13 Implementing Strategy in Companies That Compete Across

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13 Implementing Strategy in Companies That Compete Across Industries and Countries

Tonight • Implementing Strategy (Continued) (Hill) Chapter 13 • Case: Kmart Corporation: Seeking Customer Acceptance and Preference – Oral Discussion – Can strategic management issues save Kmart? Why or why not? • Discussion Quiz 7 • Written Analysis, Finkelstein, Why Smart Executives Fail Copyright © Houghton Mifflin Company. All rights reserved. 2

Next Week – How Can you motivate employees? • Age-old question: "How do I get an employee to do what I want? “ • The psychology of motivation is very complex • One of the most appealing theories, is Fredrick Herzberg’s two-factor theory Copyright © Houghton Mifflin Company. All rights reserved. 4

“Ole” Proverb on Knowledge • Unconscious incompetent – Those who know not, and know not that they know not … shun them • Conscious incompetent – Those who know not, and know that they know not … teach them • Unconscious competent – Those who know, and know not that they know, are asleep … wake them • Conscious competent – But those who know, and know that they know, are wise people … follow them Copyright © Houghton Mifflin Company. All rights reserved. 6

Communication With Understanding • • • Will be one of the biggest problems you as new MBA’s will face in an organization So what’s the importance of communication? To give you the information/knowledge and understanding to do a job. – I. e. , the skills to do the work. • To give you that desire to want to do the work. – I. e. , the will to do the work. Copyright © Houghton Mifflin Company. All rights reserved. 7

Communication and Learning How to “Play the Game” • Recognizing the need for effective communication • Do you agree with Jack Welch’s statement that “Business is a game? ” • Learning the rule and how to play the “game” – can be extremely important if as a new MBA you are to survive and advance in a business organization. Copyright © Houghton Mifflin Company. All rights reserved. 8

Enlightenment • As a new MBA, what does it take to survive, and move up in a business organization? Let me use two words to give just one answer to that question. • – – • Ability – when you lack ability to advance, you need someone to educate and train you. Desire – when you lack desire to advance, you need someone to motivate you. Bottom-line – what is take to survive and to advance is not failing. Then, why do smart executives fail? Copyright © Houghton Mifflin Company. All rights reserved. 9

Six Reasons Why Many MBA’s Fail • The chances are good that a new MBA won’t survive and advance if they, – – – • Lack drive Lack imagination (If they’re unable to see ahead, either potential problems or new opportunities. ) Lack good judgment (Try to keep your “cool” and don’t get emotional easily. ) Attitude Not a so-called “team player” Don’t communicate well Don’t panic – never let them see you sweat Copyright © Houghton Mifflin Company. All rights reserved. 10

What Should MBA’s Think About • The future – it is the only thing you can really do anything about. • Change – be an active agent of change (You can’t become better without change). • Vision and focus – always have clear objective (Always remember that you can’t have an objective without a problem/opportunity). • Behavior – learn what people do and why (Seek to lead and motivate them). • Society – play a role in the design of the socioeconomic-political world around you. – Get know and get your name in print. Copyright © Houghton Mifflin Company. All rights reserved. 11

Life’s Brick Walls – Are Only a Temporary Inconvenience • If things aren’t going great – If you didn’t get that raise or promotion – Don’t let it get you down, just say, it’s only a temporary inconvenience • Remember that many difficulties in life are only, “temporary inconveniences” • What’s the worst thing that some feel could ever have happened? – Not having ever been born. Copyright © Houghton Mifflin Company. All rights reserved. 12

Quiz 7 f. - Objectives and Problems: Rhetorical Question • Do you think there are MBA’s who work on a problem which if solved, won’t get them to their objective? • Do you think there are MBA’s, or anyone else, who work on symptoms instead of the real problem? • Can anyone cite an example? Copyright © Houghton Mifflin Company. All rights reserved. 13

Why Do MBA’ Bother to Solve a Problem? • To reach an objective is it possible to have an objective and no problem? – No: You would be at your objective. • Can you have a problem and no objective? – No: If you don’t want to go anywhere, there’s no problem getting there. Copyright © Houghton Mifflin Company. All rights reserved. 14

Teaching Objectives (Chapter 13) • To introduce you to the multidivisional structure. • To introduce you to the four global strategies – – Multidivisional International Global Transnational • To discuss the relationship between global strategy and organizational structure. • To describe three entry modes for firms wishing to enter a new industry. – Internal new venturing, e. g. , intrapreneurs – Joint venturing – Mergers and acquisitions • Explain the impact that information technology (IT) has had on strategy implementation. Copyright © Houghton Mifflin Company. All rights reserved. 15

Are You Ready – To Be Able to Think Strategically? “Just as many medical doctors are earning MBAs today to understand the many strategic issues confronting their profession, so scientists need to be able to think strategically …” p. 470 Copyright © Houghton Mifflin Company. All rights reserved. 16

IT (e. g. , my. Sap) and the Value Chain • IT is changing the nature of value chain activities both inside and between Organizations, – Affecting all four building blocks of competitive advantage: efficiency, quality, innovation, and responsiveness to customers. • For both the multi-business firm and the single-business firm, there is the need to be alert to changes (e. g. , IT) to strengthen their position in their core business, – The success of companies like Dell and Wal-Mart, and – The failure of firms such as Gateway and Kmart can be traced, – To their success in developing the IT capabilities that lead to sustained competitive advantage. P. 479 Copyright © Houghton Mifflin Company. All rights reserved. 17

Quiz 7 a. – Chapter 13 • Opening Case: The “New HP” Gets Up to Speed – – – • How does the use of a multidivisional structure hinder HP relative to a primarily single-business firms such as Dell? How does the structure help HP? What about Dell’s as it ventures into the printer business (See BW 4/19/04 “Dude, You’re Getting a Printer”)? Dell is said to have higher profits than its competitors for the preceding seven or eight years. Based on this information, which of the following is the best description of Dell’s situation? a. b. c. Dell has a competitive advantage. Dell has a sustained competitive advantage. Dell has an appropriate strategic process. Copyright © Houghton Mifflin Company. All rights reserved. 18

Quiz 7 b. – Chapter 13 • Strategy in Action 13. 4 – Using IT to Make Nestlé's Global Structure Work – • How can IT – such as my. SAP, e-mail, and global intranets – facilitate strong global cultures and ease difficulties of worldwide coordination mechanisms. When firms use a network structure to implement outsourcing (note: explain your answer), a. b. c. d. e. Many firms can easily cooperate. Bureaucratic costs are increased. The cost of the outsourced functions increases. Information technology must be used. Many firms can easily cooperate and bureaucratic costs are increased. Copyright © Houghton Mifflin Company. All rights reserved. 19

Quiz 7 c. – Chapter 13 • Strategy in Action 13. 5 – Oracle’s New Approach to Control – What problems did Larry Ellison discover regarding how Oracle was controlling its activities? – Considering Oracle’s core products, why do you think it took Ellison so long to realize that there was a problem? – What steps did he take, and why, to correct the problem? Copyright © Houghton Mifflin Company. All rights reserved. 20

Quiz 7 d. – Chapter 13 • Closing Case: Hughes Aircraft Changes its Divisional Structure – What problems did Armstrong discover with Hughes's strategy and structure? – What steps did he take, and why, to reengineer the company? Copyright © Houghton Mifflin Company. All rights reserved. 21

Quiz 7 e. - Reengineering • Reengineering – Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements • Focuses not on functions, but on processes (which cut across functions) • Process Example: Customer Order Process – Explain and provide and example. Copyright © Houghton Mifflin Company. All rights reserved. 22

Managing Corporate Strategy Through the Multidivisional Structure • Functional or product structures are not sufficient when a company enters new industries • Multidivisional structure innovations – Divisions (operating responsibility) – Corporate headquarters staff to monitor divisions (strategic responsibility) – Each division may be organized differently Copyright © Houghton Mifflin Company. All rights reserved. 24

Advantages of a Multidivisional Structure • • Enhanced corporate financial control Enhanced strategic control Growth Stronger pursuit of internal efficiency Copyright © Houghton Mifflin Company. All rights reserved. 26

Problems in Implementing a Multidivisional Structure • Establishing the divisional-corporate authority relationship • Distortion of information • Competition for resources • Transfer pricing • Short-term R&D focus • Duplication of functional resources Copyright © Houghton Mifflin Company. All rights reserved. 27

Structure, Control, Culture, and Corporate-Level Strategy • Unrelated diversification – Easiest and cheapest strategy to manage – Allows corporate managers to evaluate divisional performance easily and accurately – Divisions have considerable autonomy – No integration among divisions is necessary Copyright © Houghton Mifflin Company. All rights reserved. 28

Structure, Control, Culture, and Corporate-Level Strategy (cont’d) • Vertical integration – More expensive than unrelated diversification – Multidivisional structure provides necessary controls to achieve benefits from the control of resource transfers – Must strike balance between centralized and decentralized control – Divisions must have input regarding resource transfer – Managed through a combination of corporate and divisional controls Copyright © Houghton Mifflin Company. All rights reserved. 29

Structure, Control, Culture, and Corporate-Level Strategy (cont’d) • Related diversification – Multidivisional structure allows gains from the transfer, sharing, or leveraging of R&D knowledge, industry information, and customer bases across divisions – Difficult to measure performance of individual divisions – High bureaucratic costs – Integration and control at divisional level is required – Incentives and rewards for cooperation are necessary Copyright © Houghton Mifflin Company. All rights reserved. 30

The Role of Information Technology • IT provides a common software platform that can make it less problematic for divisions to share information • IT facilitates output and financial control • IT helps corporate managers react more quickly because of higher-quality, more timely information • IT makes it easier to decentralize control to divisional managers, but react quickly if necessary • IT makes it difficult to distort information because of standardized information • IT eases the transfer pricing problem Copyright © Houghton Mifflin Company. All rights reserved. 32

Implementing Strategy Across Countries • Multidomestic strategy – Local responsiveness; decentralized control • International strategy – Centralized R&D and marketing; other functions are decentralized • Global strategy – Cost reductions; centralized functions • Transnational strategy – Local responsiveness and cost reduction Copyright © Houghton Mifflin Company. All rights reserved. 33

Implementing a Multi-domestic Strategy • Global-area structure – All value creation activities duplicated and overseas division established in every country of operation – Decentralized authority – Managers at global headquarters evaluate performance of overseas divisions – No integrating mechanisms needed – No global organizational culture – Duplication of specialist activities raises costs Copyright © Houghton Mifflin Company. All rights reserved. 35

Implementing International Strategy • International division structure – Used when a company sells domestically made products in markets abroad – Foreign sales organization added to existing structure; same control system – Customization is minimal – Subsidiary handles local sales and distribution – Behavior controls keep the home office informed – International division coordinates flow of different products across different countries – Domestic and overseas managers may compete for control of strategy making Copyright © Houghton Mifflin Company. All rights reserved. 37

Implementing Global Strategy • Global product-division structure – All value chain activities located to allow efficiency, quality, and innovation – Problems of coordinating and integrating global activities – Structure must lower bureaucratic costs and provide central control – Product division headquarters coordinates activities Copyright © Houghton Mifflin Company. All rights reserved. 39

Implementing Transnational Strategy • Global Matrix Structure – Lower cost structures and differentiate activities – Decentralized control provides flexibility for local issues, but product and corporate managers at headquarters have centralized control to coordinate company activities on global level – Knowledge and experience can be transferred – Global corporate culture – IT integration mechanisms provide coordination – Bureaucratic costs are high Copyright © Houghton Mifflin Company. All rights reserved. 41

Entry Mode and Implementation • Internal new venturing – Structure, control, and culture must encourage creativity and give intrapreneurs autonomy and freedom to develop and champion new products and allow corporate managers to monitor profitability and fit – Organization-wide new venturing vs. separate new -venture division Copyright © Houghton Mifflin Company. All rights reserved. 43

Entry Mode and Implementation (cont’d) • Joint venturing – Managing culture differences – Allocating authority and responsibility • Mergers and acquisitions – Must establish new lines of authority – Must streamline operations – In unrelated acquisitions, managers must understand the new industry – Must standardize control systems – Must recognize culture differences Copyright © Houghton Mifflin Company. All rights reserved. 44

IT, the Internet, and Outsourcing • IT and strategy implementation – Knowledge leveraging through IT to achieve low costs and differentiation – Flattening the organization, moving toward decentralization and increased integration through IT – Virtual organization – Knowledge management system Copyright © Houghton Mifflin Company. All rights reserved. 45

IT, the Internet, and Outsourcing • Strategic outsourcing and network structure – IT increases the efficiency of inter-organizational relationships – Business-to-business (B 2 B) networks – Network structure Copyright © Houghton Mifflin Company. All rights reserved. 46