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Management, Organizational Policies and Practices Lecture 4.

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Presentation on theme: "Management, Organizational Policies and Practices Lecture 4."— Presentation transcript:

1 Management, Organizational Policies and Practices Lecture 4

2 Recap Lecture 3 Industrial Organizational View Macro Environment – PESTEL Industry Environment – Porter Five Forces Competitive – Strategic Groups

3 The Internal Assessment Lecture 4 Dr Amna Yousaf PhD-HRM 5/1/2015

4 Basis for objectives & strategies: Clear statement of vision and mission External opportunities/threats Internal strengths/weaknesses

5 5/1/2015 Internal Audit Gather & assimilate information from: Management Marketing Finance/accounting Production/operations Research & development Management information systems Key to organizational success: Coordination and understanding among managers from all functional areas

6 5/1/2015 3–6 External Analyses’ Outcomes By studying the external environment, firms identify what they might choose to do. Opportunities and threats

7 5/1/2015 3–7 Internal Analyses’ Outcomes By studying the internal environment, firms identify what they can do Unique resources, capabilities, and competencies (required for sustainable competitive advantage)

8 5/1/2015 Resource Based View Organizational Resources provide competitive advantage that can be sustained Traditional resources such as labor costs, access to financial resources and raw materials continue to be sources of competitive advantage but to a lesser degree Globalization and openenss of markets make these resources accessable worldwide and mobile Need to identify new sources of competitve advantage- do the internal audit

9 5/1/2015 3–9 - Resources Key Concepts - Resources Resources Resources Are a firm’s assets, including people and the value of its brand name. Are a firm’s assets, including people and the value of its brand name. Represent inputs into a firm’s production process, such as: Represent inputs into a firm’s production process, such as: Capital equipment Capital equipment Skills of employees Skills of employees Brand names Brand names Financial resources Financial resources Talented managers Talented managers Raw Material Raw Material Strategic Location Strategic Location Types of Resources Types of Resources Tangible resources Tangible resources Financial resources Financial resources Physical resources Physical resources Technological resources Technological resources Organizational resources Organizational resources Intangible resources Intangible resources Reputation Reputation Innovation Innovation

10 5/1/2015 Types of Resources Threshold Resources The resources needed to meet customer’s minimum requirements and therefore to continue to exist Retailer requires the supplier to posses a powerful IT infrastructure to meet retailing requirements.

11 5/1/2015 Threshold Competences Activities and processes needed to meet customer’s minimum requirements and therefore to continue to exist Supplier should be able to use IT systems effectively Threshold level changes over time as CSF’s change; Traditional banking versus online internet banking (branchless)

12 Redundancy & Complementarily Get away with redundent Resources & Competencies Competitive rivalry may make cost efficency threshold comeptnece Complementarity of resources and competencies essentail Brand name as resource but no marketing processes Lack of understanding – out of the game 5/1/2015

13 Unique Resources & Core Competences Unique resources can not be easily imitated and critically underpin competitive advantage Powerful Brand Kallogs Core competences are the activities and processes through which an organziation deploys the resources effectively to achieve competitive advatnage in ways non imitable by competitors. Unique ways of providing service or relationship building with retailers/distributors/suppliers McKinsey & Co. recommends identifying three to four competencies to use in framing strategic actions. McKinsey & Co. recommends identifying three to four competencies to use in framing strategic actions.

14 Cost Efficiency Economies of Scale Supply costs Experience Product/process design 5/1/2015

15 Robustness of Strategic Capabilities Rarity Collection of unique books in a library Intellectual capital-particularly talented individuals Relationships with key customers Harmoniuos functioning of the firms Capabilities around resources may not be rare as IC may move – competences may be rare and non transferable

16 Robustness of Strategic Capabilities Non-imitability Causal ambiguity Competences get embedded in organizational culture Tacit knowledge on organizational processes built in one culture – may not be readily idetifiable; counter cultural for comeptitor logical path can not be explicilty defined; taken for granted  Formal and informal ways Linkage ambiguity Whcih activities or processes dependent on which other. What is the chain of linkages?  The way customers are dealt on phone, return policies on goods, flexibility in deliveries 5/1/2015

17 Robustness of Strategic Capabilities Valuable Unique capabilities may not lead comepttive advantage Customer value Non substitutable Competencies may also be situtation dependent – MNC’s have different competences accross the globe Competences can be created within organziation and outside with suppliers and distributors

18 5/1/2015 Dynamic Capabilities Danger of redundancy of strategic capability – strategic drift M&S kept inventing value based on past success; faced losses in 1990’s Dynamic capabilities refers to an organization’s abilities to develop and change competencies to meet the needs of rapidly changing environments Stable environment, competitive advatange more durable and vice versa

19 Core Competencies—Cautions and Reminders Core Competencies—Cautions and Reminders Never take for granted that core competencies will continue to provide a source of competitive advantage All core competencies have the potential to become Core Rigidities Core Rigidities are former core competencies that sow the seeds of organizational inertia and prevent the firm from responding appropriately to changes in the external environment Strategic myopia and inflexibility can strangle the firm’s ability to grow and adapt to environmental change or competitive threats

20 5/1/2015 Case Examples (1) Caterpiller; construction manufacturing company dealing with a range of diversified products such as construction and mining equipment, gas engines attributes success to the technology it uses and resources it spends to update its internal environment Spends $ 4 million per day to mainintain competitive advantage through technology

21 5/1/2015 Case Examples (2) Enterprise Rent-A-Car – 5000 plus offices worldwide and continually expanding CEO attributes success to employee’s efforts and the intellectual capital they represnt Japneese Automobile reduced GM Motors dominence with narrow asset base Lowered costs Improved quality Fast production processes

22 5/1/2015 Creating Value Value is measured by product’s performance characteristics and by its attributes for which customers are willing to pay. Increasing perceptions of higher value in global than local brands Firms create value by bundling resources and capabilities in ways that create value

23 5/1/2015 The Value-Creating Potential of Primary Activities Inbound Logistics Inbound Logistics Activities used to receive, store, and disseminate inputs to a product Activities used to receive, store, and disseminate inputs to a product Operations Operations Activities necessary to convert the inputs provided by inbound logistics into final product form Activities necessary to convert the inputs provided by inbound logistics into final product form Outbound Logistics Outbound Logistics Activities involved with collecting, storing, and physically distributing the product to customers Activities involved with collecting, storing, and physically distributing the product to customers

24 5/1/2015 The Value-Creating Potential of Primary Activities (cont’d) Marketing and Sales Marketing and Sales Activities completed to provide the means through which customers can purchase products and to induce them to do so. Activities completed to provide the means through which customers can purchase products and to induce them to do so. Service Service Activities designed to enhance or maintain a product’s value Activities designed to enhance or maintain a product’s value Each activity should be examined relative to competitor’s abilities and rated as superior, equivalent or inferior. Each activity should be examined relative to competitor’s abilities and rated as superior, equivalent or inferior.

25 5/1/2015 3–25 The Value-Creating Potential of Primary Activities: Support Procurement Procurement Activities completed to purchase the inputs needed to produce a firm’s products. Activities completed to purchase the inputs needed to produce a firm’s products. Technological Development Technological Development Activities completed to improve a firm’s product and the processes used to manufacture it. Activities completed to improve a firm’s product and the processes used to manufacture it. Human Resource Management Human Resource Management Activities involved with recruiting, hiring, training, developing, and compensating all personnel. Activities involved with recruiting, hiring, training, developing, and compensating all personnel.

26 5/1/2015 © 2007 Thomson/South-Western. All rights reserved. 3–26 The Value-Creating Potential of Primary Activities: Support (cont’d) Firm Infrastructure Firm Infrastructure Activities that support the work of the entire value chain (general management, planning, finance, accounting, legal, government relations, etc.) Activities that support the work of the entire value chain (general management, planning, finance, accounting, legal, government relations, etc.) Each activity should be examined relative to competitor’s abilities and rated as superior, equivalent or inferior. Each activity should be examined relative to competitor’s abilities and rated as superior, equivalent or inferior.

27 5/1/2015 © 2007 Thomson/South-Western. All rights reserved. 3–27 FIGURE 3.3 The Basic Value Chain

28 5/1/2015 Benefits of Value Chain Cost benefit analysis at various levels Help identify comeptences of the firm Outsourcing decisions Identify profit pools Value network – set of inter-organizational links and relationships necessary to create valuable product Internal position vis a vis other parties

29 How do we assemble bundles of Resources, Capabilities and Core Competencies to create VALUE for customers? Will environmental changes make our core competencies obsolete? And... Are substitutes available for our core competencies? Are our core competencies easily imitated? Key Questions for Managers in Internal Analysis Key Questions for Managers in Internal Analysis

30 5/1/2015 Organizational Knowledge Collective and shared experience accumulated through systems, routines and activities of sharing accross the organization Explicit Knowldge: Codified information system Implicit Knowledge: Tacit, hald to formalize, personal and context specific More likely to occur where functional boundaries are blurred; less demarcation of roles Formal and systematic system of knowledge poses greater danger of imitation Experience of groups of individuals may not be copied

31 Support Activities Primary Activities Technological Development Human Resource Management Firm Infrastructure Procurement InboundLogistics Operations OutboundLogistics Marketing & Sales Service MARGIN InboundLogistics Operations OutboundLogistics Service Marketing Technological Development Human Resource Management Procurement MARGIN portion more efficiently Firms often purchase a portion of their value-creating activities from specialty external suppliers who can perform these functions more efficientlyOutsourcing Strategic Choice to Purchase Some Activities From Outside Suppliers

32 Lets company focus on broader business issues by having outside experts handle various operational details Strategic Rationales for Outsourcing Improve Business Focus Permits firm to redirect efforts from non-core activities toward those that serve customers more effectively Free Resources for Other Purposes Provide Access to World-Class Capabilities Accelerate Business Re-Engineering Benefits Share Risks The specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications Achieves re-engineering benefits more quickly by having outsiders--who have already achieved world-class standards--take over process Reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities

33 5/1/2015 Activity Maps An activity map shows how the different activities of an organization are linked together Help identify and preserve strategic capabilities Different activties must be consistent to create value Maybe reinforcing each other

34 5/1/2015 Activity Maps at Southwest Frequent, reliable departures Lean, highly productive ground and gate crews High aircraft utliziation Very low ticket prices No meals No seat assignments No baggage transfers Automatic ticketing maxchines No connections with other airlines

35 5/1/2015 Internal Assessment Analyses Qunatitative Analyses Balanced Scorecard Basic Financial Ratios Qualitative Analyses

36 5/1/2015 The Balanced Scorecard Broad based criteria to assess a firm from multiple perspectives Financial Ratios Customer Value in terms of differentiation, low costs, quick response Operations Which processes need to improve? How should they be changed? Organizational Adaptability to change? Workforce commitment towards goals?

37 5/1/2015 Qualitative Analyses Qualitative information supplements quantitative informatoin Information on employee morale, commitmnet, creativity, employee views and customer views etc Motorolla invests $600m anually based on qualitative analyses.

38 Resources * * Tangible * * Intangible Capabilities Teams of Resources Teams of Resources Sources of Core Competencies Competitive Advantage Strategic Competitiveness Above-Average Returns Competitive Advantage Gained through Core Competencies Discovering Core Competencies Value Chain Analysis Valuable Rare Costly to Imitate Nonsubstitutable * * * * * Outsource Criteria of Sustainable Advantages Discovering Core Competencies

39 5/1/2015


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