vgsm manufacturing strategy - jan 2011

8/13/2019 VGSM Manufacturing Strategy - Jan 2011

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MANUFACTURING STRATEGY

Centre for Engineering Management

M.S.Ramaiah School of Advanced Studies, Bangalore

Module Leader at MSRSAS

V.G.S.MANI

January 2010

Postgraduate Engineering Programmes


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MODULE AIMS & SUMMARY

Aims and summary

This postgraduate module is designed to pursuethe linkages between manufacturing strategy and acompanys corporate strategy. Increasinglycompanies in global markets are competingthrough manufacturing, and to do this theirstrategies for manufacturing must support thecompanys marketing objectives and be able to

provide a competitive advantage in the marketplace.


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This module helps a) manufacturing management to

understand the strategic aspect of their role inrealizing their organizations business b) emphasis

the manufacturings strategic role in supporting and

realizing companys business c) corporatemanagement to better understand the complexity &

interaction among the issues / challenges faced by

manufacturing management


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The module equips participants with an

understanding of corporate andmanufacturing strategy, and prepares them

for taking a strategic role in a

manufacturing organisation


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Module Syllabus

Nature and Objectives of Strategy: Corporate strategy concepts, theories,

models and tools of analysis;

Product Life Cycles: BCG Matrix, Analysis of corporate strategy case

studies. Manufacturing Strategy: Links between manufacturing strategy and

company strategy, Contribution of manufacturing strategy to business

performance and competitive advantage, Manufacturing strategy theories

Market Qualifying and Order Winning Criteria: Quality, Delivery, Leadtime, Flexibility, Innovativeness, Performance as order winners;

Process choice, Study of Manufacturing Systems & their

Characteristics: Fit between manufacturing systems and PLC; Product

profiling, Manufacturing focus , Manufacturing infrastructure; Case studies

Framework for Developing and Analysing Manufacturing Strategy:

Study of product/ volume, Layout/ flow (PV/LF), Manufacturing levers,

Levels of Manufacturing Capability, Competitive Analysis, Selection of

appropriate Manufacturing systems, Supporting methodology for the design

of a manufacturing strategy


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Module Syllabus

Change Management: Strategy Implementation

Business Economics, Costing and Budgetary Analysis

Strategy Performance Measurement: ERP as a tool for evaluation Workshop to analyse and present a few manufacturing strategy

case studies

Laboratory Practice

ERP (IC soft / SAP ERP) - Review of modules like Sales,Purchase, Manufacturing, Quality control and Maintenance


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Teaching and Learning Methods

Lecture Sessions

Class Presentation

Lab sessions on ERP (IcSoft)


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Evaluation

Assignment: 100% Weightage


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Software and Manuals

IcSoft ERP


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Module Delivery

Theory

V G S Mani & VijayKumar Laboratory

Vijay Kumar


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Module Resources

1. Lecture Notes on Manufacturing Strategy, MSRSAS2. Strategic Management Theory - Charles W. Hill & Gareth Jones, All

India Publishers & Distributors, Chennai, 1998

3. Manufacturing Strategy, Texts & Cases - Terry Hill, Palgrave,U.S.A., 20000

4. Manufacturing Strategy - John Miltenburg, Productivity Press,U.S.A., 1995

5. Radical Change: What Indian Companies must do to become

world class - Ghosal, Piramal, Bartlett - Penguin Books of India,2000

6. Count Your Chickens Before They Hatch - Arindam Choudhuri,Vikas Publishing, 2001

7. Reinventing the Factory II , Managing World Class Factory - Roy

Harmon, The Free Press, Canada, 19928. Contemporary Strategy Analysis - Robert Grant, Blackwell

Publishers, 19989. Manufacturing The Future : Strategic Resonance for Enlightened

manufacturing - Steve Brown, Financial Times/ Prentice Hall, 2000


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Module Resources

10. Analysis of Manufacturing Enterprise: An Approach to Leveraging

Value Delivery Process for Competitive Advantage - N. Viswanadham,

Kluwer Academic Publishers, 200011. MIT: Manufacturing Strategy Concepts - http:// ocw.mit.edu/

index.html

12. Strategic Management - Text & Cases - V.S.P. Rao, V. Hari Krishna -

Excel Books, New Delhi , 200313. Modern Competitive Strategy Gordon Walker Tata McGraw-Hill

Publishing Co. New Delhi, 2008

14. http://www.tatapeoplescar.com/tatamotors


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1. INTRODUCTION

V G S Mani

Centre for Engg. Management


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SESSION OBJECTIVES

This session provides an introduction to

contemporary industrial scenario especially with

respect to Indian situation

Students are also exposed to the role of

manufacturing and its contribution to the growthof a Nation

Concepts regarding how industries are classified

and types of manufacturing technology are alsocovered


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INTRODUCTION TO


Market forces are so powerful and strong

that it will mercilessly punish unwise

investment and weak enterprises.

Manufacturing must allow companies to

exploit market opportunities withoutbecoming a constraint.

Many nations, who were industrial powers,

have declined (e.g. Japan), while many newindustrialized nations have emerged (e.g.

China & South Korea)


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INTRODUCTION TO


New issues are emergingEnvironment,

Removal of trade barriers, growth of world

trade at a higher rate than global gdp, increased

automation vs the need for higher employment,

Newer technologies like cad, cam, cim,robotics,

Innovations such as CD, VCD, DVD, mobile

phones etc.


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MANUFACTURING CHARACTERISTICS

AT VARIOUS PERIODS

Period Characterized By Terminology

1940-50 Shortages PRODUCTIONERA

1950-65 National Excess Capacity MARKETING ERA

1965-80 Concentrated Earnings FINANCE ERA

1980-90 International Competition QUALITY ERA

1990- Global Excess Capacity PARTNERSHIP

ERA


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INTRODUCTION TO


Late 80s and early 90s brought a new

dimension to the industries competition.

Struggle to survive has become a way of

life

Time has become another extremely criticalfactor. A delay of 6 months in launching a

consumer product can reduce lifecycle

profit by 33%, whereas overspending ondevelopment by 50% will reduce profit by

only 3%.


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INTRODUCTION TO


Enterprises have to tackle all these issuesand yet be successful. For e.g. In the same

business, some companies fail while someothers do extremely well. Companies thatwere successful earlier, have fallen by the

way side (TWA, PAN AM AIRLINES,DEC,HMT, NGEF etc).

It is the responsibility of the company to

integrate industry specific and nationspecific factors with companys resources,capabilities & strategies in order to enhance

companys performance.


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ENVIRONMENTAL ISSUES

INFLUECING BUSINESS

Globalization

Time Compression

Technology Integration


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ENVIRONMENTAL ISSUES

INFLUECING BUSINESS

Over a 1-2 year period, company

performance is affected by industry related

factors

But over a 6-7 year period, industry factors

play only a small part. Rest is managementfactors


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WHY COMPANIES FAIL - INABILITY

TO ESCAPE THE PAST

Track record of

success

No gap between

expectations &

performance Satisfied with

current

performance

Accumulation of

abundant resources

Attitude that

resources will win

out Resources

substitute for

creativity


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WHY COMPANIES FAIL - INABILITY

TO INVENT THE FUTURE

Optimized business

systems

Deeply etched

practices

Vulnerability

Success confirms

practices

Momentum is

mistaken for

leadership Failure to reinvent

leadership


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CONTRIBUTION OF MANUFACTURING

STRATEGY

Manufacturing contributes to wealth creation

activity of a nation. Roughly 35 % of GDP is

contributed through industries in newly

developing countries

Many nations such as China, Japan, Korea,Germany and Italy have gained competitive

advantage and high value additions through

manufacturing route during the last decade andwhich was a key factor in their economic success


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Initially, focus was on higher efficiencies through

improvements in fits and tolerances, assembly linetechniques, reduction in product variety to reduce costs,

work force training to achieve single specialized skill,

SPM, transfer lines etc.

Later, in response to competitive market forces,

developments such as FMS, cellular manufacturing, JITand agile manufacturing etc were developed. These

developments have cut down inventories and work in

progress


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Unfortunately, there is little appreciation of the

strategic role of manufacturing in corporate strategies.

Many companies treat manufacturing function as an

inevitable nuisance! It soaks up capital in facilities andinventories, it resists changes in products and

schedules, its quality is never as good as it should be,

its people are unsophisticated, tedious, detail orientedand unexciting.


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CONTRIBUTION OF


As a result, manufacturinghas focused on day-to-day, short-term issues

has a reactive approach to long term strategicplanning

has focused exclusively on efficiency; it has hindered

it from visualizing the big picture. (Icarussyndrome)

is simply not geared to companys corporate

objectives is not designed to meet companys needs, in spite of

having good facilities.


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At best, has remained a neutral force or quite often, it

pulls in the opposite direction!

As a consequence, top management has focused on

improvements through non-manufacturing decisions suchas outsourcing, M & A, take over, J.V. etc.

This anomaly requires to be bridged; Manufacturing canoffer strategic strength to its organization in the following

ways.


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A. Provide manufacturing processes (including design

of new products) that gives the business a distinctadvantage in the market place.

B. Provide coordinated manufacturing output andsupport which provides competitive advantage &

enables the organization to win orders in the market

place (cost, quality and performance, delivery,flexibility and innovativeness)


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Indian industry must cease to operate the way it has

been doing for the last 50 years

The country must move to a new manufacturing ethos

that is benchmarked to world size and class.

C SS COS O O G S SS


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EXCESS COST OF DOING BUSINESS IN

INDIA

High cost of materials

Low productivity

High interest costs

Technological obsolescence

Complex , irrational & multiple levels of taxes Complex regulations/ procedures

Time delays/ corruption

Nitpicking culture

Poor managerial competence

(Ref - Vision 2020 Prof. Indiresan, ICFAI)


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INDIA & CHINA A COMPARISON

INDIA CHINA

FOR THE YEAR 2003 (% of GDP) (% of GDP)

Agriculture 22.2 14.6

Industry 26.6 52.3

(Manufacturing) (16.3) (39.3)

Services 51.2 33.1


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INDIA & CHINA A COMPARISON

China

2003

India

2003

India

2009

India

2020

% GDP % GDP % GDP % GDP

Agriculture 14.6 22.2 17.0 12.0

Industry 52.3 26.6 20.0 17.0

(Manufacturing) (39.3) (16.3)

Services 33.1 51.2 63.0 71.0


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CLASSIFICATION OF INDUSTRIES

Industries are dominated by different types of

competitive resources capacity, customers &

knowledge

Capacity driven industries

Physical Capital Investment is high in relation tocost or value addition

Competition takes place mainly on price

Pace of productivity improvement is modestRegister low profitability

Examples Steel, Textiles, Paper


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Customer driven industries

Investments in brands/ customer relations account for a

large part of cost/ value addition

Companies compete across a number of non price

aspects such as logistics, product positioning, publicity

etc

Advantages gained by these aspects are only temporary

these are easily imitated

Generally, these industries tend to be less mature &

fragmented

Examples household goods, food, beverages etc.


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Knowledge Driven Industries

Highly investment driven especially in R & D,

which accounts for a large part of its cost

Industries excel in innovation

Examples are Software, Electronics,Pharmaceuticals etc


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MANUFACTURING TECHNOLOGY TYPES

Process Technology pertains to the

techniques of producing and marketing

goods and services

It also includes work methods, equipment,

distribution and logistics It is fully embedded in a firms value chain

Improvements are designed to produce and

market goods & services faster, more

efficiently and in greater volumes


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MANUFACTURING TECHNOLOGY TYPES

Product Technology pertains to technology

that is built into the product/ services

Changes in product technology add new

features or provide new substitutes for

existing products Process Technology refers to the way the

firm is doing its business; Product

Technology refers to the output of anorganization


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SESSION SUMMARY

Following concepts have been covered during this

session

Contribution of manufacturing to economies of Nations

Environmental issues influencing businessReasons why companies fail

Manufacturing technologies

Classification of Industries


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2. STRATEGY & ITS FORMULATION

V G S Mani



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SESSION OBJECTIVES

In this session, participants are taught the

following concepts

Definition & characteristics of Strategy

Role, Features and levels of strategy in an

organization

Intended and Emergent strategy

Strategy Formulation

Strategic ChoiceMissions and Goals


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STRATEGY DEFINITION

Strategy is the pattern or plan that integrates anorganisations major goals, policies and action

sequences into a cohesive whole Managements plans to attain outcomes

consistent with the organizations mission &

Goals A well formed strategy helps to marshal and

allocate an organisations resources into a

unique and viable posture based on its relativecompetences and shortcomings, anticipatedchanges in the environment, and contingent

moves by intelligent opponents.

STRATEGY ADDITIONAL


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STRATEGY - ADDITIONAL

DEFINITIONS

Science and art of military commands as applied to

overall planning and conduct of large-scale combat

operations

Determination of the basic long term goals and objectivesof an enterprise and the adoption of courses of action and

the allocation of resources necessary for carrying out the

goals

The pattern or plan that integrates an organizations major

goals, policies and action sequences into cohesive whole


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Strategy Additional Definitions

An unified, comprehensive and integrated plan which is

designed to ensure that basic objectives of the enterpriseare achieved

Pattern in a stream of decisions or actions

A sequence of decisions that, over a period of time,enables a business to achieve a desired (market related)

manufacturing structure (process choice), infrastructure

and a set of specific capabilities Moving from where you are to where you want to be in

future through sustainable competitive advantage


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CHARACTERISTICS OF STRATEGY

RequiresRequires

concentration of effortconcentration of effort

Impact on the wholeImpact on the whole

organisationorganisation

Associated withAssociated with

major issuesmajor issues

Long termLong term


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CHARACTERISTICS OF STRATEGY

It is high level It is general

Time span is long range

Affects the whole organization

Developed from the ground upwards

Covers a wide range of activities Exploits a particular concept


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Strategic And Operations Planning

Strategic

Planning

Tactical Planning Operational

Planning

Long Range Plans3+ yrs

IntermediateRange 2 3 yrs

Short range < 1 yr

Top Management

Responsibility

Mid level

management

Junior level

Broad Objectives Departmental

objectives

Internal day to day

activities

Focus on planning

& forecasting

Coordination Controls


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WHY HAVE A STRATEGY?

Integrate

sub-strategiesholistically

Optimisestructural

decisions

Proactivelyplan for future

changes

Align capabilty

to marketneeds


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STRATEGIC DIMENSIONS


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STRATEGIC DIMENSIONS


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THE LEVELS OF STRATEGY

Strategy

Corporate Defines the business in which the organisation will

compete, determines the long term objectives andidentifies the courses of action and allocation of resources.

Business Focuses on how to compete in a given business, determinesthe competitive approach and the strategies for each

business unit of a multi-product organisation. It is usual

for a Strategic Business Unit to be treated as semi-

autonomous and therefore free to set their own strategy

under the corporate umbrella. Focus often on cost leadership.

Functional Aim of the functional strategy is to obtain the maximumproductivity from resources. Given the constraints set by

the corporate and business strategies, functional departments

must develop strategies in which their activities and skillsare harnessed for the improvement of performance.


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THE BUSINESS CONTEXT

Small Business

- Entrepreneurial vision

- Management of growth

Multinational

- Central vs local control

- Complexity- Multi layer management

- Aligning operations with

strategy

- Communications

Public sector

- Political dimension

- Slowness of decisionmaking

- Survival despite failure

Professional practice

- Regional markets

- Traditional structures andmindsets


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STRATEGIC PRESSURES

THE BUSINESS UNIT

Smaller business unit Strong collaboration

with suppliers

Customers who demand

more sophisticated

products and services

The emergence and

availability of new

technical solutions

There is a need to

optimise resource bases

Time-to-market fornew products is becoming

ever more critical


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STRATEGIC MANAGEMENT MODEL

External analysis

Establish Formulate Identifymission objectives strategy

Internal analysis

Organisation control Functional policies

Structure Production

Leadership Marketing

Rewards HR, etc.

Measure and evaluate performance

Corrective action

Contingency planning

Formulation

Implementation

Evaluation

Feedback


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INTENDED Vs. EMERGENT STRATYEGY

Planning assumes strategy as an outcome of

rational planning Ignores that strategy can emerge as

response to unforeseen circumstances e.g.

Haeber process for ammonia production Intended strategy deliberate strategy

realized strategy


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INTENDED Vs. EMERGENT STRATEGY

Unrealized strategy emergent strategy realized strategy Example of realized strategy- missiles

development in India;

Example of of emergent strategy - Sale of50 cc Honda bike in USA; MTR ready

made food in Bangalore

Emergent strategy is generally successful; Most companies follow a combination of

intended and emergent strategies


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DIFFERING PLANNING STYLES

Planning for a

period ofstability and

growth

Planning for

business underattack

Planning for

cutback andrationalization

Planning for

growth, globalconsequences

Long term forecast

Detailed planning

Five year budgets

Strategies for

growth

Divisionalisation

Exploratory

forecasting

Planning for change

Top management in

charge of strategy

Attempt to manage

strategic change

Visible leadership

Staff involvement

Investment in new

technology

Manpower planning

Gap analysisProduct-market

matrix

Environmental

impactSensitivity and risk

analysis

Explicit business

philosophy andobjectives

Resource portfolios

Company wide

quality improvementBenchmarking

Training

Inflexible

Over optimistic

Alternatives not

considered

Too centralized

No business linkage

Too elaborate

analysis

Short-term views

Employee backlash

Heavy staff demands

Difficult integration

Funding for new

investments

Eleme

nts

Techniq

ues

Prob

lems

1960s 1970s Early 1980s Late1980s


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DIFFERING PLANNING STYLES

1990's

Setting strategic direction in anuncertain environment

Current Issues

Environmental awareness

Crisis and recovery: managingturnaround situations Customer satisfaction

Transforming cultures Emerging markets

Achieving excellence Cost out initiatives

Responding to deregulation and

privatisation Legislation

ELEMENTS OF STRATEGY & ITS


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ELEMENTS OF STRATEGY & ITS

FORMULATION

Definitions missions, goals, objectives,

strategy

Mission statement

Is a framework for strategy formulation

Identifies interrelationship between

mission, stakeholders & strategies


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Mission statement must includeDefinition of business

State objectivesAttempt to satisfy both external and internalclaimants, resolve conflicts

Identify stake holders, identify their interests andconcerns , likely claim on the business bystakeholders

Identify critical strategic issues reject strategiesconflicting with the needs of critical stakeholders.


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MISSION CRITERIA


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MISSION CRITERIA

Focused more on customer need sat isfact ionthan on product character ist ics

Specific enough to have im pact on behaviour

of organisat ion

Able to reflect essent ial skills

At tainable

Flexible

GOALS


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GOALS

Goals specify how a company intends to go

about attaining strategic intent.

Usually companies mention increasing share

holders wealth as a goal but it can lead to

short term practices. This can be rectified by

having secondary goals such as market share,

innovation, measure of financial resources,social and employee issues.

GOALS


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GOALS

An example can be leader in the business

segment G.E. wants to be No.1 or 2 in their

line of business

Hard goals - traditional financial measures

Soft goals role of S.B.U. as a social entity.

(Caution making unrealistic statements &targets)

DEFINITION OF BUSINESS


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What is our business, what will it be, what should

it be?

(e.g. I.B.M. successfully transited from

calculators/ typewriters to computers, but was not

successful in transiting from main frame to P.C.)

Consumer oriented rather than product oriented



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Multi-product company cannot just aggregate

the individual businesses; Must identify the

synergy & the reasons why business units are

better off as a part of the multi-product

company.

e.g. identify vertical integration, commonality in

marketing/ servicing etc.


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TERMINOLOGY


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TERMINOLOGY

TERM DEFINITION PERSONAL

EXAMPLE

BRITISH

AIRWAYS

Mission Value andexpectation of all

Be healthy and look

good

To be the best and

most successful.

GoalGeneral statement of

aim or purpose

Lose weight Significant presence

globally

Objective Quantification ofgoal

Lose 5 kgs by 31st

December

Take advantage of

global expansion

StrategiesAction to achieve

objectives

Diet and exercise Create market

alliances

Action Task Implementation steps Eliminate desserts,swim every day

Acquire 70% stake

in Sabena

Reward

Payoff for reaching

objective

Buy a new suit Profit sharing

scheme

STRATEGY FORMULATION


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DRIVERS CAPABILITIES GAP ANALYSIS PROVIDERS

RESPONSIVENESS

COMPETENCY

FLEXIBILITY

SPEED

PracticesMethods

Tools

ORGANISATION

TECHNOLOGY

PEOPLEINNOVATION

INFORMATION INFORM

ATIONIN

FORMATION

INFORMATION

Need

strategic intent

Companys

weaknesses




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External analysis

Identify opportunities

and threats

Internal analysis

Identify strengths and

weaknesses

Establish

mission

Formulateobjectives

Identifyand selectstrategy

STRATEGIC CHOICE


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STRATEGIC CHOICE

Object ives

Strategy

selection

In terna lanalysis

Com pat ib il it y

w i th t o ler ance

Externa lanalysis

Mission

FORMULATING OBJECTIVES


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FORMULATING OBJECTIVES

Objectives

NonFinancialFinancial

Measurable Communicable Realistic

Provide direction

Aid in evaluation

Allow co-ordination

SETTING GOALS


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SETTING GOALS

Attainable Met with reasonable effort under the prevailing conditions

Economic Cost of setting and administering should be low in relation to activity

Applicable Fit the condition under which they to be used

Consistent Unify communication and operations throughout the company

Understandable Expressed in simple, clear term to avoid misinterpretation

Measurable Communicate with precision

Stable Long enough life to provide predictability and to amortise effort

Adaptable Designed so that elements can be added and brought up to date

Legitimate Officially approved

Equitable Accepted as a fair basis for comparison

Customer focused Address areas important to the customer (internal/external)

SESSION SUMMARY


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SESSION SUMMARY

Following concepts have been covered during

this session

Various definitions of Strategy

Why have a strategy?

Strategic Pressures & Models

Strategy formulation Methodology

Establishing Missions & Objective

Mission Criteria


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SESSION OBJECTIVES


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SESSION OBJECTIVES


following concepts

Broad /Macro Environment - P.E.S.T. factors

Competitive Environment Porters 5 F Model

Limitations of PEST & 5 F theories

EXTERNAL ANALYSIS


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EXTERNAL ANALYSIS

Broad / Macro environment

Competitive environment

P.E.S.T.

Porter 5 force modelPolitical

Technological

Economic

Social

Newentrants

Substitutes

Supplier

power

Competitors

Customer

power

MACRO ENVIRONMENT (P E S T )


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MACRO ENVIRONMENT (P.E.S.T.)

Technological trendsReplacements for steel

Development of public transport

Information technology

Communications

Economic trendsMonetary union

Exchange ratesInflation

Shift of financial power

Social trendsSkill shortage

Emergence of 'anti-growth' values

Increase in home working

Boom in leisure industries

Political trendsChange of governments

Tougher legislationResurgence of trade unions

Conflict/Unification

PORTERS 5 FORCE MODEL


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PORTER S 5 FORCE MODEL

Industry

competitors

Intensity of

rivalry

New

entrants

Suppliers Customers

Substitutes

Bargaining power of buyers

Threat of substitutes

Bargaining power of suppliers

Threat of new entrants

PORTERS 5 FORCE MODEL


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Economies of scale

Brand identity

Switching costs

Capital requirements

Access to distributionAbsolute cost advantages

Government policy

Expected retaliation

Differentiation of inputs

Switching costs

Presence of substitute inputs

Supplier concentration

Importance if volume to supplierCost relative to total purchases

Impact of inputs on cost differentiation

Threat of forward integration

Bargaining leverage

Ability to backward integrate

Substitute products

Impact on quality/performance

Brand identityProduct differences

Price sensitivity

Relative price performance as substitutes

Switching costs

Buyer propensity to substitute

EntryBarriers

Determ

inantsof

supplierpower

Determinantsof

buyer

power

Determ

inantsof

Substitutionthreat

Industry Growth Switching costs Concentration and balance

Fixed costs/value added Brand identity Diversity of competitorsIntermittent over capacity Product differences Exit barriers

Rivalry determinants

PORTER S 5 FORCE MODEL

EXTERNAL ANALYSIS


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EXTERNAL ANALYSIS

Some companies do well because of

external environment or country where they

operate

Others do badly because external

environment is hostile

E.G.- Indian professionals working abroad,inspectors harassment for indian industries

EXTERNAL ANALYSIS


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EXTERNAL ANALYSIS

Strategy must fit in with the environment or

reshape the environment to ensure fit

between intent and environment

Opportunities & threats constitute external

factors. Opportunities arise when

environment tends to create a competitive

advantage to the company; Threats arisewhen the environment endangers the

integrity of the company.


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FIVE FORCES MODEL


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FIVE FORCES MODEL

Five forces shape competition within theindustry

Stronger that any of these forces work(alone or in combination), more limited isthe ability of the companies to raise prices

and be more profitable; Hence they can beconstrued as threats.

Weaker that the forces are, the more it is an

opportunity for the company. Impact of 5 F change through time. Company may alter the impact of 5 F

through its choice of strategy

POTENTIAL COMPETITORS


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POTENTIAL COMPETITORS

These are companies, which are notcompeting, but can do so if they chose.

Ability to enter business is a function ofentry barriers (costs, technology, brand

loyalty, marketing infrastructure,economics of scale)

Companies discourage potentialcompetitors by raising entry barriers andthrough disinformation.

RIVALRY AMONG ESTABLISHED

COMPANIES


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COMPANIES

Price wars may result from intense rivalry

Extent of rivalry is determined by 3 factorsviz.

competitive structuredemand condition &

height of exit barriers

COMPETITIVE STRUCTURE


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COMPETITIVE STRUCTURE

Refers to the number and size distribution

of companies in an industry i.e. It can be

fragmented or consolidated

single dominant company is called

monopoly while a few dominant companies

is called oligopoly

FRAGMENTED INDUSTRY


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FRAGMENTED INDUSTRY

Fragmented industry structure combined with low

entry barrier results in boom & bust cycles -

(strong demand entrants hoping to cash in creation of excess capacityprice war somecompanies are forced out industry capacity

matches demand

price stability)

Low entry barrier + fragmented structure

represents a threat

Cost minimization & survival during bust cycle is

the most apt strategy

CONSOLIDATED INDUSTRIES


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CONSO N US S

In consolidated industrial situation, companies

are interdependent.

Competitive action of one company affects thebusiness of its rivals.

Can lead to dangerous competitive price spiral

Between 1990&92, airlines in america lost more

money than what they had made in the previous

50 years!



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Since price war constitutes a threat,

companies try to follow the price lead set

by dominant company by tacitunderstanding

Do you accept that market sets the price? But this arrangement can be unilaterally

abrogated by one or more company during

very adverse economic condition.



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Companies try to minimize the threat by

highlighting non price issues such as

quality/ special features and by buildingbrand loyalty.

However, it may be difficult to distinguish

between service providers e.g. Air travel,

Cable TV

Price is also used as a tool to increasedemand

DEMAND CONDITION


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Growing demand (addition of new

customers or more purchase by existingcustomers) tends to moderate competition

In this situation, companies can increase

business and revenue without takingbusiness away from competitors.

When demand is declining, company can

grow/ sustain only by taking business awayfrom competitors.


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THE BARGAINING POWER OF

BUYERS


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BUYERS

Buyers represent a competitive threat, when

their demand increases withoutcommensurate price increase (e.g. Increasein credit period, reduction in price, increasein quality etc)

Raising of demands on suppliers by buyers,entirely depends on their power relative tothe suppliers. Buyers are powerful, when

buyers are large and few while suppliers aresmall and many (e.g. Auto components)


BUYERS


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BUYERS

Buyers purchase in large quantities

Supplier depends on the buyer for a large

percentage of his business Buyers can switch easily between suppliers

When inputs can be purchased from several

buyers at the same time

When buyers can vertically integrate and

supply their own needs


SUPPLIERS


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SUPPLIERS

When supplier can force the buyer to

increase the price of inputs, they represent athreat.

Suppliers are powerful, when

Suppliers product has no substitute & is critical to thecompany

Buyer is not an important customer to the company

It is difficult for the buyer to switch to another supplier

When supplier can vertically integrate and compete withthe buyer

When the buyer cannot vertically integrate backwards

and meet their own requirements

THE THREAT OF SUBSTITUTE

PRODUCT


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PRODUCT

The existence of close substitute product

presents a competitive threat to the supplierindustry e.g. Coffee can be substituted by

tea.

This restricts the price that the company cancharge its customers.

MACROENVIRONMENT (P.E.S.T.)


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Industries are embedded in a wider

macroenvironment of Politcal, Economic,

Social &Technological factors. Demographic factors also play a role. These

factors determine the health of a nation and

its economy.



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Economic improvement of economyensures growing business volumes and

reduces competitive pressures; Converse isalso true. Other factors such as interestrates, currency value also contribute to the

competitive factors and may pose a threat/opportunity to the company. Inflation canslow down the economy and make

prediction of future that much moredifficult. (Misery index = inflation +unemployment)



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Technological- can make existing products

obsolete and create demand for new

products; As such, represents both anopportunity and a threat. This is called a

perennial gale of creative destruction.

This factor also emphasizes the need for

speedy product development and its

introduction in the market.



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Social this also creates opportunities andthreats. E.G. Health consciousness resulted

in opening health clubs & reduction ofdemand for cigarettes.

Political political factors also createopportunities and threats. E.G.Liberalization of imports has created

opportunities for traders but has threatenedthe industries. Similarly environmentalconcern has had its favourable/ adverse

effects.



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Demographic changing composition of

population has created opportunities and

threats. Likes and dislikes of younger grouphas created its own demands (soft drinks,

pizza) and reduced demand for other

products (formal clothes)



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There is a criticism that the two theories

represent a static model in a dynamic world!

Innovation gives companies an opportunity to

reduce costs & revolutionize the industrystructure. Hence the industry undergoes a

transition, when the theories are not applicable.

Convergence of PEST Factors


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P1 E

P2

S1 T S2

System 1 System 2

Why are E & T factors becoming common?


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SESSION SUMMARY


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Following concepts have been covered

during this session

Macro & Competitive environment PEST &

5F theories; their limitations

Elements of 5 Forces Supplier Power,

Bargaining power of suppliers, Threat ofsubstitute product, entry and exit barriers,

Fragmented and consolidated Industrial

Structure


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4. INTERNAL ANALYSIS

V G S Mani


SESSION OBJECTIVES


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following concepts

Analyzing the internal organization

Structures and Systems, Structural Changes

Control Systems

Culture, Style & Value

Skills & Resources

Resources Capability

ANALYZING THE INTERNAL

ORGANISATION


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Structure and systems

Culture, style

and values

Skills andresources

ORGANISATION

STRATEGY

ANALYSING THE INTERNAL

ORGANISATION


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ORGANISATION

The strategy of a firm is influenced and constrainedby the existing;

Awareness of these is essential to develop aninsight into the reality of our organisation and thushow we ought to look in the future.

StructureCulture

Values

Resources

STRUCTURE AND SYSTEMS


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Structure refers to the way in which a

company is organised in terms of

Authority

Communication

Work flow


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FUNCTIONAL STRUCTURE


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Manufacturing FinanceEngineeringSales and

Marketing

ManagingDirector


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MATRIX STRUCTURE


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Manufacturing

Sales

Etc

Product /

Centre A

Product /

Centre B

Product /

Centre C

Customer

MATRIX STRUCTURE


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A matrix is a system that indicates not only

a multiple reporting structure, but also

aligned processes and an associatedorganisational culture and behaviour

pattern.

Focus on optimising customer relationships

Communication happens both vertically

and horizontally

Intersections mean dedicated functional

resources to product / centre

Better focus on product for customer

EMERGING STRUCTURES


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Communication problems

Conflicting priotitiesLack of co-ordination

Functional

Little specialisation

Emergance of specialistsFunctional goals not linked

Expansion

Functional Expansion

EMERGINGSTRUCTURES

CO-ORDINATIONACROSS THEORGANISATION

ACHIEVING CO-ORDINATION


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Create

small

units

Formalise

roles

in a matrix

structure

Co-ordinate

activities

across

functions

Co-ordination

across the

organisation

STRUCTURAL CHANGE


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Generalmanagement

avoidance

Consequence

Uncertainty

Anxiety

Resentment

Confusion

Retain histor icalstructures

Reorganisationdelayed

STRUCTURAL CHANGE


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Systems hinderstrategic

implementation

Management

approval

Job

descriptions

Used

defensively

Avoidance of

new problems

Avoid taking

responsibility

Uncomfortable

in using init iative

CONTROL SYSTEMS


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Do the control

systems measurewhat is important ?

Do they measure only

the things you can count ?

Do they identify

staff priorities ?

Is action identified tomeet the required level

of performance ?

CULTURE, STYLE AND VALUES


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Culture is the pattern of beliefs,expectations and values shared by the

organisations employees Norms of behaviour will emerge, to which

managerial hierarchy and the employees

will follow Shared values and expectations will

establish the degrees of individual

Responsibility Initiative

Innovation


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Strategy making process influenced

by management views

Customers, reported performance,

ex-employees, other managers,

industry rumours

Competition are formally rubbishedCollective inferiority complex

OBJECTIVE INFORMATION

IGNORED OR DOWNGRADED IFIT DOES NOT FIT THE

PREVAILING VIEW OF

THE WORLD



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There is safety

in being big

Views that keep the

company doing what ithas done in the past, and

is doing now

Loyalty brings

promotion

Managers know

what they are

doing

We are trained to

avoid risks atall costs



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Where Management is harmful to good

decision making

Believed wrong or bad form to criticiseManagement

Doubters are seen as not being Team

Players

Plain fear can prevent people from

speaking their minds

This predominant management style gets reinforced where

Companys generally promote from within



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Country club management

Attention to needs ofpeople, friendly atmosphere

Team management

People commitment leadingto trust and respect

Middle of the road management

Balancing necessity to get workout and maintaining morale

Impoverished managementExertion of minimum effort to

get required work done

Authority-ComplianceMinimum interference

through procedures

Low

High

High

Low

Concernforpeople

Concern for production1 2 3 4 5 6 7 8

1

2

3

4

5

6

7

8



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Gives group

freedom to

define

problem &decide

Presents

problem &

boundaries

groupdecides

Presents

problem

asks for

ideas &decides

Consults

group &

decides

Announces

decisions

& permits

questions

Sells to

group

Tells

Use of authorityby leader

Area of freedom

Fast Slow

Autocratic Democratic

AUTOCRATIC STYLE


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Production-oriented leadership

Effective when

-time is limited

- individuals/group lack

skill and knowledge

-group does not knoweach other

Ineffective when

-members have a certain degree of

skills-knowledge

-group wants an element of

spontaneity in their work

-developing a strong sense of team is

the goal

DEMOCRATIC STYLE


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Employee-oriented leadership

Effective when

-time is available-group is well motivated

-a sense of team exists

-there is some degree ofskills or knowledge among

the members of the group

Ineffective when

-group is unmotivated

-no skills or knowledge is in members-high degree of conflict is present



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Even when you believe democratic to be

the correct style, pressure exists from

Colleagues

you would be considered as weak

Bosses

youre not in control

Staffwe dont know how to respond to this

unfamiliar approach

SKILLS AND RESOURCES


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Resources are those assets that form the

input for the production of an organisations

goods and services. Personnel and managerial expertise

Financial assets

Physical plant and facilities

RESOURCE CAPABILITY


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Value Chain AnalysisResource audit

Measures of resource utilisation (effectiveness and efficiency)

Measure of resource control

Value Chain AnalysisResource audit

Measures of resource utilisation (effectiveness and efficiency)

Measure of resource control

Drawing ComparisonsHistorical analysis

Industry norms

Experience curve

Drawing ComparisonsHistorical analysisIndustry norms

Experience curve

Assessing BalanceProduct portfolio analysis

Skills analysis

Flexibility analysis

Assessing BalanceProduct portfolio analysisSkills analysis

Flexibility analysis

Identification of Key IssuesStrengths and weaknesses analysis

Distinctive competence

Identification of Key IssuesStrengths and weaknesses analysis




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ORGANISATION

Functional

audit

Organisational

capabilityaudit

Inability to meet customer needs


=

Competitive advantage



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Distinctive

competence;

Audit

considerations

Economies of scale

Learning and experience

Response timeLinkages



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Economies of

scale

Learning and

experience

Linkages Response

time

Can accrue in

production,

purchasing and

distribution.

Need to assess

where

competitors are

exploiting scale

economies more

effectively.

Do we

communicate

ideas and

suggestions

effectively? Do

we thoroughly

document

changes and

improvement?

Cost and

performance of

one activity is

often affected

by how other

activities are

performed. Eg

Higher quality

components can

reduce

production

costs.

How rapidly can

we respond to an

order? How long

does it take us to

develop a new

product? How

soon can we

deliver?

Critical in

creating

competitiveadvantage.



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Production R&D Marketing Finance Personnel

Is themanufacturing

process meeting

current

competition?

Is it flexible tomeet future

competition?

Is the plant and

equipment

appropriate?

Does it embody

the latest

technology?

Are R&D effortswell planned,

directed and

controlled?

Is the R&D effort

based oncustomer needs

as revealed by

market research?

Have enough new

products been

generated by the

R&D process?

What is the extentof the marketing

effort?

To what degree is

the firm

marketingoriented?

How capable is

the marketing in

identifying new

opportunities?

What is thefinancial standing

of the company

and what is the

quality of

financialmanagement?

Is the company

investing to

create

competitive

advantage?

Does thecompany have

the right people

with the right

skills in the right

place?Does the firm

offer competitive

rates of pay and

conditions of

employment?

Is the workforce

informed about

company

developments?

Internal Functional Areas Audit



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EFFECTIVE

Doing the

right

thing

Deployed

in the

best way

EFFICIENT

Doing the

thing

right

Utilised

in the

best way

RESOURCES


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5. STRATEGY DEVELOPMENT

V G S Mani


SESSION OBJECTIVES


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following concepts

Combining External & Internal Analysis

Developing SWOT / TWOS matrix

Types of Strategies Growth, Stability and

Retrenchment Strategies

Generic Strategy and associated risks

Product Life Cycles

Product Portfolio BCG Matrix

COMBINING THE INTERNAL AND

EXTERNAL ANALYSIS


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Strategy should arise from matching

company strengths to environmental

opportunities, while combating threats andremoving its weak links

STRENGTHS WEAKNESSES

THREATS OPPORTUNITIES

SWOT Analysis

SWOT ANALYSIS


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Many product lines

Broad market coverage

Manufacturing competence

Good marketing skillsGood materials management systems

R&D skills

Information system competences

Brand name reputationPortfolio management skills

Cost or differentiation advantage

New venture management expertise

Appropriate management styleAppropriate organisational structure

Appropriate control systems

Ability to manage strategic change

Well developed corporate strategyGood financial management

SWOT ANALYSIS


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Obsolete, narrow product lines

Rising manufacturing costs

Decline in R&D innovations

Poor marketing planPoor materials management systems

Loss of customer goodwill

Inadequate information systems

Inadequate human resourcesLoss of brand name capital

Growth without direction

Bad portfolio management

Loss of corporate directionInfighting amongst divisions

Loss of corporate control

Inappropriate organisational structure / control

High conflict and politicsPoor financial management

SWOT ANALYSIS


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Expand core business

Exploit new market segments

Widen product range

Extend cost of differentiation advantage

Diversity into new growth businesses

Expand into foreign markets

Apply R&D skills in new areas

Enter new related businessesEnlarge corporate portfolio

Reduce rivalry among competitors

Make profitable new acquisitions

Apply brand name capital in new areasSeek fast market growth

SWOT ANALYSIS


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Attack on core business

Increases in domestic competition

Increases in foreign competition

Change in consumer tastes

Entry barriers

Rise in new or substitute products

Increase in industrial rivalry

New forms of industry competitionPotential for takeover

Existence of corporate raiders

Changes in demographic factors

Changes in economic factorsDownturn in economy

Rising production costs

Slower market growth

SWOT/ TOWS MATRIX


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Strength Weakness

Opportunities S-O Strategies W-O Strategies

Threats S-T Strategies W-T Strategies

SWOT/ TOWS MATRIX


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S-O Strategies pursue opportunities that are

a good fit to companys strengths

W-O Strategies overcome weakness topursue opportunities

S-T Strategies identify the ways that thefirm can use its strengths to reduce its

vulnerability to external threats

W-T Strategies establish a defensive plan toprevent the firms weaknesses from making

it highly susceptible to external threats

IDENTIFYING AND SELECTING

STRATEGY


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An organisations strategy describes its

method for achieving strategic objectives

Corporate strategy alternatives can beclassified as being concerned with

Growth

Stability

Retrenchment

GROWTH VECTOR MATRIX


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Product

MarketPresent New

Present MarketPenetration

ProductDevelopment

NewMarket

DevelopmentDiversification

GROWTH STRATEGIES


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Area How Risk FactorsMarket penetration

Existing markets Winning a larger share with existing Low No investment

Existing products products/taking competitors business in new products

Market developmentNew markets When existing markets offer few High Little knowledge of

Existing products prospects in growth/overcome loyalty market characteristics

Product developmentExisting markets When there is low brand loyalty and/ Low Market knowledge

New products or short product life cycles High New product development

DiversificationNew markets Development beyond present markets High Unknown market and

New products and products; product influences

- related, there is existing connections

- unrelated (conglomerate), outsidethe scope of its existing operations

INTEGRATION STRATEGIES


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Integration strategies are usually considered

as part of related diversification

Backward integration

Control over inputs to its

existing business

Forward integration

Control over distributors

or retailers of its existing

products or services

Horizontal integration

Control over competitors

in the same business

GROWTH STRATEGIES


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ORGANIC

Culture Fast rate

GrowthType

Lowrisk

Immediatemarket

Job

creation

Working

business

ACQUISITION

Growth Strategies


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Horizontal Integration

Horizontal Diversification

Unrelated Diversification

Vertical (Forward/ Backward) Integration

Mergers Strategic Alliances (Partnerships)

STABILITY STRATEGIES


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Holding strategy Company

continues atpresent rate of

development

Retains market

share Growth if the

market grows

Continuation of

functional

strategies

Harvesting

strategy

Dominant marketshare

Cost cutting and/or

price increases to

generate cash forfuture business

expansion



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Liquidation Divestment Turnaround

- Withdraw from

a decliningmarket

- Reinvest

resources in newmarket areas

- Selling off a

business unit- Threats

towards the

present position- Conglomerates

shrink back to

their core

business

- Business is

failing andapproaching

bankruptcy

- Part of thesolution being

the liquidation

of assets and/or

divestment

Appropriate to reduce overall scale of an operation, or

withdraw commitment to a particular market

BUSINESS STRATEGIES


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How a Business Unit can most effectively

compete

Results expected Resources required

Adopting a competitive position

Defending itself against the five forces in

the industry environment

GENERIC BUSINESS STRATEGIES


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DIFFERENTIATION

- Unique feature- Charge at premium price

OVERALL COST

LEADERSHIP

- Avoid marginal accounts

- Maximise cost reduction

- Efficient scale facilities

STRATEGIC ADVANTAGE

STRATEGICT

ARGET

Uniqueness perceived

by the customer Low cost position

FOCUS

Industry

wide

Particular

segmentonly - Selects a segment/group in the market place

- These are served to the exclusion of all others


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Competitive Advantage


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Cost Leadership -Toyota

Differentiation General Motors

Cost Focus - Hyundai Differentiation

Focus BMW,Mercedes

Low Cost Differentiation

Broad

Target

NarrowTarget

Competitive

Scope

Competitive Advantage

COMPETENCE CHOICES AND

GENERIC STRATEGIES


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Low (principally

by price)

High(principally by

uniqueness)

Low to High(price or

uniqueness)

Low (mass

market)

High (manymarket

segments)

Low (one or a

few segments)

Manufacturing

and materials

management

R&D

Sales and

marketing

Any kind

Cost Differentiation Focus

leadership

D

istinctive

Market

Product

C

ompetencesegmentation

differentiation

GENERIC STRATEGY RISKS


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Cost Leadership

- Loss of customer focus

- There can only be one cost leader

- Low cost positions can be copied

Differentiation

- Easily imitated

- Specialists targeting one segment

- Costs of differentiating

Focus

- Target segment may disappear

- Price attack

- Excessive unit costs

THE PRODUCT LIFE CYCLE


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It is important that companies are aware of

the stage in the product life cycle that their

various products and services are at; Provides an indication of the most appropriate

competitive and marketing strategies

Important determinant of profitability

Highlights the need for new products or

services

It is not predictive but increases awareness

and can indicate the need for change

THE LIFE CYCLE MODEL


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Development Growth Shakeout Maturity Decline

Few: trial of

early adopters

Few competitors

Growing

adopters: trial ofproduct

Entry of

competitors

Attempt toachieve trial

Fight for share

Undifferentiated

products

Growing

selectivity ofpurchase

May be many

Likely price

cutting forvolume

Shake-out of

weakest

competitors

Saturation of

usersRepeat purchase

reliance

Fight to

maintain share

Difficulties ingaining/taking

share

Emphasis on

efficiency / lowcost

Drop-off in

usage

Exit of some

competitors

Selective

distributionCompetitive

conditions

Users/

Buye

rs

Salesde

mand/

Competition


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THE PRODUCT LIFE CYCLE


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The length of the life cycle is decreasing for an

increasing number of products

Technological changes in materials and processesChanging tastes of customers

Competitive activity aimed at increasing market share in

order to gain greater benefit from the experience effect

In evaluating product/service significance

Evaluate the current position

Establish future priorities and needs

Evaluate future potential opportunities

PRODUCT STRATEGIES


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Introduction Growth Saturation Future

Pioneering:

Organisations who

pioneer need defence

ie patent, cost

advantage or

differentiation.

Choice is in pricinghigh or low and the

profitability effect.

Imitation:

Large numbers of

products fail in thedevelopment stage.

Stepping in after a

competitor has

stimulated early can

prove successful.

Growth strategies

require that new users

and new uses are

found for the product,

or that existing users

are persuaded to

increase theirconsumption. These

strategies are

necessary during the

growth phase and for

extending the life-cycle once growth

slows down

Once demand for a

product has reached

saturation stage the

appropriate strategy is

to milk it by reducing

expenditure on

development and

promotion and using

the profits to fund the

development of

replacements.

Expenditure on

research and

development should

be aimed at having

new replacement

products available at

the appropriate time.

This requires constant

awareness of

competitor activity

and changes in

consumer tastes andinsight into the new

technological

opportunities which

might be available.

THE GROWTH SHARE MATRIX

(THE BOSTON MATRIX)


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Star business Wildcat business

Cash generating business Dog business

HIGH

LOW

HIGH LOWMarketShare

Market

Growth

Movements

of cash

Movements

of business


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SESSION SUMMARY


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Following concepts have been covered

during this session

Macro & Competitive environment PEST &5F theories; their limitations

Elements of 5 Forces Supplier Power,

Bargaining power of suppliers, Threat ofsubstitute product, entry and exit barriers,

Fragmented and consolidated Industrial

Structure


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6. CHANGE MANAGEMENT

V G S Mani



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STRATEGY IMPLEMENTATION


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Functional

policies

Organisational

factors

Guidance for decision making

In terms of functional activities

Link formulation with implementation

Structure

Leadership styleMotivation & needs

MOTIVATION AND NEEDS


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Motivators

Achievement

Recognition

The work itself

Responsibility

Advancement

Hygiene factors

Company policy

Administration

Supervision

Salary

Interpersonal

relations

Working conditions

MOTIVATION AND NEEDS


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Need to challenge and develop leading

to capability

Recognition of good performance andthe development of status through

recognition

A requirement for belonging,

acceptance and affiliation

A need for a safe working environment,

job security and other negotiatedbenefits

The need for a basic living salary and

the workspace in which to operate

Self actualisation

Esteem needs

Social needs

Safety needs

Physiological needs Maslows hierarch of needs

MOTIVATIONAL FACTORS


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50% 40% 30% 20% 10% 0% 10% 20% 30% 40% 50%

Recognition

Achievement

Work itself

Responsibility

Advancement

Company policy and administration

Technical quality of supervision

Salary / Wage

Relationship with supervisor

Working conditions

Satisfiersor

Motivators

Dissatisfiers

Or

Hygiene Factors


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CHANGE PHASES


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Chal lenge

peo ple toal ign theirpurpose

Understand

currentsituationIm

plem

ent&

track

results

Enlistothers,

developmass

De

velo

pa

chang

eplan

CHANGE RELATIONSHIP


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Bottleneck Strategic

Non-critical Leverage

HIGH

LOW

LOW HIGH

Difficulty of managing

Strategic importance

FORCE FIELD ANALYSIS


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Pushing

Forces

Resisting

Forces

Present Situation

FORCE FIELD ANALYSIS


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Pushing

Forces

Resisting

Forces

Present Situation

Poor warehousing

Inadequate documentation

Shopfloor attitudes

Low quality reputation

Poor internal

relationships

Customer pressure

Good training programmes

Modern machinery

Proactive management

Motivated supervision

Change Management

Elements of Change Management Result


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VISION SKILLS INCENTIVE RESOURCES ACTIONPLANS

Good

Change

ManagementNotpresent SKILLS INCENTIVE RESOURCES ACTION

PLANS

Confusion

VISION Notpresent INCENTIVE RESOURCES ACTIONPLANS

Anxiety

VISION SKILLS Notpresent RESOURCES ACTIONPLANS

Gradual

Change

VISION SKILLS INCENTIVE Notpresent ACTIONPLANS

Frustration

VISION SKILLS INCENTIVE RESOURCES Notpresent False Starts

When all the 5 elements are fully deployed, there is a successful change management

Elements of Change Management Result


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CHANGE MANAGEMENT PROCESS


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- help people discover

the part they will play

- verify that policies,

procedures and

priorities are consistent

- model desiredattitudes and

behaviours

- reward people for

successfully changing

- dont push for

certainty or closure to

quickly

- encourage

experimentation and

dont punish failure

- step back and reflect

- solicit upward

feedback

- set short range goals

- clarify the necessity

of ending

- identify and

acknowledge losses

- compensate people

for losses

Beginning

Neutral ZoneEnding

STRATEGIC CHANGE ELEMENTS


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SimplificationELEMENTS

Integration

Automation

CommunicationReorganisation

Reexamination

Adaption

STRATEGIC CHANGE APPROACH


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Understand and

measure existingprocesses

Design and build aprototype of the

process

Identify processesto be redesigned

Identify IT levers

Develop business

vision and processobjectives

PROCESS INTEGRITY COMPONENTS


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Review of disasterrecovery requirements

Security policies andprocedures

Problem management procedures Change control procedures

Batch scheduling

procedures

Report distribution

procedures

Operations

procedures

Review of the general control environment

INTEGRITY COMPONENTS

SHARED VALUES


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Top Management

Company Employees

Where to go

How to get there

PRINCIPLES OF COLLABORATIVE

RELATIONSHIPS

Beha io r Attit des


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Collaborative

Partnering

Behaviour Attitudes

Measurements Processes Time

Extended guaranteed life

Single sourcing

High switching costs

Infrequent re-sourcing

Transaction history

Shared design

Open info exchange

Hands onLearning organisation

Team based

Supplier investment

Multi dimensional

Relationship positioning

Self regulationTotal acquisition cost

Process measurement

People involvement

Devolved authority

Covert powerDifferentiated suppliers

Pro-active innovation

Prevention driven

Mutual respect

Committed

Open and sharingTrusting

Focus on group gain

RISK SIGNIFICANCE


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HIGHMEDIUMLOW

PROBABILITY OF

OCCURENCE

LOW

MEDIUM

HIGH

LEVEL

OF

IMPACT

Minor

Significant

Critical

Significant

Critical

Fatal

Critical

Fatal

Fatal

THE COPING CYCLE


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Denial Defence Discarding Adaptation Acceptance

Performance

Self-esteem

UNFREEZE CHANGE FREEZE

EMPLOYEE RESISTANCE

R i b d b


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Resistance can be caused by;

Danger of losing job security

Loss of power

Skill or knowledge requirement Scepticism about results

Functional units interests

Resistance of customers

COLLABORATIVE DECISION MAKING

Separate the PEOPLE from the problem


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Sepa ate t e O o t e p ob e

Invent OPTIONS

for mutual gain

Apply OBJECTIVE

criteria

Consider

ALTERNATIVES

Develop an

AGREEMENT

Focus on INTERESTSbehind positions

REFLECT

on what you

have learnt


Separate the PEOPLE from the problem


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Separate the PEOPLE from the problem Soft on the people, hard on the problem

Put yourself in their shoes Listen before you talk

Involve them from the start

Help them save face Dont blame

Focus on INTERESTS

3 kinds: Shared, Opposed, DifferentAsk why? Why not?

Assert your interests not your position

Formulate shared objectives


I t OPTIONS


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Invent OPTIONS

Invent before you judge

Invent a wide range of options Leverage differences: Different interests,

time value of money, forecasts

Apply OBJECTIVE criteria Criteria: External standards of efficiency

and fairness for deciding among options

Examples: Market value, costs, core

values, efficiency, corporate principles


Consider ALTERNATIVES to agreement


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Consider ALTERNATIVES to agreement What will you do if you dont reach

agreement

Review the costs to you and to them

Develop an AGREEMENT

Aim for a higher level solutionAre there other possibilities?

REFLECT on what you have learnt

What worked / didnt work What would you do differently

Ways to improve agreement

What skills should you work on

EMPOWERMENT

Empowerment is a PROCESS by which


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Empowerment is a PROCESSby whichfreedom and control are balanced so that

supervisors and employees are authorised,enabled, held accountable and recognisedfor their contribution.

Empowerment is a sense of PURPOSEwhich motivates people to stretch, beinnovative and fully utilise their potential.

Empowerment is PERFORMANCE inwhich everyone share responsibility forexceeding expectations.

TEN STEPS TO EMPOWERMENT


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Direction

- Alignment/Outcome- Standards

- Resources

Support

- Coaching- Development

Autonomy

- Delegation

- Freedom- Responsibility

Performance

- Evaluation

- Reward/Recognition

MATRIX FORMULA

Top Management


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Top Management

From; To;- unilateral decision making - shared decision making

- short term decision making - longer term strategic decisions- special interest actions - agreed shared priorities

Functional Management

-part focus - whole focus- competitive - collaborative

- owned resources - shared resources

Product Management- short term focus - longer term focus

- weaker structure - stronger structure

vgsm manufacturing strategy - jan 2011

Documents