Management Models...

150 Slides
Product

Promotion Price

Customer
Service

Place People

Processes

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Key Words...
Break-even – Financing Life Cycle – Economies of
Scale – Elasticity – Sales Cycles – Market Potential –
Portfolio Matrix – Product Model – Four P’s –
Push/Pull Strategy – Marketing Mix – PDCA Cycle –
SWOT – Value Chain – Ansoff Matrix – BCG Matrix –
7-S Model – Core Competencies – GE Business
Screen – Nine Cell Industry – Risk/Reward Diagram –
Porter’s Five Forces – Industry Competition – Generic
Strategies – Geobusiness Model – Porter’s Diamond –
Matrix Design – PIMS – Leavitt’s Diamond – Belbin’s
Team Roles – Theory X/Y – Maslow’s Hierarchy –
Herzberg’s Theory – Cultural Web – Pareto Curve –
CIM Concept – Value Drivers
 Markets and Structure of Flow

Resources Resources
Resource
Money markets Money

Taxes, Services,
goods money

Services, money Taxes

Manufacturer Government Consumer
markets Taxes, goods markets Services markets

Services, Taxes,
money goods

Money Money
Middlemen
Goods and services markets Goods and services
 A Company‘s Macroenvironment

Le
MACROENVIRONMENT

g
isl
a
gy

tio
IMMEDIATE INDUSTRY &
lo

n
no

an
COMPETITVE ENVIRONMENT
ch

d
Te

re
gu
la
Suppliers Substitute

tio
ns
COMPANY

Rival Firms Buyers

cs
So

hi
ci

ap
lVa

r
og
al

New Entrants

m
ue

de
sa

n
nd

t io
la
Li

pu
fe

The Economy at large

st

Po
yl
es
 Break-even Point

Value $

Sales
Profit

Break-even Point
Total
Variable costs
costs

Fixed
Current sales level costs

0
0 Units sold
 Break-even Chart

1200
Total revenue
1000
Target profit

Total cost
800

600

400
) s dnas uoht ni ( sr all o D

Fixed cost
200

0 10 20 30 40 50

Sales Volume in Units (in thousands)

 Break-even Volume

35 Total
Revenue
30

25
Total Costs
$ Millions

20

15

10 Fixed
Expenses*

0
50 100 150 200
Break-even Volume Units Sold (‘000)
(90,000)
Profit Loss
* Fixed Expenses = Marketing Expenses and Other Direct
Expenses
 Break-even Regions

Cash flow

Returned capital Cumulative revenue

break-even

Cash flow breakeven

$
EVA break-even

Opportunity cost based on

capital risk assumed

P&L break-even
 Financing Life Cycle
Venture
FFF & Angels Investment Banks &
Capitalist
Banks

Early Later
Seed Capital Growth Growth
& Early Stage

Enterprise Enterprise
Cash Flow Mezzanine Public Financing
3rd Market
2nd

1st Initial
Public
Offering

Time
Valley Break-even
of Death point

Emerging Growth
 Demand and Supply

S
D
F G

E
Price

A B

D
0
Quantity
 Economies of Scale

Average cost

LACs*

Output

*Long-run average costs (LACs)

Increasing returns to scale, or economies of scale
 Elasticity

Price
e = 0 (total

Price
e=-

8
inelastic
demand)
e<-1

e=-1 e=-

8
(total elastic
demand)
e>-1

Quantity Quantity

e=0
P1

Price
(-)
P2
P1
(-)
Price

(+) P2
(+)

0 Quantity 0 Quantity

Demand is elastic and expenditure increases Demand is inelastic and expenditure increases
when price falls from P1 to P2 when price falls from P1 to P2
 Inelastic and Elastic Demand

P2 P’ 2

P1 P’ 1
eci r P

Q 2Q 1 Q’ 2 Q’ 1
Quantity Demanded per Period Quantity Demanded per Period
(a) Inelastic demand (b) Elastic demand
 Sales and Profit Life Cycles

Sales
Sales and Profits ($)

Profit

Introduction Growth Maturity Decline

Time
 Market Potential, Market Volume,
Market Share

Volume or value

Market potential

Market volume

Market share

Time
 The Product Life Cycle I

Sales over profits

Sales

Profits

Introduction Growth Maturiy Shake-out Decline

Stages over Time

 The Product Life Cycle II

Introduction Growth
Unit
Sales A
Volume
B

Maturity Commodity or Decline

Time
Note: A = Moderate Growth, B = Commodity, C = Decline
 The Life Cycle Portfolio Matrix
THE BUSINESS UNIT‘S COMPETITIVE
POSITION
Strong Average Weak

Development
A
C

Growth B

D
THE INDUSTRY‘S STAGE Competitive
shakeout F
IN THE EVOLUTIONARY
LIFE CYCLE
E
Maturity

Saturation
G
H
Decline
 Patterns of Strategic Change

Continuity Incremental Flux Global

The Whole Product Model

Potential Product

Augmented Product

Expected Product

Generic Product
 The Product-Positioning Map
High quality

E
A

B High price
Low price

C
D

Low quality
The Four P‘s of McCarthy I

Environment

Environment
Environment

Product Price

Place Promotion

Environment
 The Four P‘s of McCarthy II
High quality

Marketing
Mix

Channels
Product variety
Coverage
Quality
Assortments
Design
Features Product Place Locations
Inventory
Brand name
Transport
Packaging
Sizes Target
Services
Warranties Market
Returns

Price Promotion
List price Sales promotion
Discounts Advertising
Allowances Low quality Salesforce
Payment period Public relations
Credit terms Direct marketing
 Push versus Pull Strategy

Marketing
activities Demand
End
Manufacturer Intermediaries
Push users
Strategy
Demand

Marketing activities

Demand Demand
End
Manufacturer Intermediaries
Pull Strategy users
The Expanded Marketing Mix

Product

Promotion Price

Customer
Service

Place People

Processes
 The 6 – Step Marketing Plan
1 Situation (SWOT) Action plan 4
firm budget allocation
market product
industry promotion
competition price
environment distribution

2 Objectives
Marketing
Forecasts 5
sales quantify:
Plan
market share costs
market expansion sales
leadership profits
satisfaction market share

3 Strategy Control 6
segment – target
organization structure
price / quality
measurement tools
product positioning
check frequency
differentiation
=> Corrective actions
diversification
 The PDCA Cycle

Plan

Act Do
Performance

Check

Path of continous improvement

Time
Enterprise Management Process

Decision
Process

Mission & Enterprise

Strategy Structure

Customer
Satisfaction

Value Enterprise
Improvement Learning

Benchmarking
 SWOT Analysis Diagram

Numerous
environmental
opportunities

Cell 3: Cell 1:
Supports a turnaround- Supports an
oriented strategy aggressive strategy

Critical Substantial
internal internal
weaknesses strengths

Cell 4: Cell 2:
Supports a Supports an
defensive strategy diversification strategy

Major
environmental
threats
 SWOT Analysis I

Strengths Weaknesses

Opportunities Threats
 SWOT Analysis II
STRENGTHS
STRENGTHS/ /WEAKNESSES
WEAKNESSES
Firm,
Firm,Organization
Organization
• Market share
• Key account share
• Growth rate
• Supply diversity
• Influence
• On market
• Purchasing / selling
deadline
• New products cycles
• Negotiation power
- firm suppliers
- customers
COMPETITION
• Firm competitivity
- Product, service
- Profitability, H.R., …
• Segments invested in
• Firm’s integration level
• High-tech vulnerability
OPPORTUNITIES
OPPORTUNITIES/ /THREATS
THREATS
Environment,
Environment,Market,
Market,Industry
Industry
• Market size
• Key account size
MARKET
• Annual growth rate
• Market diversity
• Price sensitivity
• Seasonality
• Cycles
• Negotiation power
- suppliers
- consumers
• Competitor types
• Concentration level
• Intrants / extrants
• Market share evolution
• Vertical / horizontal integration
• Technology substitution
 SWOT Analysis III
STRENGTHS
STRENGTHS/ /WEAKNESSES
WEAKNESSES OPPORTUNITIES
OPPORTUNITIES/ /THREATS
THREATS
Firm,
Firm,Organization
Organization Environment,
Environment,Market,
Market,Industry
Industry
• Firm margins • Global benefits
• Economies of scale FINANCE / BUSINESS • Economies of scale
• Barriers • Barriers
• Production capacity level • Production capacity level

• Adaptability to change • Maturity / volatility

• Expertise / Know-How TECHNOLOGY • Complexity
• Patent ownership • Differentiation
• Production technology • Patents and copyrights
• Production technology

• Reactivity / Flexibility level SOCIO - POLITICAL • Attitudes / Social trends

• Adaptability • Laws and regulations
• Agressiveness • Pressure groups
• Working relationships • Trade union activities
 The Generic Value Chain I

Support
Firm infrastructure
activities

gi n
Human resource management

Mar
Technology development

Procurement

Inbound Operations Outbound Marketing Service

logistics logistics and sales

ngi
Mar
Primary activities
 The Generic Value Chain II

FIRM INFRASTRUCTURE
HUMAN RESOURCES MANAGEMENT
TECHNOLOGY DEVELOPMENT

PROCUREMENT
MARGIN

INBOUND OUTBOUND MARKETING

LOGISTICS OPERATIONS LOGISTICS & SALES SERVICE

Marketing Sales Force Sales Force Technical

Management Advertising Administration Operations Literature Promotion
 The Generic Value Chain III

Firm infrastructure

Human resources management

Ma
rg
in
Technology development

Procurement

Ma
rgin
Inbound Operations Outbound Marketing Service
logistics logistics and sales

Primary Activities
 The Ansoff Matrix I

Current Products New Products

Current Market Product

Markets penetration development

New Market
Diversification
Markets development
 The Ansoff Matrix II

PRODUCTS AND/OR SERVICES

Existing New

New
Market
Existing product
penetration
development

MARKETS

Market
New Diversification
development
 The Customer Growth Matrix

PRODUCTS AND/OR SERVICES

Existing New

Customer Customer
Existing loyalty extension

CUSTOMERS

Customer Customer
New acquisition diversification
 Product-Market Diversification

Broad
Product Diversification

Moderate

Narrow
Narrow Moderate Broad

Market Diversification
 BCG’s Growth-Share Matrix I

RELATIVE MARKET SHARE

High Low

Question
High Star Mark
MARKET
GROWTH
RATE

Cash
Low Dog
Cow
 BCG’s Growth-Share Matrix II

RELATIVE MARKET SHARE

High Low

Star Question Mark

A

High
E Divest
B
D
MARKET
GROWTH
RATE F

Low C
G Divest

Cash Cows Dog

Targeted Present position
future position in the corporate
in the corporate portfolio
portfolio
 BCG’s Growth-Share Matrix III

RELATIVE MARKET SHARE

10x High 1.0x Low 0.1x

Low Star businesses Question marks

MARKET
GROWTH 10%
RATE

Cash generating
High Dog businesses
businesses
 BCG‘s Growth-Share Matrix IV

Stars Question Marks

22%
20%
4
18% 1
16% 3
14% 2
12% 5
10%
Cash Cows Dogs
8%
6%
et a R ht wor Gt e kr a M

4% 6 7
2%
8
x1
x 01

x 1. 0
Relative Market Share
 The New BCG Matrix

Many Fragmented Specialization

NUMBER OF
APPROACHES TO
ACHIEVE
ADVANTAGE
Stalemate Volume
Few

Small Large

SIZE OF ADVANTAGES
 Underlying Relationship Between ROI
and Market Share in the New BCG Matrix
SIZE OF THE ADVANTAGE

Small Large
Stalemate Volume

ROI ROI
Few

NUMBER OF WAYS Market share Market share

TO ACHIEVE
COMPETITVE
ADVANTAGE Fragmented Specialization
ROI ROI

Many

Market share Market share

McKinsey‘s Seven ‚S‘s Framework

Structure

Strategy Systems

Superordinate
Goals

Skills Style

Staff
 Disruption and the New 7-S’s
VISION PLANNING

Vision for Disruption

Identifying and creating
opportunities for
temporary advantage
through understanding
• Stakeholder Satisfaction
• Strategic Soothsaying
directed at identifying new ways to serve
existing customers better or new
customers that no one else
serves now.

Market Tactics for Disruption

Capability for Disruption Disruption Seizing the initiative to gain
advantage by
Sustaining for momentum by
developing flexible capacities for • Shifting the Rules
• Speed • Signaling
• Simultaneous and
• Surprise
Sequential Strategic
that can be applied across Thrusts
many actions to build a series
with actions that shape, mold, or
of temporary advantages
influence the direction or nature of
the competitors‘ responses.

RESOURCE PLANNING PUNCH-COUNTERPUNCH PLANNING

 Core Competencies I

Banner
Brand

Business
Units

Core
Products
(Platforms)

Core
Competencies
 Core Competencies II

Processes

Core
Competencies
Technologies Capabilities
 Core Competencies III

High Low Company View High

Competency 1
Competency 5

Competency 4
Market View

Competency 6

Competency 2
Low

Competency 3
 The General Electric Business Screen

COMPETITIVE POSITION

Strong Average Weak

Low

INDUSTRY Medium
ATTRACITVENESS

High
 Attractiveness/Competitive Position
Strategies
COMPETITIVE POSITION

Strong Average Weak

• Evaluate
potential for
•Grow • Specialize
leadership via
•Seek dominance • Seek niches
High Segmentation
•Maximize • Consider
• Identify
investment acquisitions
weaknesses
• Build strengths
• Identify
growth • Identify growth
INDUSTRY segments segments • Specialize
ATTRACTIVENESS Medium • Invest strongly • Specialize • Seek niches
• Maintain • Invest • Consider exit
position selectively
elsewhere
• Maintain • Trust leader‘s
overall • Prune lines statesmanship
position • Minimize • Sic on
Low • Seek cash flow investment competitor‘s
• Invest at • Position to cash generators
maintenance divest • Time exit and
levels divest
 Company Position/Industry
Attractiveness Screen

Industry attractiveness

Low Medium High

High
HOLD BUILD BUILD

Business unit strengths

Medium
HARVEST HOLD BUILD

Low
HARVEST HARVEST HOLD
 A Representative Nine-Cell Industry
Attractiveness-Competitive Strength
Matrix
COMPETITIVE STRENGTHS/BUSINESS POSITION
Strong Average Weak

High Business F
Business A

LONG-TERM
INDUSTRY Medium
ATTRACTIVENESS
Business C Business B

High priority for investment

Low
Medium priority for investment
Business E Business D
Low priority for investment
GE / McKinsey Multifactor Portfolio Matrix

INDUSTRY ATTRACTIVENESS

Manage
Invest Invest Selectively
for Earnings
BUSINESS STRENGTH

Manage
Invest Selectively Harvest or
for Earnings Divest

Manage
Harvest or Harvest or
Selectively
Divest Divest
for Earnings
 Portfolio Positions and
Defensive Strategic Market Plans

Very Attractive

Protect Protect
Market Attractiveness

Protect or Protect or Protect or

Harvest Focus Focus

Harvest or Harvest or Protect or

Divest Divest Harvest

Very Unattractive
Very Weak Very Strong
Competitive Advantage
 Market Attractiveness – Portfolio
Classification and Strategies
BUSINESS STRENGHT
Strong Medium Weak
5.00
Invest / grow
Joints
High
Selectivity / earnings
Hydraulic Aerospace
Fittings
Pumps
3.67 Harvest / divest

Clutches
Fuel
Medium Pumps
TE KRA M

Flexible
Diaphragms
SS E NE VI T CARTT A

2.33

Relief
Valves
Low

1.00
5.00 3.67 2.33 1.00

(a) Classification
The Risk-Reward Diagrams

High

RISK
Low High

REWARD (NPV)

Low
Contrasting Characteristics of Upstream
and Downstream Companies
Supply stages in a manufaturing industry (supply chain)

Raw Primary Product Consumer

materials manufacturer Fabricator producer marketer Retail

Consumer

Supply flow
UPSTREAM Centre of gravity DOWNSTREAM
ORGANIZATIONS of a manufacturing ORGANIZATIONS
industry

Contrasting characteristics of upstream and downstream companies

Upstream Downstream

Commodity Proprietary
Standardize Customize
Maximize end users Target end users
Low-cost producers High margins
Sales push Marketing pull
Line-driven organization Line/staff
Process innovation Product innovation
Capital budget R & D/advertising budget
Capital-intensive People-intensive
Technological know-how Marketing skills
Supply and trading/manufacturing and engineering Product development/marketing
 Porter‘s Five Forces I

Potential
PotentialEntrants
Entrants

Threat new entrants

Bargaining Bargaining
Industry
power of Industry
competitors power of
suppliers competitors buyers
Suppliers Buyers
Suppliers Buyers

Rivalry
Rivalryamong
among
existing firms
existing firms

Threat of substitute products

Substitutes
Substitutes
 Porter‘s Five Forces II

Firms in other
industries
offering
Substitute
Products

Suppliers of
raw materials,
RIVALRY
parts,
AMONG Buyers
components or
COMPETING
other resource
SELLERS
inputs

Potential
New Entrants
Forces Driving Industry Competition

Potential Entrants

Threat of
new entrants

Industry
Bargaining power Bargaining power
competitors
of suppliers of buyers
Suppliers Buyers

Rivalry among
existing firms

Threat of
substitute products
or services

Substitutes
 Barriers and Profitability

EXIT BARRIERS

Low High

PROFITS=LOW PROFITS=LOW
Low RETURNS=STABLE RETURNS=RISKY

ENTRY
BARRIERS

PROFITS=HIGH PROFITS=HIGH
High RETURNS=STABLE RETURNS=RISKY
Four Routes to Strategic Advantage
Business/Product Offered

Old/Existing New/Creative

KFS Aggressive
KFS Aggressive
Compete initiatives
initiatives
(wisely)

Route 1 Route 3

Intensify
Intensifyfuntional
funtional
differentiation Ask
differentiation Ask„why-why‘s“
„why-why‘s“

Strategic
Relative Strategicdegrees
degreesofof
Avoid Relativesuperiority
superiority Freedom
head-on Freedom
competition

Route 2 Route 4

Exploit
Exploitcompetitor‘s
competitor‘s Maximize
weakness Maximizeuser
user
weakness benefit
benefit
 The Generic Strategies I

Differentiation Cost Leadership

Focus
 The Generic Strategies II

COMPETITIVE ADVANTAGE

Lower Cost Differentiation

Broad
Target
Cost Leadership Differentiation

COMPETITIVE
SCOPE

Narrow
Cost Focus Differentiation Focus
Target
Five Modified Competitive Strategies

TYPE OF COMPETITVE
ADVANTAGE BEING PURSUED

Lower Cost Differentiation

A Broad Overall Broad

Cross-Section Low-Cost Differentiation
of Buyers Leadership Strategy
Strategy

MARKET Best-Cost
TARGET Provider
Strategy

A Narrow Focused Focused

Buyer-Segment Low-Cost Differentiation
(or Market Niche) Strategy Strategy
Sweeney‘s Generic Strategies

Strategic change involves enhancing

The operation‘s structure

Marketer Innovator

Emphasizes Emphasizes
Enhanced

• Quality • Quality

Strategic change involves enhancing

• Dependability • Product/service
• Range • Performance

the operation‘s infrastructure

Customer service criteria

• Speed
• New product/service
• Development

Caretaker Innovator

Emphasizes Emphasizes
• Price/ cost • Quality
Basic

• Dependability • Product/service
• Quality • Performance
• Flexibility
• Speed

Traditional Enhanced
Geobusiness Model

CONTROL VARIABLES

MOTIVATION VARIABLES

CONDITIONING
VARIABLES
 Porter‘s Diamond

FIRM
FIRMSTRATEGY,
STRATEGY,
STRUCTURE
STRUCTUREAND
AND
RIVALRY
RIVALRY

FACTOR DEMAND
FACTOR DEMAND
CONDITIONS CONDITIONS
CONDITIONS CONDITIONS

RELATED
RELATEDAND
AND
SUPPORTING
SUPPORTING
INDUSTRIES
INDUSTRIES
Resource Allocation at Corporate Level

PERCEIVED NEED FOR CHANGE

Low High

Imposed
Low „Formula“ priorities
EXTENT OF
CENTRAL
DIRECTION
Free Open
High
bargaining competition
PIMS Competitive Strategy Paradigm
Market structure Strategy and tactics Performance
•Market • Pricing • Profitability (ROS,
differentiation ROI, etc.)
• R & D spending
•Market growth rate • Growth
• New product
•Entry conditions introduction • Cash flow

•Unionization • Change in relative • Value enhancement

quality and variety
•Capital intensity of products/services • Stock (share) price

•Purchase amount • Marketing expenses

Competitive position • Distribution

channels
• Relative perceived
quality
• Relative vertical
integration
• Relative market
share
• Workforce
productivity
• Relative capital
intensity

• Relative cost
 International Strategy Options

High
Joint Foreign Foreign
venture branch subsidiary

PRODUCT Joint Foreign

Licensing/ branch
DIVERSITY venture

Joint
Export Licensing/ venture
Low

Low High
MARKET COMPLEXITY
The Wheel of Competitive Strategy

Product Line Target Market

Finance Marketing
and Control
GOALS

Definition of Objectives for

how the profitability,
business is growth, market Sales
R&D share, social
going to
compete responsiveness
etc.

Purchasing Distribution

Labor Manufacturing
Generic Competitive Strategies

Return on
Investment

Market Share
 The Strategic Triangle I

Multiple market segments

Target segments
Customers

V
ue al
ue
al
V

Corporation Cost Competitors

Product/service
differentiation
 The Strategic Triangle II

Customers
Needs seeking benefits
at acceptable prices

V
al
ue

u e
al
V

Assets and Cost Assets and

utilization differentials utilization
Company Competitor
Trilogy Strategy - Culture - Structure

t
en En
nm vi
ri o ro
nm
v
En en
t
Strategy

Structure Culture

En t
vi
ro en
nm nm
en iro
v
t En
Optimum Degree of Formal Organization

Organizational
effectiveness

Degree of formal organization

The Flow of Formal Authority
 Functional, Divisional, Multidivisional
Structures
CEO
CEO

Controlling R&D

Logistics Manufacturing Sales Finance

Cement Concrete Chemicals

CEO CEO

Europe North America Asia

Europe North America Asia

Motor Motor Motor Cement

Marine Marine Marine

Concrete
Fire Fire

Chemicals
 A Matrix Design
FUNCTIONAL DEPARTMENTALIZATION
Research and
Marketing Purchasing Production
Development
Department Department Department
Department
Manager Manager Manager Manager

PROJECT DEPARTMENTALIZATION

Alpha Project
E E E E
Project Leader

Beta Project
E E E E
Project Leader

Gamma Project
E E E E
Project Leader
 Models of Virtuality

The Virtual Face Star-alliance Model

Co-alliance Model Value-alliance Model

Leavitt‘s Diamond: The Interaction of
Social Forces in an Organization

Task

Structure People

Technology
Action-centred Leadership

TASK
INDIVIDUAL
NEEDS
NEEDS

GROUP
NEEDS
Belbin‘s Team Roles

TEA M

Shaper

Company Worker
t
Plan

Chairman
Finisher

ator
Monitor-Evalu

Resource-Investigator W orker
Team
 Group Development

Stage V
Adjourning
Group effectiveness

Stage IV
Performing

Stage III
Norming

Stage II
Storming

Stage I
Forming
Time
 Theory X and Theory Y

Theory X Vicious circle of theory X

confirms following

no responsability, strong rules

no Initiative and control

leads to leads to
passive work
attitude
Theory Y
strenghten following

no responsability, strong rules

no Initiative and control

leads to allow

Strenghten effect of Theory Y passive work

attitude
Maslow‘s Hierarchy of Human Needs I

Self-Actualization
Needs
(self-development and
realization)

Esteem Needs
(self-esteem, recognition, status)

Social Needs
(sense of belonging, love)
Safety Needs
(security, protection)

Physiological Needs
(hunger, thirst)
 Maslow‘s Hierarchy of Human Needs II

GENERAL EXAMPLES ORGANIZATIONAL EXAMPLES

Achievement Self- Challenging Job

Actualization
Needs

Status Esteem Needs Job Title

Friends in
Friendship Belongingness Needs Work Group

Stability Security Needs Pension Plan

Shelter Physiological Needs Base Salary

Herzberg‘s Motivator-Hygiene Theory

HYGIENE FACTORS MOTIVATORS

•SALARY
•SALARY
•ADMINISTRATION
•ADMINISTRATION •ACHIEVEMENT
•ACHIEVEMENT
•SUPEVISION
•SUPEVISION •RECOGNITION
•RECOGNITION
•COMPANY
•COMPANYPOLICY •RESPONSIBILITY
•RESPONSIBILITY
POLICY
•STATUS
•STATUS •ADVANCEMENT
•ADVANCEMENT
•WORKING
•WORKING •NATURE
•NATUREOF
OFWORK
WORK
CONDITIONS
CONDITIONS
 Parallels Among Need Theories of
Motivation
Herzberg‘s Maslow‘s Alderfer‘s Other
Two-Factor Theory Hierarchy of Needs ERG Theory Key Needs
Achievement
Need for
Work Itself Self-Actualization
Achievement
Responsibility Needs
Motivation Growth
Advancement and Growth
Factors Needs
Need for
Self-Esteem Power
Recognition Esteem Needs
Respect of Others

Supervision Need for

Belongingness Needs Relatedness
Interpersonal Relations Affiliation
Needs

Hygiene Interpersonal Security

Security
Factors Security Needs
Company Policies
Physical Security
Existence
Pay Physiological Needs
Working Conditions Needs
Concern for people
Managerial Grid
9

Country Club Management (1,9) Team management (9,9)

Production is incidental Production is from

8

to lack of conflict and integration of task

„good fellowship“ and human requirements
7

Dampened Pendulum (5,5)

6

(Middle of the road.)

Push for production but
don‘t go „all out“. Give some
5

but not all all: „be fair but firm“

Impoverished Management (1,1)

4

Task Management (9,1)

Effective production is
Men are a commodity
3

unobtainable becaus people are

just as machines.
lazy, apathetic and indifferent.
A manager‘s responsibility
Sound and mature relationships
is to plan, direct and
2

are difficult to achieve because,

control the work of those
(human nature being what it is)
subordinate to him
conflict is inevitable
1

1 2 3 4 5 6 7 8 9
Concern for production
 Situational Leadership
LEADER BEHAVIOUR
Share ideas Explain
and facilitate decisions

RELATIONSHIP BEHAVIOUR
in decision- and provide
making I NG opportunity
AT

(Supportive Behaviour)
I P for
IC
RT

SE
PA clarification

LL
IN
S3 S2

G
NG

TE
TI

LL
GA Provide

I
NG
LE

specific
DE

Turn over instructions

responsibility for and closely
decisions and supervise
S4 implementation performance S1
TASK BEHAVIOUR
(LOW) (HIGH)
(Guidance)

FOLLOWER READINESS
HIGH MODERATE LOW
R4 R3 R2 R1
Able and Willing Able but Unwilling Unable but Willing Unable and Unwilling
or Confident or Insecure or Confident or Insecure

FOLLOWER DIRECTED LEADER DIRECTED

 Cultural Web

Stories

Rituals and
routines Symbols

THE
PARADIGM
Control
systems Power
structures

Organizational
structures
 Dynamics of Paradigm Change

Development
Developmentofof Corporate
The Corporate
Theparadigm Implementation
paradigm strategy Implementation Performance
strategy Performance

if unsatisfactory
Step 1
Step 1
Tighter
Tighter
controls
controls

Step 2
Step 2
Reconstruct
Reconstructoror
develop
developnew
new
strategy
strategy

Step 3
Step 3
Abandon
Abandonparadigm
paradigm
and
and adopt newone
adopt new one
Four Organizational Cultures

Power Culture Role Culture

Task Culture Person Culture

 Integrated Model of Strategic
Management
Vision,
Vision,values,
values,
and
andexpectations
expectations

Strategy
Goals, Strategy Policies
Mission Goals, formulation Policiesand
and
Mission objectives formulation procedures
objectives procedures
• •Alternatives
Alternatives
• •Evaluation
Situation Evaluation
Situationanalysis
analysis and
andchoice
choice
• •Enviromental
Enviromental
opportunities/
opportunities/
threats
threats
• Organizational
• Organizational
resources
resourcesand
and
competences
competences
Strategy
Strategy
implementation
implementation
and
andplanning
planning

Strategic control

Why? What? How? Guidelines

 M-O-S-T

Mission
Mission
WHAT an
WHAT anorganization
organizationisisseeking
seekingtotodo
do
Objectives
Objectives

Strategy
Strategy
HOW an
HOW anorganization
organizationwill
willachieve
achieveitit
Tactics
Tactics
 Network Analysis, PERT, CPA

5 C 7
2 4
6 2 8 G
A
4 12
5
0 D 6
1 12
0 1
B E

4 H
5
4 3
3 F
4 9
5 5
KEY: 9

Activity
Critical path
Event
Earliest event time
Event number

Latest event time

 The Five Phases of Growth

Large collaboration

coordination
"?"

delegation
SIZE OF red tape
ORGANIZATION
direction control

creativity
autonomy evolution: stages of
growth
revolution: stages of
Small leadership crisis

Young Mature
AGE OF ORGANIZATION
 The Chasm

The
The Early Mainstream
Market Market
The
Chasm

Te
Vi Pr
En chno sio ag
ma
Co
ns e
Sk
ep
thu log na rv a ti cs
s ia y ri es ti sts tiv
sts e s
 Inventory Profile

Steady and
Order predictable Slope = demand rate
quantity demand (D)
Q

Average inventory = Q / 2
Inventory
level

Time
Q/D
Instantaneous deliveries at rate of D / Q per period
 Economic Order Quantity

Total costs
Costs

Holding costs

Economic order Order costs

quantity (EOQ)

Order quantity
 Pareto Curve for ABC-Products
Cumulative % of total value

Class A Class B Class C

items items items

% of total number of items

 CIM-Concept

CIM

CAD/CAM PPS
Production Programm Planning
C
CAD
Quantity Planning

CAP A Time and Capacity Planning

Place Order

CAM
D Control Order
ee n r e mot s u C

are po orci M s dee n r e mot s u C

Activity 1
Function 1

Activity 2
Function 2
Micro operations
Approach

Activity 3
Function 3

Activity 4
Function 4

r p ss e ni s u B s ess ec or p ss e ni s u B
The Business Process Re-engineering

r e mot s u C delli fl uf s dee n r e mot s u C

 Total Quality Management

• Whole operation involved

• Quality srategy
• Teamwork
• Staff empowerment
• Involves customers and suppliers

• Quality systems
• Quality costing Inspection
• Problem solving
• Quality planning
Quality control
• Statistical methods
Quality assurance
• Process performance
• Quality standards Total quality management

• Error detection
• Rectification
 Supply Chain Management

Second-tier First-tier First-tier Second-tier

suppliers suppliers customers customers

The
Operation

Supply side Demand side

Purchasing and supply Physical distribution

management management
Logistics

Materials management
Supply chain management
 Internal Rate of Return (IRR)

Main methods of capital expenditure appraisal

Return on Investment ROI Pay Back Discounted Cash Flow (DCF)

Net Present Value (NPV) Internal Rate of Return (IRR)

 Net Present Value (NPV)

Main methods of capital expenditure appraisal

Return on Investment (ROI) Pay Back Discounted Cash Flow (DCF)

Internal Rate of Return (IRR) Net Present Value (NPV)

 Variance Analysis

Profit Variance

Total Cost Variance Total Sales Variance

Materials Labour Variable Fixed Sales Sales

Price Variance Overhead Overhead Volume Price
Variance Variance Variance Variance Variance

Materials Materials Wage Labour

Price Usage Rate Efficiency
Variance Variance Variance Variance
 The Link Between the Balance Sheets
and the Income Statement
Balance Sheet Income Statement Balance Sheet
December 31, 2001 Year 2002 December 31, 2002

Liabilities Liabilities
Assets $100 $113
Assets
$170
$190
Owner‘s equity
$70 Owner‘s equity
Expenses $77
Revenues $469.8
$480

Net Profit
$10.2
Retained earnings
$7
Dividends
$3.2
 Working Capital

Simple cycle of operations

Cash

Raw materials
Receivables inventory

Finished goods
inventory
 Financial Strategy Framework

Due dilligence process Investor Investment strategy Alternative Investments

Time to close deal Risk/Reward Space

Financial Strategy Opportunity

Debt
Entrepreneurial concerns
Sources and Deal
Time to out of cash Equity
Structure
Future alternatives Other
Burn Rate

Operating Financial Business Strategy

Requirements Requirements
Working Capital

Market Strategy Technological Strategy

Asset Requirement
Investor Perceived Risk-Return Space

Angels
High
FFF

VCs
Entrepreneur
PERCEIVED
Moderate
RETURN Realistic
Investors

Banks
Low

Low Moderate High

PERCEIVED RISK
 Du Pont Scheme
Return on equity
Earnings after tax
ROE = Owner‘s equity

Return on invested capital

Earnings before interest and tax Financial leverage multiplier Tax effects
ROIC =
Invested capital

Operating profit margin Capital turnover Financial structure ratio Financial cost ratio Tax effect ratio
Earnings before interest and tax Sales Invested capital Earnings before tax Earnings after tax
Sales Invested capital Owner‘s equity Earnings before interest and tax Earnings before tax

Sales Invested capital Owner‘s equity Cost of debt Tax rate

Cash
Operating costs
Working Capital
requirement

Fixed assets
 The Drivers of Value Creation
EBIT
Operating margin = Sales EBIT
Invested capital
(pretax ROIC)
Sales
Capital turnover = Invested capital Expected after tax
ROIC
Tax effect = (1 – Taxe rate)
Return spread
Percent of (ROIC – WACC)
debt financing Market Value Added (MVA)
Aftertax cost of debt Weighted average
cost of capital If the present value of the future stream of
WACC expected return spreads is positive, MVA is
Estimated cost of equity Percent of positive and the higher the growth, the more
equity financing value created.

If the present value of the future stream of

Economic, political, and expected return spreads is negative, MVA is
social environments negative and the higher the growth, the more
value destroyed.
Sustainability
Market structure
of growth

Competitive advantages and

core competencies
 Business Design Process

Economics
Economics
What
Whatare
are
the
thekey
key What What are my
Changing assumptions What‘s How can What What are my
Changing assumptions What‘s How can dimensions choices
About important dimensions choices
importanttoto profit
Customer
Customer About profitbebe matter
matterthe now?
Priorities customers customers? made? the now?InInthe
the
Priorities customers customers? made? most? future?
and most? future?
and
economics?
economics?
Technology
Technology

Are
Arethe
thebest How
best What‘s my How long HowcancanI I
Which choices What‘s my How long prepare
Which choices best will prepare
ones internally best willthis
this for
ones internally business design for
are business designbebe
arebest? consistens ongoing
best? consistens design? valid? ongoing
integratable? design? valid? redesign?
integratable? redesign?
 The Company Center of Gravity

The Entrepreneurial Phase The Growth Phase The Success Phase

The Center
The Center of Gravity
of Gravity

The
center
of
gravity

The The The The The The

Company Customers Company Customers Company Customers
 The Traditional Value Chain

The Traditional Value Chain

Start with Assets, Core Competencies

Assets/ Product/
Inputs, Raw The
Core Service Channels
Material Customer
Competencies Offering

The Modern Value Chain

Start with the Customer

Assets/
The Inputs, Raw
Channels Offering Core
Customer Material
Competencies
 The Modern Value Chain

Truly Understanding the Customer

Purchase Criteria

Customer Anger

Preferences

Power
Assets/
Customer Inputs, Raw
Decision-Making Process Channels Offering Core
Priorities Material
Competencies
Purchase Occasion

Buyer Behavior

Functional Needs

Systems Economics
Customer Solutions Profit

Profit

0
Product Pyramid Profit

Price

Volume
 Multicomponent Profit

Base Business

Other Components
 Switchboard Profit

Buyers Sellers
 Time Profit

$/Unit

Cost

Price

Time
 Blockbuster Profit

$/Project

Revenue

Cost

Project Type
Profit Multiplier Model

Other Forms

Key Asset
Entrepreneurial Profit

Base
Business

Spin-Outs
Specialization Profit

Return on Sales

Generalist Specialist
 Installed Base Profit

Profit Margin

Hardware/Base Consumables/
Product Follow-on Product
De Facto Standard Profit

Profit Margin

Market Share
 Brand Profit

Price/Unit

Market Brand
Price Price
Specialty Product Profit

100 %

S
Revenue

Five Years Today

Ago
Local Leadership Profit

Profitability by Region

Local Market Share

Transaction Scale Profit

$/Unit

Revenue

Cost

Size of Transaction
Value Chain Position Profit
 Cycle Profit

Price
$/Unit

Cost

Utilization
 After-Sale Profit

Base Follow-on
Product Products/Services
New Product Profit

Time
Relative Market Share Profit

Return on Sales

Relative Market Share

Experience Curve Profit

Cost/Unit

Cumulative Experience
Low-Cost Business Design Profit

$/Unit

Conventional Low Cost

Business Business
Design Design
 GE's Business Design:
„Sell the Solution, Not Just the Box“

Sell the Box, or ...

Product

... Sell the Whole Solution

The Profit Zone

Options Accessories Financing Services

Product
The SMH Product Pyramid

The Profit Zone

Blancpain

Omega, Longines,
Rado

Tissot, Certina, Mido, Pierre Balmain,

Hamilton, Calvin Klein

Swatch, Flik Flak

Endura
Lanco
Coca-Cola's Business Design:
Manage the Value Chain
1980
Distribution
Consumer Grocery Logistics Bottling Syrup

Coca-Cola
Fountain
Brand

Vending

1996
Distribution
Consumer Grocery Logistics Bottling Syrup

Fountain Coca-Cola
Mega Brand
Coca-Cola, diet Coca-
Vending Cola, Caff. Free, diet
Caff. Free, Cherry,
The Profit Zone Diet Cherry

Coca-Cola‘s participation, influence

no participation
The Charles Schwab "Switchboard"

Mutual Fund
Investors Companies

Mutual Fund
Investors Companies

The Profit Zone

Schwab
One Source
Intel's Business Design: „Two Steps
Ahead“

The Profit
Zone
Intel
$/Unit

AMD

Cost

Price

Q2 Q4 Q6 Q8 Q10
Quarters Post-Launch
Disney‘s Business Design Reinvention

The Profit Zone

The Value Capture

Cruises Publishing Videocassette

Hotels Television Retail

Merchandise Theme Parks Music

Animated and Live-Action Films

The Foundation
 The Thermo-Electron
"Spin-Out“ Business Design

The
Profit Zone

Thermo
Thermo Spectra
Instrument
Systems Thermo
Optek

Thermo
Voltek
Thermo-Electron Thermedics
Thermo
Sentron

Thermolase
Thermo
Trex
Trex
Medical
 Microsoft's Business Design:
Create-the-Standard

OEMs

The Profit Zone

Microsoft
Applications
Windows Customers

Applications
Developers
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