Environmental Scanning

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Organisational Capability Profile (OCP)

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Weakn ess (-5) 1

Financial Capability

a

Source of Funds

b

Usage of Funds

c

Management of Funds

2

Marketing Capability

a

Product Capability

b

Price

c

Promotion

3

Operations

a

R&D

b

Production system

c

Control System

4

HR

a

HR Culture

b

Industrial Relations

c

Employee characteristics

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Norma l (0)

Streng th (+5)

Weakness (-5)

1

Financial Capability

a

Source of Funds

b

Usage of Funds

c

Management of Funds

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Normal (0)

Strength (+5)

2

Marketing Capability

a

Product Capability

b

Price

c

Promotion

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3

Operations

a

R&D

b

Production system

c

Control System

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4

HR

a

HR Culture

b

Industrial Relations

c

Employee characteristics

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5

General Management

a

Organization climate

b

External relations

c

General Management system

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Strategic Advantage Profile ( SAP )

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Strategic Advantage Profile ( SAP ) Functional Area 1

Finance

2

Marketing

3

Operations

4

Personnel

5

Information

6

General Management

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Environment Threat Opportunity Profile (ETOP)

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Environment Threat Opportunity Profile (ETOP) External Environ ment 1

Technological

2

Demographical

3

Economic

4

Political

5

Legal

6

Cultural

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Balance Score Card

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Balance Score Card

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SWOT

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SWOT

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Michael Porter’s 5 Force Model

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Barriers to Entry … … large capital requirements or the need to gain economies of scale quickly. … strong customer loyalty or strong brand preferences. preferences. … lack of adequate distribution channels or access to raw materials or absolute cost advantages. advantages Page 20 of 170

Rivalry among competitors … intensity increases as * Market Structure. * Demand for the industry’s products declines or industry growth slows. slows * Fixed costs or barriers to leaving the industry are high high.

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Power of Suppliers … … high when * A small number of dominant, highly concentrated suppliers exists. * Few good substitute raw materials or suppliers are available. * The cost of switching raw materials or suppliers is high. Page 22 of 170

Power of Buyers … … high when * Customers are concentrated concentrated, large or buy in volume . * The products being purchased are standard or undifferentiated making it easy to switch to other suppliers. * Customers’ purchases represent a major portion of the sellers’ total revenue. Page 23 of 170

Substitute products … … competitive strength high when * The relative price of substitute products declines . * Consumers’ switching costs decline. decline * Competitors plan to increase market penetration or production capacity. capacity

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Boston Consultancy Group

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Strategic Groups … Firms that face similar threats or opportunities in an industry but which differ from the threats and opportunities faced by other sets of firms in the same industry.

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Strategic Groups … Rivalry generally is more intense within strategic groups than between them because members of the same group focus on the same market segments with similar products, products strategies and resources. resources Page 27 of 170

Functional Level Strategies

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Case Example: Xerox Corporation n n n n n n n n

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1960 – 80 Canon & Ricoh Fuji –Xerox: quality & cost relationship Suppliers: 5000 to 500 – 325 Defectives: 25,000 to 1,000 – 300 Standardization Central logistics & asset management 1985

The Value Chain n -

n -

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Primary Activities Manufacturing Marketing Secondary Activities Materials Management R&D HR Infrastructure

Competitive Advantage n n n n

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Efficiency Quality Innovation Customer Responsiveness

Efficiency Manufacturing: - Manufacturing Model: Ford’s Model T n Marketing -Customer Defection Rate n Materials Management - JIT n R & D Texas Instruments: 47 to 12 parts, 56 to 13 steps, 123 to 20 mins n

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Efficiency HR - Training : Sanyo - Self Managed Team - Pay to Performance: Nucor Steels n Infrastructure - Cross Functional Teams n

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Quality n

n

n

n n

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Focus on customer: quality gap Measure quality: Banks – defections, error statements Set Goals & Incentives: Xerox Listen to employees Supplier Relations

Innovation n

n -

-

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Du pont – nylon, teflon, freon & cellophane Failure: Uncertainty Poor Commercialisation: first PC’s No demand: Concord Cycle time: GM v Ford

Customer Responsiveness n

n

n

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Leadership: Tom Monaghan of Domino’s Customisation: Panasonic bicycles 11,000 & Honda v Yamaha Response time : Caterpillar v Komatzu, Fedex

Business Level Strategy

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Foundation of BLS Customer NeedsWhat to satisfy - Product differentiation - Low priced product n

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Foundation of BLS n

-

-

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Market Segmentation – How to satisfy Do not recognise eg: Gilette Grouping eg: Sony Recognise but concentrate eg: DTC

Foundation of BLS n -

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Deciding on DC Efficiency Quality Innovation Customer Responsiveness

BLS 1. 2. 3.

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Cost Leadership Differentiation Focus

1.Cost Leadership 1. Lower cost but same profit 100+50 =150 - competitor 80+ 70 = 150 – cost leader 2. Manages if rivalry increases 100+30=130 - competitor 80+50= 130 – cost leader

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Strategic Choice of Cost Leader n n

n

Low differentiation Low market segmentation DC: Efficiency in Manufacturing & MM

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2. Differentiation n

n n

n

Customer perceives it as unique – so premium price Honda v BMW Benz, Sri Krishna, Satyam Cinema’s DC :Customer Responsiveness –FedEx Innovation – Dell , R&D

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3.Focus n

n

n

n

Limited customer group or segment Cuban cigars, Bentley – Differentiator Saravana Stores – Low cost DC: If low cost –Efficiency IF Differentiation -CR

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Why Co’s Fail ? n

n

They get stuck in the middle

Combining both is a winning formula: TTDC

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Investment Strategy at BL Two factors decide investment: 1.Competitive position: Strong or weak Market share & DC

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Investment Strategy at BL 2.Life Cycle Effects: Embryonic, Growth, Shakeout, Maturity & Decline

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Strong CP

Weak CP

Embryonic Share Building

Share Building

Growth

Growth

Shakeout

Share increase

Market Concentration Harvest/Liquidate

Maturity

Hold & Maintain Harvest/Liquidate

Decline

Market conc./Harvest Page 5 of 170

Turnaround/liquida te

Global Level Strategy

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Swan Opticals n n

n

n n n

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Strong $ -1970 Hongkong- labour cost, skilled workforce & tax breaks Problems – quality & delivery schedules China – JV Fashion & quality Italy & France

Strategic Choice n

n

n

n

International Strategy: Centralised control , no differentiation- P&G Multi – domestic: maximum local responsiveness- Pharmacia Global Strategy: Location economies – Intel, Motorola & TI Transnational Strategy: cost economy & local responsiveness - Caterpillar Page 6 of 170

Choice of Entry 1. 2. 3. 4. 5.

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Exporting Licensing Franchising Joint Ventures Wholly owned subsidiaries

Export n -

n -

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Advantages Avoids establishment cost Location economy Disadvantages Transport cost Trade barriers Local marketing agents

Licensing n n -

-

-

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Advantages Low development cost Low risk Disadvantages Lack of control over technology No global strategic coordination Location economy Eg: RCA & FSX fighters

Franchising n n -

-

-

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Advantages Low development cost Low risk Disadvantages Lack of control over quality No global strategic coordination Eg: McDonalds, KFC & Hilton

Joint Venture n -

n -

-

-

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Advantages sharing development cost political acceptability Disadvantages Lack of control over technology No global strategic coordination Eg: Maruti Suzuki, HPCompaq

Wholly owned subsidiary n -

n -

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Advantages Protection of technology Global coordination Location economy Disadvantages High costs & risks Eg: Nokia, Hyundai & Saravana Bhavan

Corporate level strategy Oracle – California n Aspired to become, market leader in corporate applications n SAP 45%, Oracle 19% n Larry Ellison- acquired 19 suppliers- Peoplesoft & Siebels Build integrated software New customers Consolidated to No.2 Oracle gained 47% in ’06 SAP 15% n

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Vertical Integration

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Vertical Integration A company producing its own inputs (upstream or downstream) n

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Raw materials Intermediate Manufacturer Assembly Distribution End User Page 11 of 170

Raw materials

-Union Carbide, Dow

Intermediate Mfr- Intel, Motorola Assembly

- Apple, Compaq

Distribution- Computerworld End User Page 63 of 170

VI n n

Full Integration Taper Integration

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Full Integration n

n

When a company provides all of a particular input Eg: TVS, TISCO

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Taper Integration n

n

When independent suppliers and company owned entity are involved

Eg: BPCL, IOC

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Arguments against VI 1.

2.

3.

Cost Disadvantage: when low cost supply exist already – GM 68%; Toyota 28% Technological Change : Vacuum tubes in radio, Intel –from semi –conductors to ic’s. Demand Uncertainty : Arvind Mills

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Horizontal Integration n

It is the process of acquiring or merging with industry competitors

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Acquisition n

n

An acquisition occurs when one company uses its capital resources such as stock, debt or cash to purchase another company. Arcelor-Mital

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Merger n

A merger is an agreement between equals to pool their operations creating a new entity. Eg:Daimler-Benz to Daimler-Chrysler.

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Tyco Intnl n n n

CEO- Dennis Kozlowski in 1992 From $ 3.1 b to $38 b Strategy – Acquisitions

-step -step -step -step -step n n

1: Auditors 2: Formal bid 3: Old management & workforce slashed 4:New Management 5: unprofitable lines & sales force merged

CEO & CFO were convicted. Edward Breen –reversed strategy- non diversification & spin off. Page 15 of 170

Diversification n

n

Related: linked to a co’s existing business activity. Eg: Airtel- landline, mobile telephony, internet and set top boxes. Unrelated: no obvious connection

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Limitations 1.

2.

No. of businesses: complexities of business, information processing, overload. Eg: Megamart , More Coordinating among business: LG – Super Enz & Ciden

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Corporate level strategy Oracle – California n Aspired to become, market leader in corporate applications n SAP 45%, Oracle 19% n Larry Ellison- acquired 19 suppliers- Peoplesoft & Siebels Build integrated software New customers Consolidated to No.2 Oracle gained 47% in ’06 SAP 15% n

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Strategy Implementation Politics, Power & Conflict

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Merck & Co n

n

n

n

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Block buster drugs by Dr.Roy Vagelos Successor – Markham, R&D offended Medco – generic drugs Medco – acquired in 1993.

Change n

n

n

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Organisational Inertia Inability to change – IBM Power & Politics

Organisational politics n

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Use of power to influence the goals & objectives of the organisation to further their own interest.

Politics n

n n

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Personal reasons – bad connotation Pyramid Increase in visibility

Source of Politics – Rational vs Political Total information available Agreement over goals Agreement over means Decision by calculated planning Page 19 of 170

Source of Politics – Rational vs Political Selected information available Disagreement over goals Disagreement over means Decision by negotiated, bargaining & compromise Page 81 of 170

Power n

n

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To play politics, managers need power Ability to make others do something that would not have been otherwise done.

Source of Power n

n

n n n

Ability to cope with uncertainty – VI, low cost – sales, differentiation – R &D. Centrality – resource transfer, oil exploration & refinery Control over information Non-substitutability Control over contingencies Page 21 of 170

Organisational Conflict n

n

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When one group blocks the behaviour of another Good or Bad

Optimal level

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Process of conflict Latent conflict Perceived conflict Felt conflict Manifest conflict Conflict aftermath Page 86 of 170

Conflict Resolution Strategy n n

Using authority Changing task relationship – reduce dependency

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Strategy Implementation

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Strategy Implementation n n n n

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Strategic control IT Culture Structure

Strategic Control- Process n

n n

n

n

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Establish standards & targets Measure actuals Compare standards with actuals Take corrective action Eg: McDonald’s, Big bazaar & Hyndai

Types of Control Personal control- direct supervision, peers in teams n Output control- MBO, link to rewards- Skinner, Kodak & GM – stocks. BoD, corporate heads, divisional heads, functional heads, first level managers n Behaviour Controlstandardisation through rules. n

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IT n

Cross-functional software, Walmart

Case Example:Cypress Semi conductors – CEO:Rodgers, MBE – 4 hrs, 1500 employees

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Organisational Culture n n

n n

Values & Norms Means & Ends GE, TVS, Nokia: Innovate LIC, IOC, SBI: Conservative & Vigilant

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Microsoft Value

Norms

Ownership, creativity, honesty, frankness, open communication

Long working hours, casual dress, junk food, email & intranet

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Culture & Leadership n

n

n

n n

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Walt Disney- Disney land Sam WaltonWalmart Tom Monagan – Dominno’s Jamsetji Tata – Tata Narayana Murthy – Infosys

Traits of a strong & adaptive culture n n

n

Bias for action : Coke Nature of the Mission: Toyota , Godrej How to operate the organisation: respect for employees

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Culture at the functional level n

n

n

Manufacturing: low cost through TQM, QC R&D: coordination between scientists & engineers – Self Managed Teams Sales: Output & Behaviour controls

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Restructuring 1. Reduce the levels in the structure: GM, JacK Smith- 22 levels & 20,000 corporate level managers. 2. Reduce no. of employees

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Reasons n n

n

n

Business environment Obsolete technologyKodak Product out datednessMetalbox, Getmore Too tall or inflexible: IBM

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Reengineering n

n

n

Improve the business process – high quality, low price Hallmark cards: artists, writers, editors Wilkinson’s, Bajaj

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IBM – Credit Division n n n n n n -

Sales person Credit Checking Dept Contracts Dept Pricing Dept Dispatch Dept Sales person 7 days vs 90 mins Individual or team 4 hrs

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Organisational Structure n

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Case example : Dell Computers

Strategy & Technology

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Format war – Case Example n n n

n

n n n

Sony’s- Blue Ray v Toshiba’s HD-DVD Incompatible Others: VHS v Betamax; Windows v Machintosh Film studios: MGM, Columbia Pictures, Disney, Fox, Warner Brothers, ParamountSony Universal Studio-HD DVD P3, Vaio, HP, Dell& Samsung P3 delayed; Bad chip –Samsung Page 30 of 170

n

n n n n

Technology: body of scientific knowledge used in production of goods & services High Technology: rapid advancement Pharma: Cell biology, genomics, DNA Agriculture: genetic engineering Retail: online- amazon, ebay, etc,

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Standards n

n

n

Technical Standards: set of technical specifications that producers adhere, when making a product. Battle to set technical standards is referred as format war. Eg: Keyboards, Containers, USB

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Post Establishment n

n

Network Effects of complementary products: automobiles- roads & petrol bunks, mobiles – towers Positive Feedback: MS, Dolby

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Strategies for winning a Format War 1. Ensure supply of complements & Killer Applications n n

P3- 30 games Nitendo & Sega

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Strategies for winning a Format War 2. Aggressive Price & Market n n n

Razor & blade strategy HP – printer & cartridges P3 – displays in-store

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Strategies for winning a Format War 3. Co-operate with competitors n

CD market- Sony, Philips, JVC & Telefunken

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Strategies for winning a Format War n

License the format

n

Matsushita’s VHS v Sony’s Betamax

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Costs in Hi Tech Markets n

-

n

Fixed costs are very high but, producing cost is very low. MS-Windows Vista- $5 b, marginal cost is 0. Videogames Cost Economy: Economy of scale is not applicable.

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Managing IPR n

Expensive, risky & time consuming. Eg: Cancer drug- 12 to 18 years, 18 m, can fail –only 20% marketed. Imitated?

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Piracy n n

n

1/3 of music sold is pirated. Worst country? Adobe – Acrobat Reader: Razor Blade Strategy

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Capturing First Mover Advantage n n

n

n n

Advantages & Disadvantages Cisco- Internet Protocol in 1986, still dominates Handheld computers: Apple’s Newton v Palm DeHavilland v Boeing Motorola v Nokia

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Advantages n n n

Positive feedback loop Brand loyalty – Xerox, FedEx Switching Cost

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Disadvantages n n n

Educate customers Pioneering cost May invest in inferior or obsolete technology

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Organisation Structure

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Dell – Organizational Structure n

n

n

1984, Dell 19, took $ 1000 to assemble computers, 6 employees joined him 1993, 4,500 workers, functional structure 1995, 35 sub divisions

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Building blocks of organisational structure 1. Grouping of tasks 2. Allocate authority & responsibility - hierarchy of authority - span of control 3. Level of co-ordination

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Functional Structure

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Re-structuring & Reengineering n

n n n

Jack Smith – Gm – 22 levels, 20,000 corporate managers Kodak – 20% Hallmark cards- cross functional teams IMB – finance & leasing

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Page 45 of 170

Page 137 of 170

From Wikipedia.org n Organizational change management is the process of developing a planned approach to change in an organization. n

Typically the objective is to maximize the collective benefits for all people involved in the change and minimize the risk of failure of implementing the change. The discipline of change management deals primarily with the human aspect of change, and is therefore 46 ofindustrial 170 related to pure Page and psychology.

n It

can be very difficult to introduce change to an organization. Failure to recognize and deal with this fact has been the cause of many project failures. nFolger & Skarlicki (1999) - "organizational

change can generate skepticism and resistance in employees, making it sometimes difficult or impossible to implement organizational improvements" Copyright CVR/IT Consulting 2004

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n

From Dr. William Bridges, Ph.D., Transition — The Personal Path Through Change : n

n

n

Phase 1: Endings: Every transition begins with an ending, a loss. When things change, people leave behind the way things were — and the way they were in the previous situation. They may be left searching for a new way to define themselves. Phase 2: The Neutral Zone The neutral zone is a confusing inbetween state, when people are no longer who and where they were, but are not yet who and where they're going to be. Although the neutral zone can be distressing, it also provides many opportunities for creative transformation. Phase 3: New Beginnings A new beginning can only happen after people have let go of the past and spent some time in the neutral zone. In this phase, people accept the reality of the change and start to identify with their new situation.

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F EAR nU NCERTAINTY nD OUBT n

141

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Change Management Skills Workshop

Jul y 13 , 20 06

n Why

is Organization-wide Change difficult to accomplish? nOrganizations go through four stages on

the way to achieving their strategic objective: n n n n

Denial Resistance Exploration Renewal

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nAs the Organization works its way through

these stages, there can be a negative impact on Productivity. This is referred to as the Productivity Dip and is portrayed on the next slide.

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nMinimizing the size and duration of this

Productivity Dip is dependent upon quickly creating acceptance to the strategic plan and all that it entails.

nBut gaining that acceptance is often a

difficult process, as some employees will, for various reasons, seek to block the change

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n How

prevalent is Resistance to Change?

nIt is generally acknowledged that in an

average organization, when the intention for change is announced: n n n

15% of the workforce is eager to accept it 15% of the workforce is dead set against it 70% is sitting on the fence, waiting to see what happens

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n

Provide adequate attention to the human side of technology projects and you will eliminate one of the greatest causes of technology project failure.

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1. 2.

Stakeholder Analysis Develop Strategies n n n

3.

Staffing Strategy Communications Strategy Change Management Strategy

Execute

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1. 2. 3. 4. 5.

Identify Stakeholders Analyze Needs and Wants Identify Barriers to Change Best Means for Communication Ideas for Participation and Leveraging their Skills and Knowledge

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Stakehold Needs er and Wants

Barriers Best Ideas for to Means to Participati Change communic on ate

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Executive Management n Management n Employees n Customers n Shareholders n Distributors n Retailers n

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n

Group 1: Staffing Strategy – Come up with a Strategy for how jobs will be filled in the resulting organization n n

n

Group 2: Communications Strategy – Develop 2 Key Messages n n

n

Come up with alternatives Pick the one that makes the most sense for the scenario

Come up with what you think will be the most frequently asked questions Choose 2 and develop key messages for each

Group 3: Change Management Strategy – Come up with a strategy to determine the location(s) of Head Office functions for the combined organization n n

Come up with alternatives Pick the one that makes the most sense

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LOGISTICS MANAGEMENT

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What is Logistics? Logistics is the . . . “process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.“ Council of Logistics Management

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Is it different from SCM? Not really! “Supply Chain Management deals with the management of materials, information, and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers.” (Stanford Supply Chain Forum) So, Logistics and Supply Chain are equivalent terms. Page 68 of 170

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Logistics Functions Purchasing / Procurement

Facility Location / Network Design

Inventory Control

Transportation

Warehousing

Customer Service

Materials Handling

Order Processing

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A Sample Logistics Firm: EKOL

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Value Added Services Value added services, such as quality control, labeling, sorting, repacking, etc. can be included in the logistics processes.

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Logistics Experience will be different from one sector to another Textiles n

speed and variety due to seasonality concerns

Retailing (FMCG) n

n

Health n

prevents stores from having empty shelves or shelves with overstocks Frozen storage and transportation hygienic, have limited shelf life, require special storage conditions and entertain high inventory risks

Automotive n

just in time (JIT), delivering parts from thousands of kilometers, special packaging

Fuel and Petroleum Transportation n

very special tanker security systems

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Fuel and Petroleum Transportation n

n

Fuel tankers have bodies, including the chassis, made of aluminum alloy and are the lightest tankers in weight and highest in volume (20.000 to 38.000 liters). The tanks have a bottom loading and unloading system and all the necessary security equipments for overloading.

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Cargo air Carriers

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Container Carriers

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RFID n

n

Radio-frequency identification (RFID) is the use of an object (typically referred to as an RFID tag) applied to or incorporated into a product, animal, or person for the purpose of identification and tracking using radio waves. It comprises interrogators (also known as readers), and tags (also known as labels).

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