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LECTURE 3
In preparing for battle I have always found that plans are useless, but planning is indispensable.
- Dwight D. Eisenhower
Industry Environment
By studying the external environment, firms identify what they might choose to do
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al ob nt Gl me on vir En
economy.
Global Mind-Set
The ability to study an internal environment in ways
Analysis Outcome
Understanding how to leverage the firms
Internal Analysis
The purpose of internal analysis is to pinpoint the strengths and weaknesses of the organisation. It includes assessments of:
The firms resources and capabilities Distinctive competencies
Value Creation
Competitive Advantage
Outsource
Internal Analysis
Building and sustaining a competitive advantage requires a company to achieve superior:
Efficiency Quality Innovations Responsiveness to Customers
Weaknesses
Liabilities that depress profitability
has established both strategic and financial controls to assess its performance.
Prevents over-emphasis of financial
Curb Vagueness
(eg Improve the organisations customer service)
Be Precise
(eg Increase respond to customer orders by 33.3% by
Strategy Mapping
Stakeholder Improved Returns on Investments More rapid and accessible services
Internal Process
Leadership Development
Knowledge Management
Investments
Human Capital
IT Infrastructure
Strategy Mapping
Drivers and outcomes matched against the core competencies of the organisations business model
Splitting the Perspective Outcomes
Customer Perspective
Retention Rate Price Quality Customer Satisfaction Service Reputation
Drivers
Ensure Alignment: Each sub-unit and individual link their objectives to the map.
Promote Transparency: Communicate with and educate constituents, partners, oversight bodies, and the general public.
Source: Robert S. Kaplan (2004) "Using Balanced Scorecard Technology to Create Strategy-Focused Public Sector Organisations
Career Anchors
General Managerial
Want to be managers A liking for problem-solving and dealing
Autonomy / Independence
Primary need to work under their own rules
and steam
They avoid standards and prefer to work alone
Career Anchors
Entrepreneurial Creativity
Like to invent things, be creative and, most of all,
Security / Stability
Seek stability and continuity Avoid risks and are generally 'lifers' in their job
Career Anchors
Service / Dedication to a cause
Driven by how they can help other people
Pure Challenge
Driven by challenge Seek constant stimulation and
difficult problems
Will change jobs when bored Career can be very varied
Career Anchors
Lifestyle
Focused first on lifestyle and their whole pattern of
living
Integrate work and life May take long periods off work
Schein also suggests that it is often mid-life (late 30s and 40s) before an individual's career anchor becomes clear Also Recall McClellands Theory of Needs
Source: Schein, Edgar H, (1990). Career Anchors (discovering your real values).
Life is short, the art long, opportunity fleeting, experiment treacherous, judgement difficult.
Hippocrates
THE FIRM Goals and Values Resources and Capabilities Structure and Systems
STRATEGY
Organisational Capability
The source of
Yes
No
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Technological Development
Firm Infrastructure
Support Activities
Service Procurement Marketing & Sales Outbound Logistics Operations Inbound Logistics Primary Activities
Outsourcing
Outsourcing is the purchase of some or all of a valuecreating activity from an external supplier Usually this is because the specialty supplier can provide these functions more efficiently
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Technological Development
Support Activities
Firm Infrastructure
Service Procurement Marketing & Sales Outbound Logistics Operations Inbound Logistics Primary Activities
Competitive Advantage
Competitive Advantage
A firms profitability is greater than the average
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Competitive Advantage
How does Competitive Advantage emerge?
External sources of change e.g.: Changing customer demand Changing prices Technological change
Competitive Advantage
COST COST ADVANTAGE ADVANTAGE
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ue pro du ct
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TECHNOLOGY
PRODUCT DESIGN
MANUFACTURING
MARKETING
DISTRIBUTION
SERVICE
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Complexity Theory
Organisations are complex systems Human crowds, flocks of birds, ant colonies are also complex systems They are all systems in which large numbers of independent agents interact Complexity Theory shows that complex systems display common and predictable patterns of adaptive behaviour
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Complexity Theory
Premise is that there is a hidden order to the behaviour (and evolution) of complex systems, whether that system is
A national economy An eco-system An organisation A production line
Used in business as a way to encourage innovative thinking and real-time responses to change by allowing business units to selforganise.
Complexity Theory
Complex adaptive systems have common features Unpredictability
Waves of change are constantly interacting
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Complexity Theory
Self-organisation
A key feature of biological and social systems
the capacity to self-organise, adapt to change, and create new structures and systems in the absence of formal authority
Self-Organisation
For human organisations there are three main requirements for self-organisation
Identity Organisations need to have an intent that drives the sense-making process within the organisation Information The medium through which an organisation relates to its environment The medium through which individuals within the organisation know how to react to external changes
Self-Organisation
Relationships
Pathways through which information is transformed
requires every person to have a wide range of connections to others, with the potential for unplanned connections Networking!!
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Complexity Theory
Inertia and Chaos
Evolutionary processes in organisations can
Complexity Theory
Step back from the day-to-day running of the organisation Watch for
Emergent properties and Organisational patterns
Those conditions or patterns that bring about the best solutions should be preserved whenever possible
Complexity Vs Chaos
Complexity theory is very similar to Chaos Theory Complexity theorists maintain that chaos, by itself, does not account for the coherence of selforganising, complex systems. There are advantages for systems that evolve to the edge of chaos ...ie they know when to stop!
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average of all other companies in the same industry that compete for the same customers
Benchmarking
Comparing company performance against that of
Capability of Competitors
Strategic commitment Absorptive capacity
resources.
Profit margins and invested capital shrink
rapidly.
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Developing a sound and healthy organisation requires understanding the environment as much as understanding the organisation.
- Gary Hamel
Management Guru & Author
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