainable
growth and success of the company over time.
• It helps optimize capital allocation decisions.
 HOW TO ASSESS THE
IMPLICATIONS
EFFECTIVELY?

Create financial predictions for

the short, medium, and long term,
considering different possible
scenarios.

Client Total's
 The analysis should also consider
how the proposed strategies will
affect other stakeholders, such as
employees and customers.

Client Total's