Certification Study Group

Managing Change

The Nature of Organization Change

Organization Change

Any substantive modification to some part of the organization (e.g., work schedules, machinery, employees). External and Internal

Forces of Change

The Nature of Organization Change

Forces for Change

External forces in the organizations general and task environments that force the organization to alter the way in which it competes. Internal forces inside the organization that cause it to change its structure and strategy; some internal forces are responses to external pressures.

The Nature of Organization Change

Planned Change

Change which is designed and implemented in an orderly and timely fashion in anticipation of future events
Change which is a piecemeal response to circumstances as they develop

Reactive Change

Managing Change in Organizations

Steps in the Change Process (Lewin Model)

Unfreezing Individuals must be shown why the change is necessary. Implementing change The change itself is implemented Refreezing Involves reinforcing and supporting the change so that it becomes a permanent part of the system.

Recognition of the need for change

Establishment of goals for the change

Steps in the Change Process

A Comprehensive Approach to Change

Diagnosis of relevant variables

Selection of appropriate change technique

Planning for implementation of the change

Actual implementation

Evaluation and follow-up

Reasons for Resistance to Change

Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright 1992 by Houghton Mifflin Company. Used with permissions.

Resistance to Change
Uncertainty about the extent and

effects of change. Threats to self-interests, power, and influence. Different perceptions of change effects and outcomes. Feelings of loss in disrupted social networks, power, security, and familiarity with existing procedures.

Overcoming Resistance to Change in Organizations

Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright 1992 by Houghton Mifflin Company. Used with permissions.

Overcoming Resistance to Change

Encourage active participation in the change process. Provide education and communication about the change process. Facilitate the change process by making only necessary changes, announcing changes in advance, and allowing time to adapt to change.

Overcoming Resistance to Change

Force-field analysis, in which the forces for and against the change are delineated and the forces against the change are minimized, can be used to reduce resistance to change.

Overcoming Resistance to Change

Force-Field Analysis for Plant Closing at General Motors

Reasons for Closing Reasons Against Closing
Resistance from unions

Need to cut costs

Plant
Excess capacity

closing

Concern about worker welfare

Outmoded production facilities

Possible future needs

Figure 7.2

Certification Study Group

Logical Thinking Patters

Characteristics of Inductive Reasoning

Unlike deductive reasoning, Inductive reasoning is not designed to produce mathematical certainty. Induction occurs when we gather bits of specific information together and use our own knowledge and experience in order to make an observation about what must be true. Inductive reasoning does not use syllogisms, but series of observations, in order to reach a conclusion.

Characteristics of Inductive Reasoning

Consider the following chains of observations: Observation: John came to class late this morning.

Observation: Johns hair was uncombed. Prior experience: John is very fussy about his hair. Conclusion: John overslept

Characteristics of Deductive Reasoning

A deductive argument offers two or more assertions that lead automatically to a conclusion. Though they are not always phrased in syllogistic form, deductive arguments can usually be phrased as "syllogisms," or as brief, mathematical statements in which the premises lead inexorably to the conclusion. The following is an example of a sound deductive sullogism.

Characteristics of Deductive Reasoning

Premise: All dogs have four legs. Premise: Rover is a dog, Conclusion: Rover has four legs.

Characteristics of Deductive Reasoning

As long as the first two sentences in this argument are true, there can be no doubt that the final statement is correct--it is a matter of mathematical certainty. Deductive arguments are not spoken of as "true" or "false," but as "sound" or "unsound." A sound argument is one in which the premises guarantee the conclusions, and an unsound argument is one in which the premises do not guarantee the conclusions. A deduction can be completely true, yet unsound. It can also be sound, yet demonstrably untrue.

Certification Study Group

Organizational Planning

Plans

By Level

Strategic Tactical Operational

Planning by Organizational Level

Strategic
President and CEO Vice President Operations Manager Operations Vice President Marketing Director Advertising Vice President Finance Manager Accounting

Tactical

Operational

Time Frames for Planning

The Time Dimension of Planning

is based on the principle of commitment. Planning must provide sufficient time to fulfill the managerial commitments involved.

Long-range Plans Intermediate Plans Short-range Plans

The Nature of Strategic Management

Strategy

A comprehensive plan for accomplishing an organizations goals. A way of approaching business opportunities and challenges A comprehensive and ongoing management process aimed at formulating and implementing effective strategies.

Strategic Management

The Components of Strategy

Distinctive Competence

Something an organization does exceptionally well. How an organization will distribute its resources across the areas in which it competes.

Resource Deployment

Scope

Specifies the range of markets in which an organization will compete.

Types of Strategic Alternatives

Business-level Strategy

How the organization conducts business in a particular industry. The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.

Corporate-level Strategy

Types of Strategic Alternatives

Strategy Formulation

The set of processes involved in creating or determining the organizations strategies; it focuses on the content of strategies. The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.

Strategy Implementation

Formulation and Implementation Across Strategic Alternatives

Corporate Strategy Formulation Decisions about which markets to compete in
Business Strategy Formulation
Decisions about how to compete in each market

Implementation Competing in the markets via existing operations, mergers, acquisitions, new ventures, divestitures

Implementation Carrying out the businesslevel strategies chosen for each business
Implementation Carrying out the functionallevel strategies chosen for each business function

Functional Strategy Formulation

Decisions about how to address each function within the organization

Mission
An organizations fundamental purpose

SWOT Analysis

SWOT Analysis

To formulate strategies that support the mission

Internal Analysis Strengths (distinctive competencies) Weaknesses

External Analysis Opportunities

Threats

Strengths Weaknesses Opportunities Threats

Best Strategies
Those that support the mission and exploit opportunities and strengths neutralize threats avoid (or correct) weaknesses

Using SWOT Analysis to Formulate Strategy

Evaluating Organizational Strengths

Organizational strengths Distinctive competencies Sustained competitive advantage Organizational weaknesses Competitive disadvantage

Evaluating Organizational Weaknesses

Using SWOT Analysis to Formulate Strategy

Evaluating an Organizations Opportunities and Threats

Organizational opportunities are areas in the organizations environment that may generate high performance. Organizational threats are areas in the organizations environment that make it difficult for the organization to achieve high performance

Using a SWOT Analysis to Formulate Strategy An Example

Environmental Analysis Opportunities
High growth in market for low-cost lodging

Organizational Analysis Strengths

Solid hotel business Solid food services

Threats
Low growth in the market for highcost lodging

Weaknesses
Poor performance in cruise ship, travel agency, and theme parks Weak cash position

Porters Generic Strategies

Differentiation strategy Overall cost leadership strategy Focus strategy

Porters Generic Strategies Examples

Differentiation

Nordstroms
Wal-Mart Gucci

Overall Cost Leadership

Focus

Strategies Based on Product Life Cycle

High
Introduction Sales Volume Growth

The Product Life Cycle

Stages
Maturity Decline

Low

Time
Figure 3.3

Strategies Based on the Product Life Cycle

Product life cycle: a model that portrays how sales volume for products changes over the life of products.

Introduction Stage Growth Stage Mature Stage Decline Stage

Formulating Corporate Level Strategies Base Concepts

Each business or set of businesses within such a firm is frequently referred to as a strategic business unit, or SBU. Diversification

The number of businesses an organization is engaged in The extent to which these businesses are related to one another

Formulating Corporate Level Strategies

Single Product Strategy

No diversification involved Organization sells one product/service in a single market

Formulating Corporate Level Strategies

Related Diversification

A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.

Related Diversification

Bases of relatedness bases include

common technology, common distribution networks, common marketing skills, common brand names and reputation, and common customers.
Basis of Relatedness Similar technology Common distribution and marketing skills Common name brand and reputation Common customers Examples Phillips, Boeing, Westinghouse, Compaq RJR Nabisco, Phillip Morris, Procter & Gamble Disney, Universal Merck, IBM, AMF-Head

Related Diversification

Advantages of Related Diversification

Reduces organizations dependence on any one of its business activities and thus reduces economic risk. Reduces overhead costs associated with managing any one business through economies of scale and economies of scope.

Related Diversification

Advantages of Related Diversification

Allows an organization to exploit its strengths and capabilities in more than one business. Synergy exists among a set of businesses when the businesses value together is greater than their economic value separately.

Formulating Strategy Unrelated Diversification

Unrelated Diversification

When an organization operates several businesses that are not associated Stable performance over time Resource allocation spread over more than one industry Reduced business cycle risk

Advantages

Formulating Strategy Unrelated Diversification

Disadvantages Strategy does not usually lead to high performance due to the complexity of managing a diversity of businesses Firms with unrelated strategies fail to exploit important synergies, thus are at a competitive disadvantage to firms with related diversification strategies Most organizations have now abandoned

this strategy

Managing Diversification

Major Tools for Managing Diversification

Portfolio management techniques

Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.

Two important portfolio management techniques

The BCG Matrix The GE Business Screen

BCG Matrix

Provides a framework for evaluating the relative performance of businesses in which a diversified organization operates. Uses two factors to evaluate a firms set of businesses: market growth rate and market share. The matrix classifies the types of businesses that a diversified firm can engage in.

BCG Matrix

It helps managers to develop a better understanding of how different strategic business units contribute to the overall organization. By assessing each SBU on the basis of its market growth rate and relative market share, managers can make decisions about whether to commit further financial resources to the SBU or to sell or liquidate it. SBU stands for .

The BCG Matrix

High
Market growth rate

Stars

Question marks

Cash cows

Dogs

Low

High

Relative market share

Low

Source: Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.

BCG Matrix

Dogs are businesses that have a very small

share of a market that is not expected to grow. Cash cows are businesses that have a large share of a market that is not expected to grow substantially. Question marks are businesses that have only a small share of a quickly growing market. Stars are businesses that have the largest share of a rapidly growing market.

GE Business Screen

A method of evaluating businesses along two dimensions:

(1) industry attractiveness and (2) competitive position

The GE Business Screen is a more sophisticated approach to portfolio management than the BCG Matrix

GE Business Screen

A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors:

Industry attractiveness. Competitive position (strength) of each firm in the portfolio.

In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

The GE Business Screen

Industry growth rate High Winner Winner Question mark

Medium

Winner

Average business

Loser

Low

Profit producer Good

Loser

Loser

Medium Competitive position

Poor

In general, the more attractive the industry and the more competitive the position, the more an organization should invest in a business.

Competitive position
1. Market share 2. Technological know-how 3. Product quality 4. Service network 5. Price competitiveness 6. Operating costs

Industry attractiveness
1. Market growth 2. Market size 3. Capital requirements 4. Competitive intensity

Tactical Planning
An organized sequence of steps

designed to execute strategic plans Tactical plans are to battles what strategy is to a war Strategy focuses on resources, environment, and mission, whereas tactics focus primarily on people and action

Tactical Planning

Developing and Executing Tactical Plans

Executing tactical plans
Evaluate each course of action in light of its goal Obtain and distribute

Developing tactical plans

Recognize and understand overarching strategic plans and tactical goals

Specify relevant resource and time issues Recognize and identify human resource commitments

information and resources Monitor horizontal and vertical communication and integration of activities
Monitor ongoing activities for goal achievement

Operational Planning
Single Use Plans A plan that is not likely

to be used again in the near future.

Program plan Project plan

Standing Plans - a plan for activities that

recur regularly over a period of time

Policy Standard Operating Procedure Rules and Regulations

Contingency Planning
The determination of alternative

courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate.

The Contingency Planning Process - An Ongoing Process

Action Point 1: Develop plans, considering contingency events Implement plans and formally identify contingency events Specify contingency event indicators and develop plans for each event

Action Point 2:

Action Point 3:

Action Point 4:

Successfully complete each plan or contingency plan