Assignment 221
Delp10
B123-Chapter10-Spring18.pptB123
Chapter 10
Strategy and the Organization
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Topic 1 – Strategy & the Organisation
The organizational context
- Our lives, whether we are managers or not, are lived in organisations. These range from micro- to macro-organisations, that is, from systems as small as the smallest family unit to those as large as the government or state.
- We can think of these organisations as embedded or nested sets of systems, with influence .owing in both directions, but not in equal amounts.
- Clearly, a government will have more influence on an individual than the individual will have on a government, except in exceptional cases. Influence takes place through the interaction of systems and individuals. We can easily adapt this idea to the situation of an individual manager, the employing organisation and the wider community.
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- Just as individuals are influenced by systems which are shaped by culture, politics and economics, so managers and organisations are influenced by the wider environment.
- This external or far environment needs to be understood if organisations are to be successful. It is not under the control of the manager or organisation. Managers need to analyse it, understand what its implications are, and make appropriate plans.
- The near environment of suppliers, buyers, customers, competitors and other stakeholders can be influenced by managerial action.
- Only the internal environment of the organisation itself can be controlled directly – although, as many managers will agree, even this has its challenges!
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- The fundamental principle of strategic management is a Western cultural one – that we are controllers of our own destiny and can make things happen.
- In the quest for improving an organisation, current practices are constantly scrutinized along with what is happening in the far environment where both threats and opportunities may exist. This necessarily involves scrutiny of the near environment too.
- Importantly, the near and far environment can also be viewed from the perspective of time. This is particularly vital in planning: identifying trends over time and ascertaining whether these trends constitute threats or opportunities which might indicate the need for organisational change.
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Developing an organisational vision
- The terms ‘mission’ and ‘vision’ are often used interchangeably, although ‘mission’ is usually focused on the tangible goals of the organisation, while ‘vision’ may include quite abstract elements.
- An organisational vision is a framework that includes the guiding philosophy, core values, beliefs and purposes from which the mission statement is developed.
- The purpose of developing an organisational vision is to encourage management teams at the corporate level, the business unit or the brand level, to think in detail about what they are trying to create.
- Examples: San Diego Zoo: To become a world leader at connecting people to wildlife and conservation.
- Also: Save the Children: Our vision is a world in which every child attains the right to survival, protection, development and participation.
- Cleveland Clinic: Striving to be the world’s leader in patient experience, clinical outcomes, research and education.
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An organization’s Mission
An organisation’s mission statement sets out what the organisation wants to be. It should be the starting point for setting objectives and making strategic decisions. It contains the organisation’s value proposition – its reason for being – and therefore influences the entire organisation’s thinking.
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Typical format of a mission statement
- Good mission statements are concise and to the point, and capture the essence of the organisation by stating: its purposes (why the organisation exists, for example, to meet a specified need); its business statement (for example, to build homes); and its values (for example, a commitment to affordability and quality). There is no strict format, however.
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An organization’s Mission
- Mission statements typically contain one or more of the following four components:
The organisation’s philosophy
specification of the product/market domain
the organisation’s key values
critical factors for success in the marketplace.
Example: Cleveland Clinic: To provide better care of the sick, investigation into their problems, and further education of those who serve.
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STEEP Model
- It helps you construct a long-term forecast for your unit, your organisation, and for yourself.
- S – social
- T – technological
- E –economic
- E – environment
- P – political
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The PEST & PESTLE Model
- PEST is useful for forecasting demand by studying current and past patterns, how these are likely to be affected by a possible future changes in the organization's environment including Political, Economic, Social & Technological changes.
- PESTLE which includes Legal & Environmental factors separately.
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Porter’s five force model
- Much strategy is concerned with establishing and maintaining competitive advantage.
- This model identifies five types of competitive pressures within a sector
- Established competitors
- New entrants to the market
- Substitute products
- The bargaining power of suppliers and that of customers.
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Porters value chain model
- There are five primary activities that are strategically important for the organisation
- Inbound logistics
- Operations
- Outbound logistics
- Marketing & sales
- After sales services
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SWOT Analysis
- It is used to assess the competitive position of a product or service.
- S – strengths
- W-weakness
- O – opportunities
- T – threats
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Approaches to strategy
- Market based approach: starts by analyzing the environment outside the organization – the customers, suppliers and competitors – and then tries to fit the organization and its resources to its environment.
- Resource based approach: shifts the emphasis from the external to the internal context: the focus is placed on the resources that an organization possesses, or needs to possess, as the basis for a sound strategy.
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Porters model of generic strategies
- Competitive scope: This defines the range of products or markets over which an organization chooses to compete – the range can be narrow or broad.
- Competitive advantage: This refers to the advantage (or the plus) that an organization has over its competitors.
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Sources of competitive advantage
Cost leadership: Here the organization is the low-cost producer in its sector. Low-cost production should not be confused with low pricing, although low costs are usually reflected in low prices to the consumer. It is when the organization can achieve and sustain cost leadership by producing goods or services at a lower cost than its competitors (while maintaining quality).
Differentiation: an organization following a differentiation strategy seeks to offer extra advantages to its customers. It identifies particular elements in the product that are important to the customers and looks to make product more attractive by contrasting its unique qualities with other competing products. These elements can be either the product’s specifications or quality or style or even packaging….
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Ansoff Matrix
- It is a way of presenting the strategic options that are open to an organization in relation to its products or services, together with the risk associated with those options.
4 options:
Market penetration (present/present) This option is to seek extra sales for the product in the present market.
Market development (present/new) Alternatively, the organization can seek to find new markets for the current product.
Product development (new/present) Rather than seek new markets, the organization may modify the product and seek customers for it in the present market.
Diversification (new/new) It requires a new product to be marketed in new markets. This option is the most high risk of the four because it requires the development of both product and market
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