Business Analysis

ACCA P3

Instructor: Nguyen, Hoang Lan

Hanoi
 Preface Contents

RELATIONAL DIAGRAM OF MAIN CAPABILITIES

Strategic Strategic Strategic Action

position (1) Choices (2) (3)

Business Information Project Financial

process technology Management Analysis
change (4) (5) (6) (7)

People (8)
 ORGANISING FOR
SUCCESS

Topic List

The modern business environment has seen the

Challenges and concepts
Types of structure
Processes
Relationships
Collaborative organisational structures
Stereotypical configurations
Configuration and strategy
emergence of new structural ideas and designs, and
traditional assumptions about organization structure are
being replaced with more flexible formats. The need to
exploit knowledge has made organization structures,
processes and relationships vital ingredients in strategic
success.
 Challenges Types of Processes Relationships
and structur
concepts e

Three major groups of challenges for twenty first century organization

structures

1 Flexibility of organizational design: Rapid environmental change and

uncertainty require organisations to be flexible

2 Globalization: New global communication and information systems must

be accommodated

3 Effective System: The strategic importance of knowledge means that there

must be effective processes and relationships for linking those who have
knowledge and those who need it
 Challenges Types of Processes Relationships
and structur
concepts e

Organizational Configuration
An organization's configuration consists of the structures, process and relationships through which it
operates.
- Structure has its conventional meaning of organization structure.
- Processes drive and support people: they define how strategies are made and controlled; and how the
organization's people interact and implement strategy.
- Relationships are the connections between people within the organization and between those inside it
and those on the outside.
Also, structure, processes and relationships are highly interdependent and must work intimately and
consistently together.
Formal structure shows:
 Who is responsible for what
 Who communicates with whom
 The upper levels of the structure reveal the skills the organization values and, by extension, the
role of knowledge and skill within it
 Challenges Types of Processes Relationships
and concepts structure

Self-contained organisational structures: historically most organisations have tended to be 'self

contained' as they are distinct from external groups (customers, competitors and suppliers).
Johnson, Scholes and Whittington identify review seven basic structural types:
1 Functional According to the type of work – logical but does not reflect value creating processes
2 Multidivisional The multi-divisional structure divides the organisation into semi-autonomous divisions that
may be differentiated by territory, product, or market
3 Holding company Divisions are separate legal entities
4 Matrix Co-ordination across functional lines – allows flexibility, but may cause confusion (dual
authority)
5 Transnational
National units operate independently, but share capabilities – some have a specialisation that
supports the whole organisation
6 Team-based
Use of cross functional teams to operate a specific process area
7 Project
Similar to team-based, but with a finite life, since projects by definition have a finite life
No single model of organisation is suitab le for all purposes. Managers must choose a structure in the light of which
challenges they regard as most pressing.
 Challenges and Types of
Processes Relationships
concepts structure

1. Functional Structure
In a functional structure, people are organized according to the type of work that they do.
 Challenges and Types of
Processes Relationships
concepts structure

1. Functional Structure
In a functional structure, people are organized according to the type of work that
they do.

Advantages of functional departmentation

 It is based on work specialism and is therefore logical
 The firm can benefit from economies of scale
 It offers a career structure

Disadvantages
 It does not reflect the actual business processes by which value is created
 It is hard to identify where profits and losses are made on individual products
 People do not have an understanding of how the whole business works
 There are problems of co-ordinating the work of different specialisms
 Challenges and Types of
Processes Relationships
concepts structure

2. Multidivisional
The multi-divisional structure divides the organization into semi-autonomous divisions
that may be differentiated by territory, product, or market
 Challenges and Types of
Processes Relationships
concepts structure

3. Holding Company

The holding company (group) structure is a radical form of divisionalization. Subsidiaries are separate
legal entities. The holding company can be a firm with a permanent investment or one that buys and
sells businesses or interests in businesses: the subsidiaries may have other shareholders.
 Challenges and Types of Collaborative
Processes Relationships
concepts structure organisational structures

4. Matrix Structure

Matrix structures attempt to ensure co-ordination across functional lines by the embodiment
of dual authority in the organisation structure.
 Challenges and Types of Collaborative
Processes Relationships
concepts structure organisational structures

4. Matrix Structure

Matrix structures attempt to ensure co-ordination across functional lines by the embodiment of
dual authority in the organization structure.

Matrix management thus challenges classical ideas about organization by rejecting the idea of
one person, one boss.

A subordinate cannot easily take orders from two or more bosses, and so an arrangement has to
be established, perhaps on the following lines.

a) A subordinate takes orders from one boss (the functional manager) and the second boss (the
project manager) has to ask the first boss to give certain instructions to the subordinate.

b) A subordinate takes orders from one boss about some specified matters and orders from the
other boss about different specified matters. The authority of each boss would have to be
carefully defined. Even so, good co-operation between the bosses would still be necessary.
 Challenges and Types of Collaborative
Processes Relationships
concepts structure organisational structures

4. Matrix Structure

ADVANTAGES DISADVANTAGES
- Offer greater flexibility - Dual authority threatens a conflict
between managers

- Improve communication within the - One individual with two or more bosses is
organization more likely to suffer role stress at work

- Dual authority gives the organization - Sometimes more costly

multiple orientations

- Provide a structure for allocating - Difficult for the management to accept a

responsibility to managers for end-results matrix structure

- Provide for inter-disciplinary co-operation - Require consensus and agreement which

and a mixing of skills and expertise may slow down decision-making
 Challenges and Types of Collaborative
Processes Relationships
concepts structure organisational structures

5. Transnational Structure
The transnational structure attempts to reconcile global scope and scale with local responsiveness.
The transnational structure attempts to combine the best features of these contrasting approaches in order to
create competences of global relevance, responsiveness to local conditions and innovation and learning on
an organisation-wide scale
6. Team-based Structure
A team-based structure extends the matrix structure's use of both vertical functional links and horizontal,
activity-based ones by utilising cross-functional teams.
7. Project-based Structure
The project-based structure is similar to the team-based structure except that projects, by definition, have a
finite lifeand so, therefore, do the project teams dealing with them.
 Challenges and Types of Collaborative
Processes Relationships
concepts structure organisational structures

Choosing types of Structure

An organization structure must provide a means of exercising appropriate control; it must also respond to the
three challenges identified earlier: rapid change, knowledge management and globalization. They emphasis
that no single model of organization is suitable for all purposes: managers must make choices as to which
challenges they regard as most pressing.
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e

Control processes determine how organisations function. They may be analysed

according to whether the deal with Inputs or Outputs, and whether they involve
Direct management action or more Indirect effects. For example, balanced
scorecards are direct output-based processes.
Types of control process
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e
Organizational relationships are categorized as internal or external.
Degree of centralization is an important issue in internal relationships.
Advantages of centralization Advantages of
decentralization
▪ Allows easy exercise of firm control and ▪ Reduces the workload
strong leadership ▪ Utilizes expertise and local knowledge
▪ Policy and procedure are easily ▪ Enhances job satisfaction for
standardized
subordinates
▪ Internal disputes may be settled
more easily, though political activity ▪ Promotes faster response to changing
may still thrive conditions and enhances flexibility
▪ Concentration avoids the increased
overheads that duplication of
facilities may produce
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e

CENTRALIZATION Advantages of
decentralisation
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e

DECENTRALIZATION Advantages of
decentralisation
Goold and Campbell identify three types of strategic decision making and control.
1 Strategic planners have a small number of core businesses. Planning and control are centralised.
2 Strategic controllers tend to be diversified. The strategic apex provides objectives and guidelines, but leaves
planning initiatives to business unit managers.
3 Financial controllers are more interested in profit targets than business unit strategy. Use financial performance
for control.
Outsourcing, offshoring and shared servicing

Outsourcing has made the concept of the boundary-less organisation possible.

Outsourcing involves the contracting out of certain internal functions to a third party.

Offshoring is a form of outsourcing which involves an external party in a different

country providing an organisation with a particular process.

Advantages of offshoring Disadvantages of offshoring

▪ Cost savings ▪ Quality issues

▪ Focus on core activities ▪ Public perceptions
▪ Improve capability ▪ Loss of control
▪ Skills
▪ Flexibility
 Challenges Types of Processes Relationships Collaborative
and concepts structur organisational structures
e

Shared servicing is an alternative to outsourcing. A shared service centre brings

together certain functions within an organisation.
IT support functions are commonly combined to provide services to the entire
organisation, not just one department.

Advantages of shared
service centres

▪ Reduced headcount
▪ Reduction in overhead
costs
▪ Facilitates knowledge
sharing
▪ Standardised approaches
 Other forms of boundary-less organisation structure

Alliances Network organisations

Minimum effective scale may require
pooling of resources. Complex
organizations such as alliances,
partnerships and consortia result.
Co-operation may be based on any value
activity.
Shamrock organisation
◾ Network structure may exist within an organisation in the
form of a loose array of informal, fluid relationships; this
approach can achieve innovative response to change.
◾ Strategic outsourcing can lead to external networks and
virtual teams. This creates interdependence. Competitors
may collaborate on non-core competence matters such as
R&D and distribution.

(Handy) The virtual organisation

◾ Geographically dispersed organisational components
Self-employed Contingent workforce ◾ Information technology is central to the
professionals and Often part
technicians – paid by time/temp – no career production process
results – benefits –
may telecommute
track – routine work –
engaged as required
◾ Flexible structure
◾ Collaborative culture

Professional core Consumers

Their skills define the eg buyers
organisation's core of DIY
competencies furniture
 8: Managing strategic change
Topic List
Situation analysis for change
Styles of change management
Change management roles
Change management levers Pitfalls
of change management
Strategies can be expected to change and
evolve over time because of environmental
changes and developments. Certain factors
will drive change, and expecting and
controlling such factors is an important
part of strategic management.
 Situation Styles of change Change Change Pitfalls of change
analysis for management management roles management levers management
change

The management of change star ts with an understanding of three main consider ations.
1 The type of change required – its scope and nature
Scope of change
Realignment Transformation
Incremental Adaptation Evolution
Nature of
change 'Big bang' Reconstruction Revolution

(a) Adaptation is the most common type of change. It does not require the development of a new
paradigm and proceeds step by step.
(b) Reconstruction can also be undertaken within an existing paradigm but requires rapid and extensive
action. It is a common response to a long-term decline in performance.
(c) Evolution is an incremental process that leads to a new paradigm. It may arise from careful analysis
and planning or may be the result of learning processes.
(d) Revolution is rapid and wide-ranging response to extreme pressures for change. A long period of
strategic drift may lead to a crisis that can only be dealt with in this way. Revolution will be very obvious
and is likely to affect most aspects of both what the organization does and how it does them
 Situation Styles of change Change Change Pitfalls of change
analysis for management management roles management levers management
change

2 The wider context of the change, in large part cultural considerations

◾ Time available ◾ Capacity – Availability of resources,

◾ Features to preserve especially finance, IS/IT, management
time and skill
◾ Organisational diversity
◾ Workforce readiness to change, or
◾ Capability to manage change – largely resistence to change
depends on experience ◾ Power to effect change
◾ Scope of change needed

3 Forces facilitating and blocking change – use of force field analysis

 Situation Styles of Change Change Pitfalls of change
analysis for change change management roles management levers management
management

There are five main styles of change management:

Style Characterised by Appropriate to
1 Education and communication Persuasion Incremental change, willing staff
2 Collaboration and participation Involving those affected Incremental change, supportive culture
3 Intervention Change agents Incremental change
4 Direction Managerial authority, probability Transformation
of resistance
5 Coercion/edict Use of power to impose change Times of crisis

Different approaches may be appropriate to different stakeholders. Normal management practice will
also affect the style used. It may be advantageous to use more than one style.
 Situation Styles of change Change Change Pitfalls of change
analysis for change management management management levers management
roles

A change agent is an individual or group that helps to bring about strategic change in an organization.
Johnson, Scholes and Whittington examine change agency by considering three distinct groups:

1 Strategic leaders

Five approaches to strategic leadership:

◾ Strategic analysis and design focus
◾ Human assets development focus
◾ Expertise as source of competitive advantage focus
◾ Control by procedures and performance monitoring
◾ Change as continuous process – emphasis on communication and monitoring
2 Middle management
Providers of advice; translation of strategy at local level; implementation and control
3 Outsiders
Bringing a fresh point of view, such as a new chief executive or the use of consultants
 Situation Styles of change Change Change Pitfalls of change
analysis for change management management roles management management
levers

A turnaround strategy is required when a business is in terminal decline. It has its own change
management techniques:
Crisis stabilisation – management changes – comm unication with stakeholders – attention to target
markets – concentration of effort – financial restructuring – prioritisation
In other circumstances, change management levers relate to the cultural web.

Change management levers

Challenging the paradigm
Changing routines
Use of symbolic processes
Power and politics
Communication and monitoring
Tactics
move away from entrenched habits discard
old ways of doing things introduce new
rituals and systems
build a power base, overcome resistance and achieve compliance explain
the need for change, what change intends to achieve careful timing, use of
'quick wins', handling job losses – with care
 Situation Styles of change Change Change Pitfalls of
analysis for change management management roles management levers change
management

Change programmes may be subverted and lead to unintended consequences. This has four
implications for change management.
◾ (a) Monitoring and control are vital aspects of change management, as is the flexibility
to adjust programs as they unfold.
◾ (b) It is essential to understand the existing culture and its effects, since they are
highly likely to hinder planned change.
◾ (c) It will generally be advantageous to involve the organization's people in the
change process.
◾ (d) Change represents a major challenge and may be more difficult to implement than
it seems at first.