CHAPTER2.ppsx
- 1. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Two Strategy, Organization Design, and Effectiveness
- 2. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organization Direction, Design, and Effectiveness • An organization is created and designed to achieve a certain goal. • The structure and organizational design are a result of the search for this objective. • The main responsibility of top management are: • To determine the objectives; • To determine the strategy; • To determine the structure of the organization. 2
- 3. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Organization Direction, Design, and Effectiveness
- 4. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SWOT ANALYSIS 4
- 5. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SWOT ANALYSIS 5
- 6. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Organizational Purpose • Strategic intent - organization’s energies and resources are directed toward a focused, unifying, and compelling goal Operative Goals • Overall Performance • Resources • Market • Employee Development • Innovation and Change • Productivity • Mission • Competitive Advantage • Core Competence
- 7. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 The Importance of Goals • Official goals and mission statements describe a value system – Legitimize the organization • Operative goals serve several purposes – Employee direction and motivation – Decision guidelines – Standards of performance
- 8. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Selecting Strategy • A strategy is a plan for interacting with the competitive environment • Managers must select specific strategy design • Models exist to aid in formulating strategy: – Porter’s Five Forces – Miles and Snow’s Strategy Typology
- 9. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Porter’s Competitive Five Forces • Managers should understand forces in industry and environment – The Threat of New Entrants – The Power of Suppliers – The Power of Buyers – The Threat of Substitutes – Rivalry among Existing Competitors • Porter suggests that companies adopt strategies based on five forces analysis
- 10. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PORTER’S FIVE FORCES 10
- 11. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Porter’s Competitive Strategies 1 LOW COST LEADERSHIP STRATEGY • Tries to increase market share by keeping costs low compared to competitors. • Whit a Low-cost leadership strategy, the organization aggressively seeks efficient facilities, pursues cost reduction, and use tight controls to produce, products or services more efficiently than its competitors. • Emphasis on low costs • Maximizes the efficiency • Favors stability 11
- 12. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Porter’s Competitive Strategies 2 DIFFERENTIATION STRATEGY • Organizations attempt to distinguish their products or services from others in the industry. • An organization may use advertising, distinctive product features, exceptional service, or new technology to achieve a product perceived as unique. • Emphasis on the differentiation of products/services (perception of the product as the only) • Focus on the activities of research and product development, design and marketing 12
- 13. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Porter’s Competitive Strategies 3 FOCUS STRATEGY • The organization concentrates on a specific regional market or buyer group. • The company will try to achieve either a low cost advantage or a differentiation advantage within a narrowly defined market. • Choice of a specific market area or group of buyers • Two types of focus: Cost Leadership - Differentiation 13
- 14. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Porter’s Competitive Strategies
- 15. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 Miles and Snow’s Strategy Typology • Prospector – Learning orientation; flexible, fluid, decentralized structure – Values creativity, risk-taking, and innovation • Defender – Efficiency orientation; centralized authority and tight cost control – Emphasis on production efficiency, low overhead • Analyzer – Balances efficiency and learning; tight cost control with flexibility and adaptability – Emphasis on creativity, research, risk-taking for innovation • Reactor – No clear organizational approach; design characteristics may shift abruptly depending on current needs Managers should seek to formulate strategy that matches the demands of the external environment.
- 16. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 How Strategy Affects Organization Design Managers must design the organization to support the firm’s competitive strategy. Strategy impacts internal organization characteristics
- 17. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Contingency Factors Affecting Organization Design
- 18. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18 Assessing Organizational Effectiveness →Managers must evaluate goals →Effectiveness can be difficult to measure →Managers determine what to measure Effectiveness takes into consideration a range of variables at both the organizational and departmental levels.
- 19. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Sample Goals • Profitability – The positive gain from business operations or investments • Market Share – The proportion of the market the firm is able to capture relative to competitors • Growth – The ability of the organization to increase its sales, profits, or clients • Social Responsibility – How well the organization serves the community • Product Quality – The ability of the organization to achieve high quality products/services
- 20. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 Resource and Internal Process Goals • Resource-based indicators look at the inputs regarding processes – The use of tangible and intangible resources in operations (i.e. supplies, people) • Internal processes must be measured for effectiveness – Operational efficiency – Growth and development of employees
- 21. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 Contingency Approaches to the Measurement of Organizational Effectiveness
- 22. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22 Balance Scorecard Approach
- 23. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Design Essentials Organization exist for a purpose Strategic intent include competitive advantage and core competence Strategies may include many techniques There are models to aid in the development of strategy Organizational effectiveness must be assessed No approach is suitable for every organization
- 24. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. EXERCISE LEARNING TEST 1 1. Official goals provide _____, while operative goals and strategies provide ______. • a. measurable objectives, legitimacy • b. legitimacy, employee direction • c. employee direction, decision guidelines • d. decision guidelines, legitimacy 2. Which of the following is true about Porter's competitive strategies: • A. Differentiation strategies address whether the market scope is broad or narrow. • b. Differentiation can be broken down into low cost or broad scope categories. • c. An airline using the differentiation strategy would be likely to offer travelers refreshments at a reasonable price, rather than serve bounteous meals. • d. Apple, Inc. is a company that has benefited from a differentiation strategy and never tried to compete on price because it likes being perceived as an "elite" brand. 24
- 25. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. EXERCISE LEARNING TEST 1 • 3. The extent to which goals are obtained is a traditional definition of the degree of _____in the organization. • a. efficiency • b. scientific management • c. Strategy • d. effectiveness • 4. The top management role in organization effectiveness involves examination of internal environment whic includes: • a. Opportunities • b. Weaknesses • c. Uncertainty • d. Resource avaibility 25
- 26. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. EXERCISE LEARNING TEST 1 • 5. The most common occurrence in setting goals and selecting a strategy is that: • a. The environment is ignored to select the ideal mission • b. Goals are set so high that can rarely be attained • c. New goals and strategies are selected on the basis of environmental needs and the organization is redesigned accordingly • d. Environment and current structure and goals are considered simultaneously. • TRUE / FALSE • 1. Official goals address issues pertaining to corporate legitimacy 26