University of Cassino Faculty of Economy Business Organization BUSINESS MANAGEMENT A. Y. 2008 -2009 Prof. Francesco Polese 1
Business Organization Premises Growing up of business dimensions, developing of business relationships with the market, and the nowadays management procedures have lead to assume for Direction and Organization functions more importance and strategical remarkable contents. 2
Business Organization Business Directional Process The function of Business Direction demands the simultaneous assumption of decision actions, of employment of resources, of leading of workers and of appraisal of the performances, according to an integrated cycle that previews for each activity the development of different moments (phases, stages) closely and mutually interdependent. 3
Business Organization Business Directional Cycle Planning Decisions Actions Control Organization Evaluation Actions Direction Actions Leading Guide Actions 4
Business Organization Business Directional Cycle Every cycle is carried out, in its several moments, by means of the finding, the management and of the communication of informations that flow inside of the enterprise and that must necessarily be integrated with those coming from the outside; in this sense we can speak also about an informative cycle. 5
Business Organization Informative Cycle for Direction Environmental Informations Executive Guidelines Internal Control Data Executive Results 6
Business Organizational Function The Enterprise works as a system, constituted from several elements that act for a common purpose, coordinated by means of the accomplishment of specialistic functions and oriented to the attainment of a final (survival) goal. The study of the Organization can be carried out by means of the analysis of the Structural aspect related to the ordering of tasks and responsibilities, and of the Behavioural aspect of the organizational system, considered as a whole. 7
Business Organizational Decisions The planning (or re-planning) of the Organization demands the assumption of a set of decisions: Definition of the Objectives Definition ofvertical integration degree (efficient border) Analysis of the complex of existing ties (Professional abilities, Investments, Structural costs) Construction of the Organizational Structure Characterization of the Functions (inside the Business System) Characterization of the strength elements and valorization of the main meaningful potentialities 8
Business Organizational Decisions To define an Organizational Structure it is necessary the definition of an outline of connections between the several organizational positions finalized to the activation of authority relationships, of cooperation, information around which the business life is developed, as well as it concerns the “vertical” development, the “horizontal one”, the “crosssectional one” and “functional one” (of lines or staff). The planning of the structure demands also the definition of procedures (organizational routines) that establish the adoptable behavioral rules for the solution of periodical (or extraordinary) problems; they come planned in starting phase, enriched in itinere for effect of the accumulation of knowledge and experience, and they translate in decisional and operating rules. Therefore we distinguish operative, of control, informative and decisional procedures 9
Business Organization Structural Models for Organization Several models of Organizational Structure exist to define the inner articulation of the relationships, the roles and the existing responsibilities in an enterprise: Functional Pattern: Its characteristic: the subdivision of the areas of responsibility for groups of tasks in terms of management functions What is the main principle: the principle of specialization of each operating areas, and of sub-division of the managerial process in connection with the different nature of the problems to train, approaching the responsibles competences according to the kind of task to carry out The definition on which it is based: the function consist of a set of complementary and interdependent tasks and duties (functions) in relation to an aim What it is the limit: possible difficulty of coordination between the different Responsibility Area To who it is apt: to enterprises with greater operating stability 10
Business Organization Functional Structural Model Top Government Business Management Business Direction Marketing Management Production Management Sales Office Planning Office Public relations Office Customer care Office Human resources Management Systems and Methods Office Administration and Financial Management Accounting Office Plant Office Controll Office Planning Office Production Office Finance Office Supplies Office Purchase Office 11
Business Organization Structural Models for Organization Several models of Organizational Structure exist to define the inner articulation of the relationships, the roles and the existing responsibilities in an enterprise: Divisional Pattern: Its characteristic: the division of the management responsibilities for groups or various families of products, each entrusted to a divisional director, who is the only responsible of economic and operating result (also geographical meaning) What is the main principle : the subdivision of the business (enterprise) in more parts, considered distinct centers of profit (and cost) with elevated autonomy, above all operative. The definition on which it is based: the business focuses its attention on the result rather than on the tasks and stimulates the assumption of responsibilities (decentralization) What it is the limit: possible creation of inner conflicts (often it’s due to not the convergence of the specific interests) To who it is apt: to mainly dynamic enterprises in the (entrepreneurial) managerial behaviors 12
Business Organization Multi-divisional Structural Model Top Government Business Management Human resource Business Direction Alfa Product Division Production Division Plant Division Finance and accounting Beta Product Division Marketing Division Studies and plan Division Sales Division Production Division R&D Division Gamma Product Division Marketing Division Public relation Division Sales Division Production Division Planning Division Marketing Division Budget Division Sales Division 13
Business Organization Structural Models for Organization Several models of Organizational Structure exist to define the inner articulation of the relationships, the roles and the existing responsibilities in an enterprise: Matrix Pattern: Its characteristic: the corporate structure introduces a reticular character, with interlacing of functional competences, flexible form and interconnection of responsibility (institutionalized evolution of the Organizational plan) What is the main principle: the definition of the amplitude and the limits of the delegation of the directional powers according to the degree of decentralization realized in the government of the business system The definition on which it is based: the requirement of <<department division>> of the job and the responsibilities What it is the limit: the processes of information and decision can be carried out with a minor tie of institutionalized hierarchical filter To who it is apt: to the enterprises highly (deeply) dynamic in the managerial behaviors 14
Business Organization Matrix Structural Model Top Government Production Manager Mkt Manager Administration Management Human resources Management Alpha Products Technical Manager Sales Manager Head accountant Human resources Responsible Beta Products Technical Manager Sales Manager Head accountant Human resources Responsible Gamma Products Technical Manager Sales Manager Head accountant Human resources Responsible 15
Business Organization Themes Business Functions Purchases/Supply Production Logistics Marketing Quality R&D Definitions Evolution Purchase Mkt Make or buy Suppliers Relationship Suppliers Integration Supply Chain Management 16
Business Organization Purchases/Supply Purchases Supplies Definition the set of the activities turned to stipulates contracts for the supply of the necessary assets/ services the set of the activities turned to guarantee a regular standard flow of goods and services according to a predetermined business planning Relevance decisional process operating tasks (even if the managed amounts can be also much considerable) and moderated decisional autonomy greater discretion and delegation General Framework in The short run trend, with a “passive” attitude to answer the demands for the production The long run trend, with a “proposal” guidance for plans 17
Business Organization Purchases/Supply The purchases office must, at first, comprise the requirements of production (quantity, quality and timing) according to: 1) To estimate and to choice of the suppliers It’s not necessary to put more suppliers in competition and to choose lower purchase price. Risks and opportunities estimation of the only supplier (single sourcing) 2) To deal and to define the conditions: Choosing between open contracts or orders spot. Quality and delivery time turn out critical. The acceptance or test control can be made from the supplier 3) To speed up the deliveries and to define the anomalies: It’s the more delicate phase because the anomalies can have origin from problems of the supplier or inner problems of the plant. In the great enterprises the center purchases function only takes care of the heavy supplies addressed to several plants while the little ones purchases are managed from local offices. 18
Business Organization Purchases/Supply The supplying function has acquired during last years an increasing importance and strategic relevance regarding: Purchases relevance, It’s expressed as an added value for line of product, or costs percentage of raw materials on the total costs complexity of supply market, the It’s linked to lack of supply, technological development in new materials, entrance constraints, cost / complexity of logistic factors, any condition of monopoly / oligopoly. 19
Business Organization Purchases/Supply There are two paths in the development of the supply function: through materials management, in relation to the recognition of the costs of purchase (more frequently); through the management of the supplying sources, with regard to the strategic or technological criticality of the purchases. 20
Business Organization Purchases/Supply Il marketing purchase It’s based on the systematic study of the supply market in order to consider and manage suppliers as a resource. It’s based on procurement mix: Product: = all decisions relating to materials supplied. The product policies are linked to critical state of economic situation and risk of supply. Price = the negotiation of economic conditions and issues related to quality and deliveries impacting on the total cost of supply. Sources supplying = the monitoring of the market supply is finalized to the identification of potential suppliers, their evaluation, selection and qualification, and to verify suppliers related to critical performances Communication = promoting the corporate image towards potential and consolidated suppliers, through financial and technical assistance and through lightness in production schedules 21
Business Organization Purchases/Supply Kraljic Matrix Non-critical Items: No important intervention Leverage Items: to optimize costs through the analysis of value and the search for new sources Bottleneck Items: Reliability, deliveries to guarantee also to higher costs Strategic Items: cooperation with the suppliers 22
Business Organization Purchases/Supply The outsourcing choices are due to : The search of elasticity margins according to fluctuations in demand; The exploitation of cost differentials; The need to cope with insufficient production capacity; The outsourcing of stages characterized by low crucial degree; The outsourcing working on bulky and weight materials; the outsourcing of parts to be carried in small quantity. The outsourcing choices are due to : - a "positive" attitude of search for greater flexibility, productivity and cost - a “precautionary” attitude link to the will to to relegate outside risk and impediment factors 23
Business Organization Purchases/Supply The evaluation of outsourcing choices considers: Internal costs Exsternal Costs the cost of the direct materials; purchase price; the cost of the direct labor; services charges, if not included in the price, such as transportation (logistics) costs, packaging, insurance and so on; other variable costs; changes in fixed costs the cost of plants, specific equipment and so on, however charged on customer; amortization of specific investments; financial charges on specific equipment; any start-up costs, understood in a broad sense any increased costs related to initial development 24
Business Organization Purchases/Supply In the relationships with suppliers different requirements must be distinguished: Specialty sub-supply It provides elasticity to the production process in terms of production volumes Capacity sub-supply It is incremental and not internally available, it brings technological expertise not possessed from the purchaser Permanent sub-supply It’s the result of a constant and structured relationship Occasional sub-supply It’s the result of episodic relationship and linked up contingent requirements Suppliers are regarded as business assets : - Investing in suppliers relationship - Consolidating long-term relationships 25
Business Organization Purchases/Supply The enterprises reduce the number of their suppliers: Through centralization of same category purchases Standardizing the components and subset Buying units/subunits rather than individual components 26
Business Organization Purchases/Supply The development of consolidated suppliers relationship and the sharing of the information on the production plans is finalized to reduce total costs, and to manage efficienlty the storage 27
Business Organization Purchases/Supply The consolidation of suppliers relationship requires: organizational integration: to common interbusiness procedures computer science integration: to invest in innterorganizational systems for the exchange/sharing of the data cultural integration: to invest in an acculturation /understanding process Levers of integration Organization Information technology Culture Operational - Quality control integrated procedures, sending orders, invoicing, transport, planning and production control - Integrated management -Uniformity in strategic guidelines on manufacturing (Production flow) - Uniformity of values (Manufacturing excellence, service orientation) systems - EDI for launch orders, forecasts, invoices -Uniformity of language (for example , materials tagging) - Integrated planning information systems (CAD developing procedures (for example materials and common -CAM) processes tagging) - EDI for project data communication - Uniformity of language Technological - New products integrated - Uniformity in the product design (Modularization, standardization) - Uniformity of values (eg. , Technological excellence) 28
Business Organization Purchases/Supply The reduction of time to market increases through the establishment of new monitoring tools on the entire supply chain. 29
Business Organization Purchases/Supply SUPPLY CHAIN • What is Supply chain? • Objective of a supply chain • Supply Chain Management 30
Business Organization Purchases/Supply What is Supply chain? Supplier Manufacturer Distributor Retailer Customer Consists of all parties involved, directly or indirectly, in fulfilling a customer request It refers to the distribution channel of a product, from its sourcing, to its delivery to the end consumer (also known as the value chain). The supply chain is typically comprised of multiple companies who are increasingly coordinating activities via an extranet 31
Business Organization Purchases/Supply Objective of a supply chain • Maximise overall profit • Profit • Revenue generated from customer - costs incurred along the entire chain • (e. g. manufacturing / storing / distributing the product) • When is Supply chain effective? • Manage Product, Information and Fund flow 32
Business Organization Purchases/Supply Objective is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost 33
Business Organization Purchases/Supply SUPPLY CHAIN MANAGEMENT Supply chain management is the integration of key business processes from end user through original supplier that provides products, services, and information that add value for customers and other stakeholders. 34
Business Organization Purchases/Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and customers so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time in order to minimize system wide costs while satisfying service-level requirements. 35
Business Organization Purchases/Supply Chain Management • Business association • Cluster secretariat Education and research organisations Specialised services and closely-related industries (certification, etc. ) Producers • Technical/technology demonstration centre • Technology transfer centre • Distribution • Marketing • Packaging 36
Business Organization Purchases/Supply F I N A L C O N S U M E R S SUPPLIERS COMPANY INTERMEDIATE CUSTOMERS Value Creation (Product/Service Development) Process Information/Demand Flows Sourcing Operations Logistics Value Delivery (Order Fulfillment) Process Value Maintenance (After Sale Service & Support) Process F I N A L C O N S U M E R S 37
Enterprise Organization Topics Business Functions Supply Production Logistics Marketing Quality R&D Definition Production cycle centrality Production process Supply chain, outsourcing Inferences on Strategy Process Organization Production programs and plans Control 38
Enterprise Organization Production Definition The production function deal with the transformation process of goods, and with all the operations with which the acquired resources (input) are converted into finished goods (output) for the market INPUT Transformation process OUTPUT Market 39
Enterprise Organization Production cycle centrality The production cycle is central in every business, proceeded by the supplying process and followed by distribution, continually interconnected with marketing, design, finance, human resources, R&D Incoming logistics Outgoing logistics Production Function Supplying and raw material management Distribution and products delivery and management Marketing mix etc. Human resources Jobs organizations and resources management Finance Mng and planning of financial necessities R&D Design, new products development 40
Enterprise Organization Production chain Rappresents the system of enterprises involved and participating to the transformation of inputs into finished products, contributing to deliver into final market Outsourcing Enterprises sometimes need external support in logistics, production, finance support, etc. , in order to became more flexible in costs (from fixed to variables), financial need decrease, know-how concentration, networks support fulfillment, core business focusing Production de-centralization Growing trend leading to great enterprises transformed in a central unit as controlling and dispatching outside processes and activities, maintaining internally market distribution and overall management and coordination. 41
Enterprise Organization Production Choises Strategies Price-competition Costs Differentiation Choices Mix production definition Plants definition Logistics determinations Focus Quality Production Focus Mix, Quality, Quantity Dimensional targeting, technologies, external services Vertical integration, production decentralization 42
Enterprise Organization Production organization typologies Production Cycle characteristics Operating process Distinct units/goods Intermittent Lab (job shop) Differentiated mass production Mix Batch Standard mass production Continuous Line production Homogeneous products Continuous flow production 43
Enterprise Organization Production plants Design a) Lay out b) Tech and economical flexibiliy c) Flexible automation d) Capacity Economic flexibility Technical flexibility Plant capacity to remain competitive under subutilization Plant capacity to adapt to different products with low switching costs 44
Enterprise Organization Production Stocks as a balance between production and selling 45
Enterprise Organization Production function organization I. Production system’s Reporting II. Production control systems III. Reactive production systems 46
Enterprise Organization Production I. Production system’s Reporting A. B. C. D. E. F. G. Production orders Material invoice Operation master lists Material requests reports Work timing reports Resources availability reports Production status report 47
Enterprise Organization Production A. Production orders authorize every production unit to process their job B. Materials invoices List of materials composing each product C. Operation master lists List of operation sequence of human resources and machinery necessary for each product D. Material requests reports These requests prepare materials and authorizes their release from stocks for 48 production purposes
Enterprise Organization Production E. Work timing report Useful to document production timing and work management of every production order F. Resources availability reports Detailed stock availability report of materials/products necessary to operations G. Production status report Details completed productions vs orders and how these relate to global production. Orders are monitored and registered 49
Production control systems Production control Operating units Stocks control Costs accounting General register 1 1 Production 2 3 control N Order to production 2 Production order completed Production reports Journal Voucher Overal cost of production Costs production status To Management 50
Enterprise Organization Production Just-In-Time Production v Just-in-time Production (JIT) describes a production systems in which parts (Components and midproducts) are produces only if requested by following production phases v. JIT system is different for limited stock levels in all production phases 51
Enterprise Organization Production III. Quick response production systems A. B. C. D. E. Definition of reacting production systems Physical production systems (CAD, CAM) MRP systems MRP II systems Internal control 52
Enterprise Organization Production A. Definition of quick response production systems • CIM system integrates CAD and CAM) with MRP II (manufacturing resource planning) • A quick response manufactoring system is a CIM system integrated by ICT. 53
Enterprise Organization Production B. Physical systems production 1. Computer-Aided Design (CAD) v CADD system uses SW to define production functions. v Designers may store products descriptions on a database, in order to manage them consequentially 2. Computer-Aided Manufacturing (CAM) v CAM systems are useful in production processes planning and management v Statistical process control systems let output monitoring and control on possible deviations from planned production, in order to act and minimize out of control processes 54
Enterprise Organization Production C. MRP systems Material Requirement Planning (MRP) systems include these 4 sub-systems: 1. Production planning 2. Production Scheduling 3. Costs accounting 4. General Production Reporting 55
Enterprise Organization Production planning Marketing 1 Production planning Materials invoices 1. Operations list Requests on production depend upon selling orders and previews 56
Enterprise Organization Production planning 1 Marketing 2 Stock control Production planning Materials invoice Operation list 2. Previewed selling should be coherent with stocks of finished products 57
Enterprise Organization 1 Marketing Production planning 2 Stock control 3 Production planning Materials invoice Operation list 3. Raw material availability necessary to production purposes is communicated with a specific report 58
Enterprise Organization 1 Marketing Production planning 2 Stock control 3 4 Production planning Production units Materials invoice Operation list 4. Technical and human resources availability necessary for production is due upon available factors reports 59
Enterprise Organization 1 Marketing Production planning 2 Stock control 3 4 Production planning 5 Production units Materials invoice Operation list 5. Production processes orders are reported into production scheduling 60
Enterprise Organization Production 2. Production Scheduling It indicates the sequence of operational phases necessary for production in every production unit, the process timing, the expected performance in every task, etc. 3. Cost accountability Production reports evaluation with reference to expected costs (direct and indirect) 4. Reporting Specific data about every production order, including stock levels changes (raw materials and products) 61
Enterprise Organization Production D. MRP II Systems Manufactoring Requirement Planning (MRP II) systems the goal is not only the identification of materials to buy (as in MRP), but involves the quantification about resources needed for production (human, technical, machinery, etc) and the evaluation of the feasibility of production programs planned with MRP. 62
Enterprise Organization Production E. Internal control Quick response production systems internal control may be a problem due to transactions, eventually solved with a strong human resources role. With ICT controls are to be integrated within the productiuon process and cannot be at the end of the pipe! 63
Enterprise Organization Themes Functions Supply Production Logistics Marketing Quality R&D Definition Marketing Process Focus Strategies Politics Critical factors Limits Relational Marketing 64
Enterprise Organization Marketing Definition Process with which a business studies its market, trends, concurrency searching for opportunities and hints for production related to potential buyers, creating demand for new products and delivering these through the new selected distribution flows. 65
Enterprise Organization Marketing Context analysis Marketing Strategy The Marketing Process Marketing Mix Action and control 66
Enterprise Organization Marketing Context analysis Marketing Strategy Marketing Mix – Enterprise – Partner – Clients – Concurrents – Phisical Context Action and control 67
Enterprise Organization Marketing Context analysis Marketing Strategy Marketing Mix Action and control • • Segmentation Targeting Positioning Value Proposition 68
Enterprise Organization Marketing Context analysis Marketing Strategy Marketing Mix Action and control • • Product Price Place Promotion 69
Enterprise Organization Marketing Context analysis Marketing Strategy Marketing Mix Action and control • Marketing Plan • Product introduction 70
Enterprise Organization Marketing Selling Cycle client research deal clients relationships management Product delivery technical assistance invoice Financial rules 71
Enterprise Organization Marketing policies orientation CUSTOMER SATISFACTION (Quality) a) Time to market Reduction TIME – BASED COMPETITION b) Time to customer Reduction CUSTOMER RETENTION (Fidelity) c) Flexibility (upon changes in clients needs) 72
Enterprise Organization Marketing Consumer behaviour - concurrent needs Buying process - concurrent goods/services - concurrent brands - rational Buying impulses - emotive - irrational Mind the relation between price and available financial resources 73
Enterprise Organization Marketing MARKETING STRATEGIES - INDIFFERENTIATED MARKETING : Considers market being homogeneous - DIFFERENTIATED MARKETING: Is targeted towards several great market segment with different marketing programs - CONCENTRATED MARKETING: Is targeted to one, os just a few, market segment with a unique marketing program 74
Enterprise Organization Marketing Strategical issues on product policies Offer width Differentiation of assortments Productions innovation and originality Choices variety (products, brand, packaging, etc) 75
Enterprise Organization Marketing Depth, range and choice Range Settore “A” Settore “B” Settore “C” Choice Linea 1 Linea 2 Linea 3 Linea 4 Depth MOD 11 MOD 21 MOD 31 MOD 41 MOD 12 MOD 22 MOD 32 MOD 42 MOD 33 MOD 43 MOD 13 Linea 5 MOD 51 MOD 52 MOD 53 Linea 6 Linea 7 Linea 8 MOD 61 MOD 71 MOD 81 MOD 62 MOD 7 2 MOD 82 MOD 73 76
Enterprise Organization Marketing Product life cycle Incomes and profits Incomes Profits Introduction Development Maturity Decline Time 77
Enterprise Organization Marketing Incomes Rivitalized Product life cycle Time 78
Enterprise Organization Marketing MARKETING approaches in different product life cycle Characteristics Introduction Incomes Low incmes Costs High cost for client Profits Negative Clients Innovators Concorrents Few Development Maturity Growing incomes Incomes peak Fare cost for client Increasing Early adopters Increasing Low cost for client Decline Decreasing incomes Low cost fol client High Decreasing Majority Late entrant Stable Decreasing 79
Enterprise Organization Marketing approaches in different life cycle stages Strategies Introduction Development Maturity Decline Pubblicity Product knowledge among retailers and early clients Diffuse product knowledge among mass market Brand differences and advantages Reduce maintainance costs for loyal clients Promotion Intense promotion to favor product selling Reduce, to benefit from growing demand Increase to limitate brand change Riduce to minimum 80
Enterprise Organization Marketing Price 81
Enterprise Organization Marketing Product 82
Enterprise Organization Marketing Promotion 83
Enterprise Organization Marketing Place 84
Enterprise Organization Marketing People 85
Enterprise Organization Marketing Process 86
Enterprise Organization Marketing Physical Environment 87
Enterprise Organization Marketing Traditional Marketing limits Traditional marketing is too much focused on produtc, interpreting clients as consumers (just capable of giving input for strategies definition). Marketing Mix (4 P) doesn’t grant enough importance to clients and to stabel relationships with them, thus missing to consider clients as a pillar of value creation process (Value Constellation, Relational Marketing), as a strategic resource for competitive advantage. This has been referred to as Marketing Mix “Miopia”. 88
Enterprise Organization Marketing Passagge from… Marketing Internal Relational Mix Marketing Integrated Marketing Total relational Marketing 89
Enterprise Organization Marketing Mix Relational Marketing Transactional Marketing Interactive Marketing Client Passive, anonimous, target Strategic actor Time Short run Long run Quality produced perceived Strategic issues Mkt Mix Client interaction Client participation to production process 90
Enterprise Organization Marketing Relational Marketing goal becomes to keep clients loyal, rather than to increase the market, not caring about the offered service quality. Business capacity to stabilize relationships with clients thought a reciprocal exchange and fulfillment of promises. 91
Enterprise Organization Marketing Relational Marketing Long run relationships with clients may be interpreted as relationships’ life cycle: First contact phase. To create the interest of potential clients, thus actions are limited to traditional marketing mix (with focus on communication). Purchase phase. The attention switches from purchase to service promises definition: traditional marketing mix tools (publicity and promotions) are coupled with interactive marketing ones (direct communication with potential buyers). Consumption phase. Enterprises have to mainain promises. Relational marketing comes to the fore. 92
Enterprise Organization Marketing Internal Marketing Since quality depends so much on the participation of everyone among the producer organization, to strenghten service cultre in employees and to foster relational marketing approaches internal marketing programa are to be done (i. e. training, communication, focus groups, etc. ). Internal marketing focuses on the increase about client attention both of managers and employees. The first client of every organization, in fact, is the internal one, thus he is the first to be satisfied! The clear determination of roles, hierarchy, methods, activities strongly influences perceived quality of clients. 93
Enterprise Organization Marketing Integrated Marketing Il external marketing: traditional mkt management, focused on creating expectations delivering promises to market. Internal marketing: focused on the creation and maintainance of service culture and client orientation within the organization, necessary to create the premises to fulfill the promises. Relational marketing: relational management among employees and clients, to stabilize relationships and fulfill promises. 94
Enterprise Organization Marketing Total relational Marketing Businesses in contact with their clients in value co-creating logics deliver a new concept of marketing. Total relational Marketing is marketing based on relations, networks and interactions; it is based on win interactions with clients and stakeholders, and value is co-created jointly among involved parties. 95
ORGANIZING ENTERPRISE Themes Business functions Purchases/Supplies Production Logistics Marketing Quality R&D Model EQA Process control Organization TQM Evolutionary ladder Route quality Model EFQM 96
ORGANIZING ENTERPRISE Quality MODEL 2001 EQA Instrument of government enterprise for excellence in sustainable over time HUMAN FACTOR LEADERSHIP POLICIES & STRATEGIES RESOURCES & PARTNERS ENABLERS 50% STAFF SATISFACTION PROCESSES CUSTOMER SATISFACTION IMPACT ON COMPANY RESULTS 50% BUSINESS RESULTS
ORGANIZING ENTERPRISE Quality ISO 9000 To facilitate the achievement of the objectives for quality, have been identified eight principles of quality management: Customer-oriented organization Leadership Involvement of staff Approach to processes Systems approach to management Continuous improvement Decisions based on facts Relationships of mutual benefit with suppliers
ORGANIZING ENTERPRISE Quality PROCESS A set of related activities or interacting elements that transform into elements in output INPUT Process 1 Process 3 Process 4 OUTPUT Process 2 Note 1: The elements entering into a process generally come from elements in output by other processes. Note 2: The processes in an organization are generally planned and executed under controlled conditions in order to add value. Note 3: A process must be validated (qualified) when the compliance of the resulting product can not be readily or economically verified.
ORGANIZING ENTERPRISE Quality the person or organization which is intended output of a process The customer may be internal or external For a process (ex. providing a training course) may be needed more subprocesses (identifying needs, planning, promotion, collection of entries, selection, delivery. . . Final exams. . . billing. . ) Process Loop (for each process) identification of customer needs and PI provision under controlled conditions design setting requirements
ORGANIZING ENTERPRISE Quality Analysis of critical processes o o CREATION OF A TEAM WORK DESCRIPTION OF THE PRESENT PROCESS (RULES OF EXECUTION, RESPONSIBILITY, RESOURCES. . ) o o o DATA COLLECTION IDENTIFICATION OF THE CLIENT/S NEEDS TRANSLATION IN TARGETS OF PROCESS (PROCESS INDICATORS) EVALUATION CAPACITY OF PROCESS POSSIBLE REDESIGN OF PROCESS (RULES OF EXECUTION, RESPONSIBILITY, RESOURCES . . ) o IDENTIFICATION OF THE ELEMENTS OF CONTROL PROCESS (SYSTEM FOR MONITORING, DIRECT MEASURES ON PROCESS AND INDIRECT MEASURES ON OUTPUT) o TRAINING ON THE STAFF
ORGANIZING ENTERPRISE Quality CONTROL OF A PROCESS o PLAN: DETERMINE THE TARGETS AND CRITERIA FOR ACCEPTANCE, MADE THE CHOICES (4 M), DETERMINE THE METHODS TO ACHIEVE THE TARGETS, TRAINING STAFF (DESIGN) o o DO: EMPLOYMENT (PERFORMANCE) CHECK: MESASURE, CHECK THE EFFECTS OF APPLICATION (DIAGNOSIS) o ACT: RULE, ADOPTING THE ACTION REQUIRED OF CORRECTION AND IMPROVEMENT (THE FEEDBACK)
ORGANIZING ENTERPRISE Quality THE PROCESS INPUT THE PROCESS materials instructions information documents people processing (added value) POINT OF MEASURE OUTPUT materials instructions information documents people POINT OF MEASURE
ORGANIZING ENTERPRISE Quality Organization oriented TQM The activity of defining the objectives and strategies (strategic planning) division of labor, guidance, coordination and control (leadership, management and personnel management and system) is geared to the principles of quality The culture of listening and comparison (involving all internal and external partners), effectiveness and efficiency, planning and systematic, prevention, diagnosis and verification as continuous improvement
ORGANIZING ENTERPRISE Quality EVOLUTIONARY LADDER ISO Vision 2000 ISO 9000 TQM METHODS / ACTIVITIES EXCELLENCE INTEGRATION COMPANY / MARKET IN GLOBAL SYSTEM TOTAL QUALITY ALL COMPANY QUALITY ASSURANCE MARKET ORIENTED PRODUCTION SYSTEM CQ PRODUCT OUT FINAL TEST PRODUCTION BUSINESS AREAS FINISHED PRODUCT 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 TIME
ORGANIZING ENTERPRISE Quality The ideal of an organization geared to TQM • Organic structure • flexible • managed to processes and / or small groups or teams • a "pyramid" reversed • with great development of communication (computerized) internal and external
ORGANIZING ENTERPRISE Quality Globalization Legislative changes Integration of areas CHANGES WITHOUT PRIOR A world in Network Removal of geographical barriers Price Pressure
The location of Quality ’THE EVOLUTION OF QUALITY CONCEPT PLANNING CONTROL ORGANIZATION THE EVOLUTION OF BUSINESS APPROACHES INSPECTION AND STATISTICAL CONTROL STATISITCAL CONTROL PROCESSES TOTAL QUALITY CONTROL MODELS STANDARDS PRODUCT RULES FOR THE CONTROL RULES OF CONTROL PROCESSES RULES / GUIDELINES FOR DEVELOPMENT AND MANUFACTURING “VALUE "FOR CUSTOMERS STAFF, COMPANIES ‘ SHAREHOLDERS L’eccellenza PLANNING CONTROL THE PROCESS Il miglioramento La conformità CONFORM OF PRODUCT QUALITY SYSTEMS , ENVIRONMENT, SAFETY TOTAL QUALITY MANAGEMENT RULES / GUIDELINES / LAWS FOR SYSTEMS ORGANIZATIONAL (ISO 9000/ISO 14000 LEGGE 626/HACCP. . . ) NATIONAL MODELS / INTERNATIONAL FOR EXCELLENCE ORGANIZATION
ORGANIZING ENTERPRISE Quality Model EFQM for Excellence and the rules ISO 9000 MODEL for excellence ISO 9001: 2000 ISO 9001: 1994 § Management responsibilities §Quality system §Procedures §Tests, inspections, testing §Corrective and preventive actions §Measures, analysis § Summit responsibility §Quality system §Customer focus §Processes §Resources §Continuous improvement § Leadership §Policies and Strategies of organization §Development and justification of people §Resources §Quality System §Processes §Learning and Research best Practices §Continuous Improvement §Challenging targets §Results §Customers §People §Impact Company §Products, Processes, Economics and Finance §Benchmarking
ORGANIZING ENTERPRISE Quality Model EFQM for Excellence and the rules ISO 9000 Excellence S T R A T E G I E S COMPETITIVENESS ISO 9000: 2000 QUALITY SYSTEM S SE ES ISO 9000: 94 MINIMUM REQUIREMENTS CONTINUOUS IMROVEMENT OC PR T Q M M O D E L E F Q M
ORGANIZING ENTERPRISE Quality The EFQM Excellence: The basic concepts Attention to Customer Oriented to results Leadership The Foundamental Public responsibilities concepts of excellence (EFQM) Partnership Innovation and improvement Process management People involvement
Business Organization Research and Development BUSINESS FUNCTIONS Purchases/Supplies Production Logistics Marketing Quality R&D Definitions Collaborations Self-development Choice methods Team Work 112
Business Organization Research and Development Definition The research and development (R&D) is defined as the combination of creative work undertaken in a systematic way to increase the range of knowledge (including knowhow, culture and society) and to use this knowledge for new applications Source: Manuale di Frascati, OECD, 2002 113
Business Organization Research and Development Types • Basic Research: experimental or theoretical work undertaken primarily to acquire new knowledge on the fundamentals of the phenomena and facts that might remark, not intended for a specific application or use. • Applied research: original work undertaken primarily to acquire knowledge and aimed at a practice and a specific application or use. • Experimental development: systematcal work, based on existing knowledge gained through research and practical experience, led to complete, develop or improve materials, products and production processes, systems and services. 114
Business Organization Research and Development Innovation Tecnology "Activities related to technological innovations of product and process cover every scientific, technological, organizational, financial and trade effort to make or made available on the market versions characterized by a significant improvement in functional or content respect to previous versions, or an alternative solutions aimed at solving the same problems / satisfaction of those needs " Source: Oslo Manual, 2004, OCSE 115
Business Organization Research and Development Input indicators - Expenditure on R&D -Employees in R & D -Intensive R & D = (Expenditure on R & D/Turnover)*100 Output indicators - Scientific publications and citations - Patents and patent citations - New products / services launched on the market - Turnover (profits) generated from new products launched on the market 116
Business Organization Research and Development Trends in industrial R&D • Restructuring of corporate R&D by the largest companies worldwide • The increasing orientation towards the activity of applied research and technological development (at the expense of basic research) • The increase in the propensity to patent and increasing attention to the commercial exploitation of technology • Specialization in process steps of innovation and growth of technology outsourcing • The role and contribution of small enterprises for technological development and economic growth 117 -
Business Organization Research and Development Collaborations in R & D Sometimes the development of a project requires complementary activities to those undertaken by an enterprise, without which it would be difficult transformation of a core of technological knowledge into a marketable product. Many times, companies must then choose whether to pursue its innovative activities either alone or in collaboration with partners. The collaboration could allow the company to achieve more ambitious goals more quickly and with less cost and risk. Through collaboration with other companies, an organization access to a wealth of knowledge and skills not supplied, which could cost time and money (in case of internal development). The cooperation strategies , however, involve a sharing of power control and distribution of profits, in addition to having to pay for the risk of unfair and opportunistic behavior of partners. 118
Business Organization Research and Development Collaborations nella R&S: Why? Issues related to the company functioning – Scale economies – Purpose economies (differentiated resource exploitation for various commercial applications) – Distribution costs and risks – Enlargement resource base and internal expertise Structural characteristics of competitive contest – Specialization economies and the role of complementary resources – Network economics – Allegations of markets for technology Environmental characteristics – Evolutionary characteristics of scientific-technological progress – Practice communities – Risks of inefficient duplication of investments 119 -
Business Organization Research and Development The different forms of cooperation Depending on the type of relationship – Vertical agreements – Horizontal agreements – Transversal agreements According to the legal nature of the agreement – Contractual collaboration (non-equity) – Company collaboration (equity) According to the purpose of the competitive agreement – Non-competitive agreements – Pre-competitive agreements – Competitive agreements 120 -
Business Organization Research and Development The different forms of cooperation • Joint venture: is a particular form of covenant that requires participants to adopt a formal structure, almost always a new entity legally separate, with equity. • Licensing: is a contractual agreement that gives an organization (or individual) the rights to use intellectual property of another organization, usually in exchange for a royalty. • Outsourcing: is a formula under which a company moves outside certain processes rather to achieve its own. • Research organizations: are organizations formed to promote collaboration among a group of players, for example, companies and public research institutions. 121
Business Organization Research and Development The choice of partners Compatibility of resources: in which measure the potential partner is consistent with the resource requirements of the project? Compatibility strategic: see if the objectives, styles business, organizational behavior of the partner are consistent Impact on the opportunities and threats in the competitive environment: what influence will hold the strategy of cooperation on the bargaining power of customers and suppliers, the degree of competitive rivalry, the threat of new entrants or substitutes? 122
Business Organization Research and Development The pilot customer • • • Representativeness Dimension Degree of priority Past reports Location Contractual power 123 -
Business Organization Research and Development Options for development of new technologies and new business ü Licenses; ü Acquisitions; ü Educational acquisitions; ü Venture capital; ü Internal venture; ü Joint-venture; ü Strategic alliances; ü Research consortia; ü Internal development
Business Organization Research and Development The advantages of self-development The strategic of technology developed may suggest to not share their know-how. If the efforts of an organization have produced technological knowledge hardly imitated in short, the development extends autonomy in the position of competitive advantage over competitors and other businesses, including goods and services. The autonomous development also allows control over the trajectory of technological development to give that, then may be to support the competitiveness of business in relation to the market, resources, skills and expertise. There also companies that aren’t culturally inclined relational opening, and have skills and knowledge that are difficult to share in developments of partnerships with other companies. Even if it is more costly and difficult the selfdevelopment, infact, capitalize and maintain the wealth of knowledge and skills of corporate researchers, sometimes keeping the company competitive in terms of distinctive competencies. Sometimes companies believed to have sufficient skills, capabilities and resources to pursue autonomously the development of a complex project. Can happen that is not a suitable partner to support a possible deficiency, and enterprise finds itself forced to fill internally the gap capacity and / or skills necessary for the 125 development project.
Business Organization Research and Development Choice of Innovation Projects To evaluate a technology innovation project the management offers a wide variety of methods, informal instruments with sophisticated techniques based on qualitative data or based on assumptions strictly quantitative. In most cases, use a combination of methods in order to provide more adequate assessment of the opportunities and risks of an innovative project. 126
Business Organization Research and Development The development budget Most companies have limited resources and capital constraints and they are therefore forced to select only some of the appropriate projects. Many companies adopt the methods of 'rationing' capital, which initially set a budget for R&D activities and then establish a ranking of projects to choose that could be financed. §Budget is sometimes set in terms of share of turnover determined in the prior year. §This percentage is based on sector parameters (industry benchmark) or historical indicators reported by corporate performance (historical benchmark). 127
Business Organization Research and Development Choice methods Quantitative methods • Discount Cash Flow • Real options Qualitative methods • Questions filter • Q-Sort • Portfolio. R&D Mixed Methods • Conjoint Analysis 128
Business Organization Research and Development Choice methods The most popular methods for the quantitative assessment of innovative projects are based on techniques discount cash flow and on analysis of real options. Techniques discounting cash flows (DCF = discounted cash flow) NPV = the expected cash flows are discounted incoming and compared with the present value of cash flows in output VAN = ∑ Ft/(1+r)t t = 0 …. N F Net cash flow a year t N economic life r discount rate (capital cost) Internal rate of return = is the discount rate that makes the net present value of zero. 129
Business Organization Research and Development Choice methods The real options methods It is a valuation technique that applies the model of option rights (stock options) on shares in an investment project The call option allows the investor to reserve the right to purchase future by a certain date (maturity) at a set price (strike price). If in future the value of the action exceeds the strike price the holder may exercise its right and purchase the action (if the surplus value of absorbing the cost of the buyer earns). Otherwise may withdraw losing the value of option, or he can buy the same if the value exceeds the strike price, but doesn’t cover everything (action + stock option). In the case of a program of r&d: The cost of R&D program can be considered the price of an option to buy (call option). The cost of the investment future to support and fund the program is the operating cost (strike price). The return on the investment in terms of present value of expected cash flows from the r&d project correspond to the value of an acquired with right of option. 130
Business Organization Research and Development Choice methods The most important factors in choosing the projects are very difficult to evaluate in quantitative terms. For this reason, almost all companies using qualitative methods. Applications filter, for example, are used to investigate and evaluate the main dimensions that influence the choice, such as: • The customers role (market, product use, compatibility and ease of use, distribution and pricing strategies) • The skills and organizational skills role (ability and skills possessed and future, ability of competitors) • Project times and costs 131
Business Organization Research and Development Choice methods Q – Sort is a simple technique for the classification of ideas or objects based on a variety of parameters. • ideas or variations of the project are described in a paper • for each of the selected parameters, the cards are sorted according to the response capacity of each project • a series of confrontation rounds between the different classifications, accompanied by a discussion among the participants, should allow to lead to an assessment shared 132
Business Organization Research and Development Choice methods The management can use a map where to place development projects (Portafolio map R&D), distinguished for example needs financial resources and skills to be used. The basic research or experimental projects: arise along the frontier of technological innovation and test prototypes that don’t offer an immediate commercial application. The breakthrough project: provide for the development of products that incorporate technology product and revolutionary process. The draft platform: are profound improvements in cost, quality or performance technology than previous generations of product. Projects derivatives: provide only incremental changes of products or processes, sometimes simply extending the range of varieties. 133
Business Organization Research and Development Choice methods Portafolio map R&D 134
Business Organization Research and Development Choice methods Quantitative methods and qualitative methods provide valid information to management in the selection of development projects, especially when the techniques are used in combination. Sometimes it is useful to convert qualitative information in quantitative variables. For example, the conjoint analysis estimates the value that a customer attaches to certain factors of choice and importance on product attributes, so as to enable the management to take decisions on the final configuration of the project. 135
Business Organization Research and Development Team work Many companies constitute team to lead and manage the develop project of a new product. The composition and working methods of the team depend on the strategies of firms and nature of projects. Team dimension The team may be composed of a very small core or by hundreds of members. The large size is not always an advantage, because it can lead to increased operating costs and communication problems. With the increase of dimension tend to increase the risk of social inertia (social loafing), associated with the phenomenon that brings the components of the team to not receive the just recognition for its contribution. Team composition To promote coordination and cooperation between organizational units, many businesses entrust the development of new products to team composed of experts with complementary skills and from different functional areas 136
Business Organization Research and Development The organizational structures of internal R & D 137 -
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