Strategic Management – Revision session 02 Topics: 7 to 11 By - Nilantha Perera,

Development Directions Development directions are the strategic options available to an organisation, in terms of products and market coverage, taking into account the strategic capability of the organisation and the expectations of stakeholders 2

Strategy Development Directions Exhibit 7.1 Source: Adapted from H. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6. 3

Methods of Strategy Development Internal Development Build on and develop an organisation’s own capabilities Organic development Mergers and Acquisitions Take over ownership of another organisation Strategic Alliances Two or more organisations share resources and activities 4

Organisational Configurations Exhibit 8.1 5

Organisational Configuration (1) Structural design Roles, responsibilities and lines of reporting Importance of knowledge management Risk of undermining strategy implementation An organisation’s configuration consists of the structures, processes and relationships through which the organisation operates 6

Organisational Configuration (2) Processes Supporting people Influence success/failure Define how strategies made and controlled Define interactions and strategy implementation Relationships Between organisational units and the centre (parenting) Outside firm, e.g. outsourcing and strategic alliances 7

A Functional Structure Exhibit 8.2 8

A Multidivisional Structure Exhibit 8.3 9

A Holding Company (1) Investment company Shareholdings in variety of separate businesses Subsidiary businesses operate independently, have other shareholders and retain original company name Portfolio parenting role 10

A Holding Company (2) Characteristics Flexible Bring in outside shareholders as partners Sell subsidiaries as conditions change Hard to control Hands-off management style Rights of outside shareholders Difficult knowledge sharing – little synergy 11

A Multinational Matrix Structure Exhibit 8.4a 12

A Matrix Organisation in a School Exhibit 8.4b 13

A Transnational Structure Exploits knowledge across borders Gets the best of multi-domestic and global strategy High local responsiveness High global coordination National units operate independently, but are a source of ideas and capabilities for the whole organisation National/regional units achieve greater scale economies by specialising Corporate centre manages global network 14

Multinational Structures Exhibit 8.5 Source: Reprinted with permission of Harvard Business School Press. Adapted from C. Bartlett and S. Ghoshal, Managing Across Borders: The transnational corporation, 2 nd edition, Random House, Copyright © 1998 by the Harvard Business School Publishing Corporation; all rights reserved. 15

Project-based Structure (1) Teams created, undertake the work, then dissolved For large expensive items or limited time events Constantly changing organisational structure Collection of project teams Created and steered by small corporate group Set up ad hoc taskforces for new elements of strategy to provide momentum 16

Project-based Structure (2) Advantages Flexible Good accountability and control (clear tasks/defined time) Effective knowledge exchange Attract international members due to short project times Disadvantages Possible lack of coordination Proliferation of projects Breaking up teams hinders knowledge accumulation 17

Comparison of Structures Exhibit

Types of Control Processes Exhibit

Exhibit 9.1 Enabling strategic success 20

Strategy and People Exhibit

People as a Resource The ‘hard’ side of HR management Concerned with issues of performance management Performance management enables success via: Audits to assess HR requirements Goal-setting and performance assessment Reward planning 22

People and Behaviour The ‘soft’ side of HR management Managing change requires understanding, addressing and changing behaviours Link between managerial behaviour and success of strategy Concerned with the behaviour of people – individually and collectively Managers as shapers of context (cultural web) Understanding relationships between behaviours and strategic choices Being realistic about the difficulty and time-scale in achieving behaviour change (structures and systems) Being able to vary style of managing change 23

Strategy and Information Exhibit

Strategy and Finance Exhibit

Strategy and Technology Exhibit

Key elements in managing strategic change Diagnosis Leading and managing change Levers for change Managing change programmes 27

Managing change – key issues Four key premises:  Strategy matters – in identifying the need for change and the direction of change.  Context matters – the right approach to change depends on the circumstances.  Inertia and resistance – getting people to change from existing ways of doing things is essential.  Leadership matters – good leadership of change at all levels is needed. 28

Types of strategic change Figure 14.2 Types of change Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, 3rd edition, Prentice Hall,

Types of strategic change Four types of strategic change:  Adaptation – can be accommodated with the existing culture and can occur incrementally.  Reconstruction – rapid change but without fundamentally changing the culture.  Revolution – fundamental changes in both strategy and culture.  Evolution – cultural change is required but this can be accomplished over time. 30

The importance of context Figure 14.3 The Change Kaleidoscope Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, Prentice Hall,

Forcefield analysis A forcefield analysis provides an initial view of change problems that need to be tackled by identifying forces for and against change. Various concepts and frameworks are useful here:  Mapping activity systems.  Stakeholder mapping.  The culture web.  The 7-S framework. 32

A forcefield analysis for the UK forestry commission Illustration

Newcomers and outsiders ‘Outsiders’ can also play an important role in strategic change. These could include: A new chief executive from outside the organisation can bring a new perspective. New management from outside can also increase the diversity of ideas. Consultants are used to help formulate strategy or to plan the change process. 34

Styles of strategic leadership Situational leadership – successful strategic leaders are able to adjust their style of leadership to the context they face. Two approaches: Theory E: the pursuit of economic value; top-down; ‘hard’ levers of change; emphasis on changes of structures and systems, financial incentives, portfolio changes, downsizing. Theory O: the development of organisational capability; emphasis on culture change, learning, participation in change programmes and experimentation. A combination of the two approaches may be required and can be beneficial. 35

Styles of managing change Education/ Delegation Participation Collaboration Direction Coercion Styles of Managing Change 36

Levers for change A compelling case for change Challenging the taken-for-granted Changing operational processes and routines Symbolic changes Power and political systems 37

Why change programmes fail Research into why change programmes fail indicates seven main failings:  Death by planning.  Loss of focus.  Reinterpretation of change in terms of current culture.  Disconnectedness.  Behavioural (only) compliance.  Misreading scrutiny and resistance.  Broken agreements and violation of trust by management. 38

Exhibit 11.1 Strategy Development Processes 39

What is an Intended Strategy? An intended strategy is an expression of a desired strategy as deliberately formulated or planned by managers.

What is an Emergent Strategy? An emergent strategy comes about through everyday routines, activities, and processes in organisations leading to decisions that become the long-term direction of an organisation.

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Tenets of Organizational Learning Managers facilitate rather than direct Information flows and relationships are lateral as well as vertical Organizations are pluralistic Experimentation is the norm 43