Implementing Strategy in Companies That Compete in a Single Industry

Implementing Strategy in Companies That Compete in a Single Industry
12 Implementing Strategy in Companies That Compete in a Single Industry

The Value Chain: Primary and Support Activities
Copyright © Houghton Mifflin Company. All rights reserved.

The Generic Building Blocks of Competitive Advantage

Competencies vs. Core Competencies vs. Distinctive Competencies
A company competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity A core competence is a well-performed internal activity that is central (not peripheral or incidental) to a company’s competitiveness and profitability A distinctive competence is a competitively valuable activity that a company performs better than its rivals How to achieve competencies? Copyright © Houghton Mifflin Company. All rights reserved.

What Are Your Strengths?
You don’t have to be good at everything, but what you are good at, use it. Ask yourself now, “what am I good at”? Important to know who you are, “Do you know who you are”? Ask yourself now, “Who am I”? Copyright © Houghton Mifflin Company. All rights reserved.

Your Core Skills Define for me now the following:
Ability Skill Can you have an abilities that have not yet become skills? What are your “core” skills Give me now, three (3) examples of your core skills. What skills do you need that you feel you don’t already have? Copyright © Houghton Mifflin Company. All rights reserved.

Core Competence – Corporation Can be Viewed as a Large Tree
Trunk and major limbs are core products Smaller branches are business units Leaves, flowers, and fruit are end products Root system that provides nourishment, sustenance, and stability is the core competence Can miss strength of competitors by looking only at their end products Same way can miss strength of a tree if look only at its leaves Important point to remember: “Don’t judge a firm’s competitiveness primarily in terms of the price and the performance of end products.” Copyright © Houghton Mifflin Company. All rights reserved.

Microsoft – Core Competencies
Microsoft’s core competencies: Creating high-volume software products, working with other software companies, and providing customer service and support. Important re-engineering principle: A firm should focus on its core competencies and outsource everything else. Why? Copyright © Houghton Mifflin Company. All rights reserved.

Examples: Distinctive Competencies
Sharp Corporation Expertise in flat-panel display technology Toyota, Honda, Nissan Low-cost, high-quality manufacturing capability and short design-to-market cycles Intel Ability to design and manufacture ever more powerful microprocessors for PCs Motorola Defect-free manufacture (six-sigma quality) of cell phones Copyright © Houghton Mifflin Company. All rights reserved.

Chapter 12 - Overview Strategy implementation
How a company should create, use, and combine organizational structure, control systems, and culture to pursue strategies that lead to a competitive advantage and superior performance Strategy implementation involves Identifying strategic opportunities and threats. Aligning the organization’s own strengths & weaknesses with environmental opportunities and threats. Matching an organization's structure and control systems to the requirements of its own strategy. Designing structures that allow for the formulation of strategies. Setting up feedback loops to monitor the success of an organization’s chosen strategy. Copyright © Houghton Mifflin Company. All rights reserved.

Organizational structure
Implementing Strategy Through Organizational Structure, Control, and Culture Organizational structure Assigns employees to specific value creation tasks and roles and specifies how those are linked to increase efficiency, quality, innovation, and responsiveness to customers To coordinate and integrate the efforts of all employees Copyright © Houghton Mifflin Company. All rights reserved.

Implementing Strategy Through Organizational Structure, Control, and Culture (cont’d)
Control system (e.g., MBO – Management by Objectives) A set of incentives to motivate employees to increase efficiency, quality, innovation, and responsiveness to customers Provides feedback on performance so corrective action can be taken Organizational culture The collection of values, norms, beliefs, and attitudes shared within an organizations and that control interactions within and outside the organization Copyright © Houghton Mifflin Company. All rights reserved.

Culture and Strategic Leadership
An organization’s founder is particular important in determining culture. People in organizations usually recruit and select only those they like and/or who share their values. Its these shared values and common culture that tend to increase integration and improve coordination and cooperation among organizational members? Copyright © Houghton Mifflin Company. All rights reserved.

Long Leash versus Short Leash
Bottom line – rules and procedures and direct supervision tend to be less important when shared norms and values control behavior and motivate employees. Trust – Long leash versus short leash Attitude – ability and skills may get you hired but attitude can get you fired ASAP. Performance = f (Ability + Skills + Motivation + Attitude …) Copyright © Houghton Mifflin Company. All rights reserved.

Implementing Strategy

Building Blocks of Organizational Structure
Grouping tasks, functions, and divisions in an attempt to keep bureaucratic costs to a minimum. Organizational structure follows the range and variety of tasks that an organization pursues Companies group people and tasks into functions and then functions into divisions Bureaucratic costs Copyright © Houghton Mifflin Company. All rights reserved.

Building Blocks of Organizational Structure (cont’d)
Allocating authority and responsibility Hierarchy of authority (chain of command) Span of control (number of subordinates) Tall and flat organizations Drawbacks of taller organizations Less flexibility and slower response time Communication problems Distortion of commands Expense Copyright © Houghton Mifflin Company. All rights reserved.

Tall and Flat Structures

Allocating Authority and Responsibility (cont’d)
Centralization or decentralization? Delegating responsibility reduces information overload and enables managers to focus on strategy Empowering lower-level managers increases motivation and accountability Empowering employees requires fewer managers In theory centralized decisions allow easier coordination of activities, and fit broad organizational objectives. Copyright © Houghton Mifflin Company. All rights reserved.

Building Blocks of Organizational Structure (cont’d)
Integration and integrating mechanisms Direct contact among managers across functions or divisions Liaison roles (Senior Advisors) Gives one manager in each function or division the responsibility for coordinating with the other Teams Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Control Systems
Four basic building blocks Control and efficiency Control and quality Control and innovation Control and responsiveness to customers Copyright © Houghton Mifflin Company. All rights reserved.

Steps in Designing an Effective Control System

Levels of Organizational Control

Types of Strategic Control System
Personal control Face-to-face interaction Output control Performance goals for each division, department, and employee Behavior control Rules and procedures to direction actions or behaviors of divisions, functions, and individuals Operating budget Standardization Copyright © Houghton Mifflin Company. All rights reserved.

Using Information Technology
Behavior control IT standardizes behavior through the use of a consistent, cross-functional software platform Output control IT allows all employees or functions to use the same software platform to provide information on their activities Integrating mechanism IT provides people at all levels and across all functions with more information E.g., we SAP consultants say that IT allows every in the organization to be reading from the same sheet of music. Copyright © Houghton Mifflin Company. All rights reserved.

Organizational Culture
Culture and strategic leadership Again, I go back to Professor’s Guth’s model and that the key aspirations (values) of the top key people in an organization have a tremendous impact on the overall success and failure of an organization. How to operate the organization (motivating employees to do their best) Copyright © Houghton Mifflin Company. All rights reserved.

Building Distinctive Competencies at the Functional Level
Grouping by function: functional structure Grouping people on the basis of their expertise or because they use the same resources Advantages People can learn from one another People can monitor each other Managers have greater control Copyright © Houghton Mifflin Company. All rights reserved.

E.G., Dell, Inc. Began by initially assembling computers on a 6’ table. Basic Functions of a typical business. Sales, marketing and distribution Manufacturing Finance Copyright © Houghton Mifflin Company. All rights reserved.

Functional Structure and Bureaucratic Costs
Communications and other problems Can’t have communication (both verbal and/or non verbal) without understanding The outsourcing option Copyright © Houghton Mifflin Company. All rights reserved.

Implementing Strategy in a Single Industry
Implementation begins at the functional level, however, managers must coordinate and integrate across functions and business units Effective strategy implementation at the business level Increases differentiation, adds value for customers, allows for a premium price Reduces bureaucratic costs Copyright © Houghton Mifflin Company. All rights reserved.

How Organizational Design Increases Profitability

Kodak’s Product Structure

Implementing Strategy- Matrix Structure – Product Team Structure
Competing in fast-changing, high-tech environments—product-team and matrix structures (cont’d) Product-team structure Tasks divided along product or project lines Functional specialists are part of permanent cross-functional teams Copyright © Houghton Mifflin Company. All rights reserved.

Product-Team Structure

Restructuring and Reengineering M. Hammer
Restructuring involves Streamlining hierarchy of authority and reducing number of levels Downsizing the workforce to reduce costs Reasons Change in the business environment Excess capacity Organization grew too tall and inflexible; bureaucratic costs To improve competitive advantage and stay on top Copyright © Houghton Mifflin Company. All rights reserved.

Restructuring and Reengineering (cont’d)
Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements Focuses not on functions, but on processes (which cut across functions) Copyright © Houghton Mifflin Company. All rights reserved.

Implementing Strategy in Companies That Compete in a Single Industry

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