B121

Chapter 10

Strategy and the Organization

Topic 1 – Strategy & the OrganisationThe 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. (shown in the next figure)

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!

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. (shown in the next figure)

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.

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.

An organization’s Mission

Mission statements typically contain one or more of the following four components:1. The organisation’s philosophy

2. specification of the product/market domain

3. the organisation’s key values

4. critical factors for success in the marketplace.

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.

The six F testThe following questions will help you to identify how well a vision is likely to be embraced. Because there are six questions, each playing on a keyword beginning with the letter ‘F’, the questions are known as the six F test.

1. Is it fantastic? Does it grab attention?

2. Is it feasible?

3. Is it focused?

4. Is it flexible?

5. Is it faxable? Can it be remembered easily and communicated succinctly?

6. Is it fun?

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

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.

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.

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

SWOT Analysis

It is used to assess the competitive position of a product or service.

S – strengths

W-weakness

O – opportunities

T – threats

Approaches to strategy

Market based approach

Resource based approach

Porters model of generic strategies

Competitive scope

Competitive advantage

Sources of competitive advantage

Cost leadership

Differentiation

Ansoff Matrix

It is a way of presenting the strategic options that are open to an organization in relation to its products o services, together with the risk associated with those options.

4 options:

Market penetration

Market development

Product development

Diversification

New product development process

The key stages of the new product development process are:

Concept test

Product development

Product & service testing

Test marketing

Organization structure

This reveals how the organization has been built.

Formal structure

Informal structures

The network or virtual organisation

Organization culture

Each organization will have its own collection of values and attitudes.

Organizational change

Restructuring

Focusing on core competencies

Culture change

The aim is to shape the organizational culture to help align employees values and behavior with the organizations goals and priorities.

Overcoming barriers

The strength of leadership at the top of the organization

An effective means of cascading the initiative down through the organization.

A focus on behavior rather than values.

Manipulation of important cultural symbols.

Six step model of change

Step 1 – establish a sense of urgency.

Step 2 – create a guiding coalition

Step 3 – develop a vision and a strategy

Step 4 – address cultural issues.

Step 5 – manage the transition

Step 6 – sustain momentum

Stakeholders

They are someone who have a share or an interest in an enterprise.