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BPR is a fundamental rethinking of the business activities making changes in all the functional areas
and non- functional areas in order to make optimum utilization of the available resources.
The organization should re structure the process keeping in mind the overall organization goal rather
the department goal.
Nowadays with available technology, the organization can incorporate the required changes to
improve the business.
Business process reengineering means staring all over, starting from the scratch. Reengineering, in
other words, means pulling aside much of the age- old practices and procedures of doing a thing by
forgetting how work has been done so far, and deciding how it can be best done now.
Reengineering begins with fundamental re- thinking. The organizations try to find out answers to such
questions like why do we do what we do? and why do we do it the way we do?
Reengineering does not begin with anything given or with any assumptions. The thinking process in
reengineering begins with a totally free state of mind without having any preconceived notion.
Reengineering first determines what a company must do. And then it decides on how to do it.
Reengineering ignores what the existing process is and concentrates on what it should be.
Another key element in the reengineering involves radical redesigning of process.
Radical redesigning means going to the root of the problem areas, not merely attempting to make any
superficial changes. Radical redesign involves completely discarding all existing structures and
procedures and evolving completely new ways of doing the work.
Reengineering is about business reinvention- not business improvement, business enhancement or
business modification.
The steps of BPR are:1. Determining objectives and framework- It helps in building comprehensive foundation for the
reengineering process. This will provide the required focus, direction, motivation, etc for the redesign
process.
2. Identify customers and determine their needs- The designers have to understand the customers
needs and wants, their profits, their steps in acquiring, using and disposing a product and the purpose
is to provide added value to the customer.
3. Study the existing process- This will provide an important base for the redesigners. The purpose of this
is to understand the what and why of the targeted process.
4.
Formulate and redesign a process plan- The information gained through the earlier steps is translated
into an ideal redesign process. In this step, alternative processes are considered and the best is
selected.
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5. Implement the redesign- It is easy to formulate new process but to implement them is hard.
Implementation of the redesign process and application of other knowledge gained from the previous
step is to achieve dramatic improvement.
Problems in BPR
1. Only a few companies are able to go for a major and radical improvement in the business process.
2. This restructuring may impose new challenges
3. It disturbs established hierarchies and functional structures and involves resistance among the workforce.
4. Reengineering takes time and expenditure
5. Even there can be loss in revenue during the transition period.
6. Setting of targets is complicated and difficult.
7. If the targets are not properly set, or the whole transformation not properly carried out, reengineering
efforts may turn out as a failure.
Total Quality Management (TQM)
TQM is seen as the most comprehensive approach to quality thinkable for an enterprise.
The pillars of TQM are:T stands for Total- It is the integration of staff, suppliers, customers and other stakeholders. It is away from
party- specific thinking to a more holistic approach.
Q stands for Quality- it is the quality if the work and the process of the enterprise leading to quality of
products.
M stands for Management- It stresses on the leadership task quality and quality of leadership form a
scientific point of view TQM can be a seen as a leadership.
Success of an organization is greatly influenced by and depends on the quality of its products marketed and
services offered. In addition, the reputation of the organization is determined by the behavioral disposition of
the people. The quality of products and services depends on the methodology and technology adopted, as well
as on the work culture of the organization. Quality is the essential requirement for survival and growth. The
importance of quality has commanded the strategic apex of the company to concentrate on quality and this
led to the development of the new aspect of management. The philosophy of TQM means that the
organizations culture is defined by and supports the constant attainment of satisfaction through an integrated
system of tools, techniques and training. This involves the continuous improvement of processes, resulting in
high quality products and services. As popularized by Deming and Later Juran, TQMs premises center on
intrinsic quality control, removal of adversarial relationships, constancy of purpose, continual in- service
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training, and attention to customer preferences. It holds that changes is inevitable, desirable and welcome and
that it must be planned for with participation by the greatest number of constituencies.
Benchmarking
Benchmarking is basically a process of determining who the best, which sets the standard is and what that
standard is.
It is an exercise of identifying the best practices in the industry and to emulate them.
The practice of benchmarking enables an organization to accelerate an organizations rate of
improvement.
Benchmarking promotes a thorough understanding of companys own processes. Thus, the companys
own profile is well understood.
The thorough study leads to identification of non- value adding activities
Benchmarking, thus, is a part of larger profit effort usually a process of reengineering or quality
improvement initiative.
Types of Benchmarking: Benchmarking is essentially looking around and learning from others. Based
on the objects to be benchmarked, four categories of bench marking are in practice, which are:
1. Product Benchmarking - Customer satisfaction benchmarking or customer value Benchmarking
are the alternatives names of product benchmarking. Engineering and qualitative comparison of
products and services comes within the purview of this benchmarking.
2. Performance Benchmarking One organization benchmarks the performance measures of other
organizations. Performance measures may include return on assets, cycle time, percentage of on
time delivery ,percentage of damaged goods, fraction defectives, mean time between failures
(MTBF), time spent on administrative activities and the like. Thus, this is a process of intercompany
comparison done through a set financial ratio, performance indicators where scope for
improvement is high enough. National productivity council has recently prompted.
3. Process Benchmarking- In process benchmarking, the phrases like know where, know how,
know why, are found of paramount importance. In addition to knowing where a company is, we
are also able to know, how and why it has reached that stage. Process benchmarking helps us
to open our eyes and provides us with a more effective and efficient process to be implemented.
This type of benchmarking contains all the elements of ideal benchmarking process. E.g. analysis,
comparison and synthesis. National productivity council proposed a model process benchmarking
methodology to be carried out by a team of process experts.
The following are the steps:
1. Identify the object or process to be redesigned
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2. Map and measure the existing process in its entirety in terms of relevant critical dimensions.
3. Identify the partner where the same process is known to be better performed.
4. Analyze the partners process and find out the differences. This often requires collection of
checklist/ questionnaire and / or physical visit to the partners side.
5. Redesign the process and put up the proposal for management approval.
6. Implement the redesigned process
7. Monitor the performance of the redesigned process
8. Recalibrate the process.
4. Strategic Benchmarking - This benchmarking refers to the ability to see where one company wants
to go. In case of strategic benchmarking, strategy is both forward looking (proactive PDCA), as
well as side looking (Interactive). Indian firms started pursuing strategic benchmarking since 1990s.
Based on the organization being benchmarked, there can be as many as five methodologies.
1. Internal benchmarking: organization can benchmark within itself. One department can
benchmark some other department. If there is collaboration, then benchmarking can be
among organization collaborated.
2. Industry benchmarking: Performances of other organizations, within the industry, producing
the products or services of same nature are compared.
3. Competitive benchmarking: Performances of competitors are directly compared.
4. Best in class benchmarking: Implies comparison of best practices prevalent in an organization
irrespective of products and services.
5. Relationship benchmarking: Simply benchmarking an organization with another organization,
already having relationship like customer supplier relationship, or joint venture
management.
Six- Sigma
Sigma is a statistical term that measures how far a given process deviates from perfection. Six sigma stands for
Six Standard Deviations (Sigma is the Greek letter used to represent standard deviation in statistics) from
mean. Six sigma methodologies provide the techniques and tools to improve the capability and reduce the
defects in any process. Six sigma is the methodology that improves the capability and reduces the defects in
any continuous improvement and radical design. It is a statistical tool used for problem solving which reduces
the defects by streamlining processes.
Six Sigma was started in Motorola, in its manufacturing division, where millions of parts are made using the
same proceeds repeatedly. Eventually, Six Sigma evolved and applied to other non- manufacturing processes.
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Today, Six Sigma is applied to many fields such as Services, Medical and Insurance Procedures, call centers, etc.
following Motorola, General Electrics, allied Signal, Honey Well, Ford, Etc also followed suit and realized
powerful bottom line results in their organization.
Higher the Sigma level, better the capability of the process to produce defect free work and vice versa.
The process model for Six Sigma
To achieve better results through involvement of all the people in continuous improvement of their processes,
it is required to apply process model to a business. In six sigma, targets for improvement are set for a process
and not for a function.
Six Sigma methodology
Six sigma methodology improves any existing business process by constantly reviewing and re-tuning the
process. To achieve, this six sigma uses a methodology known as DMAIC (Define opportunities, Measure
performance, analyze opportunity, Improve performance, Control performance)
Define opportunity Define the goals and objectives of improvement project, which is derived from critical to
quality characteristics, based on voice of customer, project charter, problem statement, milestones, scope of
project and a high- level map of the process are developed in this phase.
Measure Measure the process to find the current level of performance and to gauge improvement later.
Calculate the sigma level as a measure against customer requirements and for comparison with other
processes.
Analyze Analyze the data connected in the measurement phase to identify problems in the process and to
find the root causes of the variation. It is applied used of experience, data and a process review to find viable
causes. It is repeated for refinement or rejection of possible causes, until the root cause is found and verified
with data.
Improve- Improve the system by finding ways to do things better, safer, cheaper or faster but most of all to
satisfy your customers. In this phase test, refine and implement a solution to the root cause. Implement the
new approach and validate the improvement.
Control Control the improvement implemented on continuous basis. Institutionalize it by altering policies,
procedures, budgets, instructions and other management systems, if necessary. Sell the project to your
customer and internally, secure management support, and give final ownership to those working with it on day
to day basis.
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Analyze: The stores identified at least three other factors besides display type that could impact sales.
Range for each factor was identified. Design of Experiments was conducted.
Improve: "Fancy" display had no significant impact on sales. The "fancy" displays were not ordered
for any more stores, with considerable cost savings.
Control: Future changes will be tested and evaluated using statistical techniques.
Tools of Six Sigma
At each phase of Six Sigma specific tools are used:
S.NO
Phase
Define
Measure
Analyze
Improve
Action plan
Control
The steps to Six Sigma: Six sigma begins with shrinking the inherent variation in a process to half the
specification range (Cpk= 2.0). At the same point of time the mean is to shift at most 1.5 sigma from the
specification midpoint (the target quality)
6. Ensure continuous improvement by measuring, analyzing and controlling the improved process.
Many companies are frequently adopting Measure- Analyze Improve- Control (MAIC) cycle to use six
sigma. They adopt certain steps:
1. Select critical to quality characteristics.
2. Define performance standard (the targets to be achieved)
3. Validate measurement systems (to ensure that data are reliable)
4. Establish product reliability (how good are your products now)
5. Define performance objectives
6. Identify sources of variation (use 7 QC tools)
7. Screen potential causes (apply correlation studies etc
8. Ascertain relationship between variables (Causes of factors, fan and the output)
9. Establish operating tolerances for input factors and output variables.
10. Validate the measurement system (without validation you cant be sure)
11. Determine the process capability (Cpk)
12. Implement process controls
Contemporary Strategic Issues
If any organization wants to stay competitive, it needs to be in e- commerce. The strategy should be to
integrate the Internet into all of the core business.
The impact of the Internet and the rapidly emerging e- commerce environment is very much in the growth of
the business. The real- time data processing and e-commerce applications make a lot of difference to the
business growth. The coming of e-commerce has changed the character of the market, created new driving
forces and key success factors and created new strategic groups.
E- Commerce applications have enormous potential for the growth of the company. The internet economy
provides opportunities and also poses threats that demand strategic response and that require managers to
craft bold new strategies.
What is Internet Technology?
The Internet is an integrated network of banks of servers and high- speed computers, digital switches and
routers, telecommunications equipment and lines, and individual users computers. The backbone of the
Internet consist of telecommunications lines criss- crossing countries, continents, and the world that allow
computers to transfer data in digital form at very high speed.
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The bandwidth of the line determines the capacity or speed of the data transfer. These lines are connected to
computer- like digital switches that move traffic along the backbone lines; many of these switches act as
routers, deciding which way to direct the traffic and how to handle the requests of users computers to send or
obtain data based on the destinations and line congestion.
Users gain access to the network via a LAN server or an ISPs computerized switch that has the capability to
route traffic to and from end users directly connected to it. Many different types of specialized software are
required to make the Internet function and infuse it with attractive e- commerce capabilities.
Characteristics of the e-commerce environment
1. The internet makes it feasible for companies everywhere to compete in global markets. Internet opens up
a much bigger geographical market.
2. Competition in an industry is greatly intensified by new e-commerce strategic initiatives of existing rivals
and by the entry of new, enterprising e-commerce rivals.
3. Entry barriers into e-commerce are relatively low.
4. The information is available to the customers throughout the day.
5. The internet results in a much faster diffusion of new technology and new ideas across the world.
6. Saves cost and time.
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include certain strategies and may even dictate a particular course of action. Determining vision and mission
provides long term direction, and infuse the organization with a sense of purposeful action.
Environmental constituents exist in isolation and do not interact with each other.
Incorrect: Business environment consists of a no: of factors, events, influences etc. Which arise from different
sources and interact with each other continuously to create new sets of complex influences.
Profit may not be a universal objective but business efficiency is definitely an objective common to all
business.
Correct: The primary objective of business is to earn adequate profit but not maximum profit. Profit serves as a
yardstick to measure the success of a business. To facilitate and sustain profit earning, certain other objectives
are also pursued by business and efficiency is one of them.
Strategic analysis:
Industry is a grouping of dissimilar firms.
False: Industry is a group of firms whose products have same and similar attributes such that they compete
for the same buyers.
Strategic planning:
Acquisition is a strategy.
True: Acquisition is a cooperative expansion strategy. It provides a rapid means of gaining an established
product or market.
A companys strategy has always to be proactive in nature.
False: Strategy is partly proactive and partly reactive. A companys strategy is typically a blend of proactive
actions on the part of managers to improve the companys market position and financial performance and
as needed reactions to unanticipated developments and fresh market conditions. Hence portion of a
companys strategy is always developed on the fly, coming as a reasoned response to unforeseen
developments- fresh strategic manoeuvre on the part of rival firms, shifting customer requirement and
expectations, new technologies in the market opportunities, a changing political or economic climate in
the surrounding environment.
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functional managers nevertheless have a major strategic role to develop functional strategies in their area
that help to fulfil the strategic objectives set by business and corporate level managers.
A core competence is a unique opportunity of an organisation not shared by the others.
True: Core competencies represent distinctive skills which help a firm gain competitive advantage over the
others. It is thus not shared by others and if the competitors imitate or develop similar core competencies,
the firm has to continuously gain more and more competencies to stand aside.
True: Strategy does follow the structure as it is impossible to formulate or implement strategy without
structure. Structure defines the framework within which the activities are to occur.
Resistance to change is an impediment in building of strategic supportive corporate culture:
True: It is strategy implementers work, once the strategy is chosen, to change whatever factors of the
corporate culture whatever factors of the corporate culture hinders effective execution. This is because,
once a culture is executed, it is difficult to change.
Changes of any type are always disquieting, sometimes they may be threatening:
Incorrect: The toughest management task is to talk about change.
This is because of heavy anchor of
deeply held values and habits people cling emotionally to the old and familiar. However favorable
changes either in the external environment on internal environment are not threatening or disquieting.
An organisations culture is always an obstacle to successful strategy implementation.
Incorrect: Culture is not always an obstacle. Strong culture promotes good strategy execution. It does the
following positives to the organization:
Provides a system of informal rules and peer pressure regarding how to conduct a business internally
and how to go about doing ones job.
Shape the mood, temperament, and motivate the workforce, positively affecting organisational
energy, work habits and operating practices, the degree to which organisational units cooperate, and
how customers are treated.
Nurtures and motivates people to do their jobs in ways conducive to effective strategy execution.
It provides structure, standards, and a value system in which to operate and it promotes strong
employee identification with the companys vision, performance targets and strategy.
This makes the employees feel genuinely better about their jobs and work environment and the merits
of what the company is trying to accomplish.
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Incorrect: Although any business action may result directly or indirectly i creation/erosion o shareholders
wealth, the main focus of six sigma is on delivering value to customers. Six sigma aims in improving
customer satisfaction. Primarily, six sigma means maintenance of the desired quality in processes and end
products. It also means taking systematic and integrated efforts toward improving quality and reducing
cost.
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performance. On the other hand BPR relates to analysis and redesign of workflows and processes
both within and between the organizations.
Strategic management is a bundle of tricks and magic.
Incorrect: Strategic management in not a bundle of tricks and magic. It involves systematic and
analytical thinking and action. Although, the success or failure of a strategy is dependent on
several extraneous factors, it cannot be stated that a strategy is a trick or magic. Formation of
strategy requires careful planning and requires strong conceptual, analytical, and visionary skills.
The purpose of SWOT analysis is to rank organisations.
Incorrect: SWOT analysis stands for the analysis of strengths, weaknesses, opportunities and
threats. It is not used for ranking of organizations. It is a tool for organizational and environmental
appraisal necessary to formulate effective strategies.
SBU concepts facilitate multi-business operations.
Correct: Organizing business along SBU lines and creating strategic business units has become a
common practice for multi product/ service and global organizations. It is a convenient and
intelligent grouping of activities along distinct businesses and has replaced the conventional
groupings. SBU facilitates strategic planning, gaining product related /market related
specialization, gaining cost-economies and more rational organizational structure.
PLC is an S-shaped curve.
Correct: PLC(product life cycle) which is a graphical depiction of sales overtime is an S-shaped
curve with four strategies- introduction, growth, maturity and decline. The pattern is shared by all
product group and families though the duration for each phase is different in each case.
Identification of PLC stages for a product/service offers useful insights for marketing
management.
The rate and magnitude of changes that can affect organisations are decreasing dramatically.
Incorrect: No, the reality is just the other way round. Business environment especially after
globalization and liberalization is witnessing change that is fast paced and has far reaching
implications for business. This is true for economic, political, technological, legal, and sociocultural factors. This has created strong pressures on organization for proactive adaptation to
environmental changes for survival growth and competitive edge.
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