mba in perspective fundamentals in general management

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MBA in Perspective

Fundamentals in General Management

Prof. dr. Pieter Klaas Jagersma

BSN - Buren - May 20 2008

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Points to cover

• Speaker and approach• History of general management• Basics of general management• Scanning the environment• Policy formulation• Policy implementation• Policy evaluation and control• Last but not least

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Speaker and Approach

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‘Heart’share

Science

Author

Entrepreneur

Non-executive

Private life

Speaker

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About today’s lecture ...

• Put MBA in perspective - holistic approach• Cliffhangers (frameworks/visualizations) • From Paper > Practice• ‘On the cutting edge’ - tailor made for BSN• Present some generalized lessons learned• ‘The key to success is not trying to please

everyone’/Cosby ‘95 (monologue/dialogue)• Have fun!

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Today’s core message

Transparancy is the magic word!

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History of General Management (GM)

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Contents

• General management: what’s in a name?• General management and faculty• Journals and professional societies• Development of general management

theory and research

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a

General Management: What’s in a Name?

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Quite clear .....

General Management is about the direction of organizations

‘Heart’ of wealth creation in modern society!

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General Management =

General management is an approach in which leading managers (‘general’ managers) decide what to do with

regard to which value chain activities in a holistic manner and oriented towards

specific organization-wide goals [MBA]

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Practice >> very old

but .....

Theory >> ‘child of sixties’

Surprise ...

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Background

• First Industrial Revolution (1750-1850): no ‘strategic’ behavior >> businesses small, little

capital employed, room for everyone,‘invisible hand of the market’

• Second Industrial Revolution (1850-1920): construction of key railroads >> mass market buil-

ding possible >> ec. of scale/scope >> rivalry ‘visible hand of general managers’: large verti-cal

integrated firms + management hierarchies to deal with (environmental) complexity

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Background (Cont.)

• Alfred Sloan (CEO GM: 1923-1946): articulated need for ‘general’ management think-ing:

business policy = f (strengths + weaknesses of Ford) developed multidivisional ‘control’ structure • WW II vs ‘general’ management: how to allocate scarce resources across an organi-

zation? (quantitative analysis/’OR’-’besliskunde’) through formal planning organizations can exert

control over market forces and future

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b

General Management and Faculty

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• First ‘Business Policy’ (GM) course at Harvard University (1912)

• GM/Business Policy course: built out of functio-nal courses like accounting, operations, finance (‘integration’)

• Case method (Harvard style)• Model for other Business Schools• First course or final course

Roots of General Management as an academic discipline

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• Professors (experienced teachers with broad view of business) + assistent/associate professors (for-mer ‘senior’ - general - managers)

• Eclecticism + holistic perspective: how to match a firm’s choices with its (competitive) environ-ment (famous ‘fit’ question)

• General Management/Business Policy as a ‘cap-stone course’

General Management faculty

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• Single ‘capstone course’ permits no development!• Faculty makes intellectual homes elsewhere• Course development work: cases (not articles and

books)• ‘Rich’ general descriptions of practice (thanks to

case writing and consulting)• In 1963 influential ‘general management’ confe-

rence at Harvard Business School (HBS)• Since early 1970s accumulation of cases and re-

search (externally)

Consequence of ‘capstone course’

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c

Professional Societies and Journals

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Professional societies

• The Planning Forum (USA)/Business Poli-cy Society (UK) (since 1950s/1960s)

• Strategic Management Society (since 80s) >> Sponsored AMJ, AMR, AME, SMJ

• Vereniging voor Strategische Beleidsvor- ming (VSB) (since 1980s)

• NCD (since 1970s)

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General Management Journals - categories

Specific Business Journals LRP, The Planning Review (70s); JoM (60s); SMJ (80s)

and JBS (also since 80s)

General Management Journals HBR, SMR, CMR, JofB, Business Horizons, JoGM, HMR,

M@n@gement (www.managementsite.net)

Academic Journals ASQ, AMJ, AMR, Management Science, MAB, M&O,

ESB

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d

Development of General Management Theory and Research

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Birth of the General Management Field: One fundamental work/book

“Business Policy: Text and Cases”

(Harvard Textbook Andrews / Learned et al,

1965)

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Business Policy: Text and Cases (1965)

• Organization-concept of Chandler + ‘Dis-tinctive Competence’ (Selznick, ‘57) + ‘un-certain environment’ (which means instant adaptation of organizations)

• Environment (thanks to changes): ‘opportunities and threats’ and firm’s ‘strengths + weaknesses’ were adapted to avoid threats and take advantage of opportunities [SWOT]

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Business Policy: Text and Cases (1965) (Cont.)

• Internal appraisal of strengths and weaknesses >> ‘distinctive competencies’ and external appraisal of threats and opportunities > ‘potential success factors’ (CSFs/KSFs)

• Internal + external appraisal = foundations of ‘business policy formulation’

• ‘Business policy formulation’ is ‘analytical’ and ‘business policy implementation’ is ‘ad-ministrative’ (denken versus doen)

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Their audience ...

Professors and students

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Who influenced General Management practice?

1 General Electric (GE): in 1960s

‘godfather’ of business planning and executive education programs with help from ‘academic friends’ and

private consulting firms (McKinsey&Company)

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Who influenced General Management practice? (Cont.)

2 The Boston Consulting Group - BCG

(Henderson - mid-1960s)

Why?- Applying quantitative research to business problems- Selling powerful oversimplifications- What are basic rules for success?- The most relevant frame of reference is the ‘concept’

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How?

Concepts a. Experience curve Experience in production > market share > lower

costs > higher margins and cash flow > highest profits > dynamic aspect called for ‘competitive behavior’ (needing: ‘integrated’ management = ‘general management’)

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How? (Cont.)

b. Growth-share matrix Cash cows/dogs/stars/question marks (‘era of port-

folio analyses’)

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‘Growth-share matrix’

Star ?

Cash cow Dog

high low

high

low

Marketshare

Ind

ust

ry g

row

th

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Industry attractiveness - Competitive position matrix

Invest/ Selective Selectivitygrowth growth

high medium low

high

medium

low

Industry attractiveness (lots of criteria)

Bu

sin

ess

stre

ngt

h

Selective Selectivity Divest/ growth harvest

Selectivity Divest/ Divest/ harvest harvest

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How? (Cont.)

Spin-offs: Bain&Company etc etc ‘Thanks to’ BCG, the entrepreneurial res-

ponsibility of management was recognized to consider the long-run, dynamic direction of the firm, even while maintaining routi- ne and efficient operations (mindset of decision makers: from efficiency to effectiveness)

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General Management research in the 1960s/1970s

• Experiental, case-based evidence in 1960s: descriptive studies

• Systematic observation, deductive analysis and modeling (1970s): normative studies

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General Management research in the 1980s: dichotomy

Descriptive studies of how policies are for-med/implemented (‘management process’)

G. Steiner (long-range planning), H. Mintzberg (‘emergent decision making’), J.B. Quinn (‘logical incrementalism’)

Studies seeking to understand the relationship between organization choices and per-formance (‘management content’ school)

HBS (growth and diversification), Purdue (heterogeneity and perfor-mance within a single industry), Harvard University (IO/market po-wer and entry/exit barriers) et cetera et cetera

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General Management research in the 1990s/2000s

General Management inspired by ‘globalization’:

- third dimension of management (P/F)

productfunctions

geography

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Basics of General Management (GM)

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Organization performance (‘firms’)

attractive- positioning potential potential maximumness of of firm internal external profitabilityindustry synergy synergy

55% 20% 10% 15% 100%

Source: Caves (1977); Porter (1980); Goldman Sachs (1996); Jagersma (2000)

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Definition of ‘general management’

General management =

1. environmental scanning + 2. (business) policy formulation + 3. (business) policy implementation + 4. (business) policy evaluation/control

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• Future thinking/‘Controlling’ the future Design of a desired future

• (Integrated) Decision makingFundamental choices; Integration of hierarchically determined actions

• ‘Formalized procedure to produce an articulated result, in the form of an integrated system of decisions/actions’ (Mintzberg, 1990)Emphasis on formalization: decomposition, distinction, and rationali- zation of processes/decisions/actions

General Management is ...

‘Business plans’

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Why business plans?

• They provide a discipline forcing managers to take a careful look ahead periodically (mngt of ‘future’)

• They require rigorous communications about mis-sion, vision, strategies, objectives, goals, and resour-ce allocations: clarity

• Basis for evaluating + integrating short-term (func-tional) plans

• They help implement changes once decided on• They make the management group coherent

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Bad General Management - numbers oriented

‘Playing tennis by watching the scoreboard instead of the ball’

- The Economist (1988)

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General Management (process): 6 basics

GM is a process - basic ingredients design great general management

Congruence/‘fit’ between ingredients is decisive Responsible for ‘pie’ is the ‘general’ manager,

CEO and/or Managing Board (RvB/Directie) The result of the GM process - a couple of steps -

is explicit and prioritized Simplicity always wins! Formulation + implementation ‘join hands’

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Basics of GM process

Scanning the Policy Policy Policy environment formation roll-out evaluation

External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)

Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources

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SExplicit; prioritization; consistency; communicate; responsibility

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Basic requirements for successful General Management

Focus Fit Fitness Flexibility 4Fs

..... on ..... be- ..... of front- ..... of total customer tween will and back- organizationneeds and skill office

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Scanning the environment

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External environment: what’s in a name?

• Opportunities and threats (OTs) outside the organization

• Organizational context: determines success or failure of organization

• Variables (often) not within short-run con-trol of general management

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External environment: two parts

Societal environment: forces that influen-ce the long-term decisions of an organiza-tion

Business (industry) environment: forces or groups that directly affect an organiza-tion (stakeholders, 5-forces of Porter, uni-ons, et cetera)

Scenario Building

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Societal trends

1. Sustainability (‘CSR/’Sustainability’) 2. Information society 3. Globalization

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BV Nederland verstrikt in ‘Economische Zone des

Doods’ (EZ2D)

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Headlines of international newspapers

“The Globalization of Markets .....” “A Global Trade War on the Way?” “Protectionist Pressures are Building .....” “Ads that celebrate the Global Product .....” “Multinationals Tackle Global Marketing .....” “Globalization: The Debate Goes on .....” “P&G’s Gamble on ‘Globalization’ .....” “Going Global in Europe .....” .....

Source: Financial Times/WSJ(E)

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Global industry - What’s in a name?

- ‘an industry in which a company’s competitive position within that industry in one country is in-terdependent with that in another country’ (Porter, 1986)

- ‘an industry in which a competitive advantage is derived from the exploitation of scale, scope and skills economies or comparative advantage across country boundaries within a centrally coordinated business system’ (Jagersma, 2002)

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Industries can be characterized on a spectrum Sources of sustainable competitive advantage

Source: Jagersma (2002)

Local >>> Emerging >>> Global Derived from Derived from worldwide country market management of business system (integration) - ‘3S economies’ - Country comparative advantage (factor costs) - Centralization of strategy and (de)centralization of stages of

business system as efficiency and effectiveness dic- tate

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‘Doomloop’ for (most) companies

- many players- innovation- effectiveness- customer- organic growth- high margin

- (very) few players- lack of innovation/imitation- efficiency- firm and competitors- anorganic growth- low margin

localindustries

emergingindustries

globalindustries

TIME

MARGIN

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Industries can be characterized on a spectrum Industries on the MOVE

Source: Jagersma (2004 data 1980 vs 2002)

Local >>> Emerging >>> Global

47% (89%) 33% (8%) 20% (3%)

[1] Trade-off: local versus global industries[2] Turbulence plus unpredictability > alliances/M&A[3] New skills required (entrepreneurial skills?)

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[1] % companies/industries in ‘EZ2D’ [added value in terms of share of GNP]

Countries Local Emerging Global

USA 34% 29% 37% Germany 40% 30% 30% UK 39% 22% 39% France 45% 29% 26% Spain 49% 27% 24% Belgium 41% 26% 33% Netherlands 47% 33% 20% Italy 53% 35% 12% Japan 39% 29% 32% South-Korea 34% 21% 45% Source: a.o. OECD, UN, EC/EU (2000-2003)

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[2] % industries on new/mature spectrum

Countries New Growth Mature

USA 34% 26% 40% Germany 14% 32% 54% UK 29% 30% 41% France 15% 26% 59% Spain 23% 32% 45% Belgium 20% 28% 52% Netherlands 15% 30% 55% Italy 13% 23% 64% Japan 25% 35% 40% South-Korea 28% 33% 39% Source: a.o. OECD, UN, EU/EC (2000-2003)

2

1

3

5

3

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In our ‘global village’, competing globally is imperative for

countries

Countries Global ‘competitors’ Global ‘casualties’ IMD; WEF; PKJ IMD; WEF; PKJ

USA 3 Germany 7 UK 4 France 7 Spain 4 Belgium 6 Netherlands 9 Italy 10 Japan 2 South-Korea 1

?

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Implication: CHANGE necessary!

Countries

Industries

Companies

Units/departments

Managers/employees

Skills

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Tool no. 1 - Mapping an industry landscape: SCP model

Structure Conduct Performance

Main drivers/’shocks’- Technology breakthroughs- Changes in government policy/regulations (domestic/ international)- Changes in life styles/tastes

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Tool no. 2 - Mapping an industry landscape: ‘5 forces model’ of Porter (1980)

Threat of New Entrydecline in EOS + customerheterogeinity > market frag-mentation into nichesemergence of switching costs

Bargaining Power ofSuppliersconcentration/fragmentationof suppliersforward integrationimprovement in supplier in-formationsurge or decline in supplynew means for coordinatingwith suppliers

Bargaining Power ofCustomersconcentration/fragmentationof buyersbackward-integrationimprovement in buyer in-formationsurge/decline in demandshifts in customer tastesnew means for coordinatingwith customers

Threat of Substitutesemergence of new substitutechange in barriers of entryincrease in buyer comfort witha substitute

Rivalry among Ex-isting Competitorsshift in industry growthchange in mix between fixed and variable costsemergence of dominant design or productconsolidationfragmentation/new entry.....

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Tool no. 3 - Mapping an industry landscape: ‘value net’ of Brandenburger and Nalebuff (1996)

Customers

Suppliers

Company ComplementorsCompetitors

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Four phases in the evolution of environmental scanning

Primitive Ad hoc Reactive Proactive

No impetus “Watch out” Deal with envi- Predict environmentronment to pro-

“Face it” No active search tect the future Structured effortRandom effort

No effort Sensitive to cer- Appropriate Deliberate efforttain issues responses

No purpose Scan to enhance Less specific in- Looking for compe-understanding fo collection titive advantage

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Internal environment: what’s in a name?

• Strengths and Weaknesses (SWs) inside the organization

• Organizational content: determines success or failure of organization

• Variables within short-run control of gene-ral management

• First of all: structure, culture, and resources

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MB

CS

BU 1 BU 2 BU 3

Headquarters/Head Office/Corporate Center

verticalsynergy

horizontalsynergy

Vertical and horizontal synergy

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Vertical synergy

MB

CS

BU 1 BU 2 BU 3


verticalsynergy

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Generic roles of CC/HQ

MBCs

Steer

Bind

Support

?

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Ways for CC/HQ to add value

• Coordinate• Integrate• Allocate• Initiate

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Transfer/share of skills,experience and knowledge

ECONOMIES OF SKILLS/KNOWLEDGE

How to add value as CC/HQ no. 1 - Coordinate

X

YK B

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Cost

Volume Volume Volume

X Y X/Y

ECONOMIES OF SCALE

How to add value as CC/HQ no. 2 - Integrate

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CC

X Y

Resources- People (MD)- Funds (enhance ROI)

ECONOMIES OF SCOPE

How to add value as CC/HQ no. 3 - Allocate

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How to add value as CC/HQ no. 4 - Initiate

Stand-alone BU performance improvement ‘Sounding board’ for making decisions (‘objective view’) Agreeing/monitoring performance (‘stretched targets’) Selecting/replacing BU managers Approving major capital expenditures Mobilizing special expertise (M&A skills)

Corporate development To help implement growth strategies (‘spotting’) To help implement desinvestment strategies

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Horizontal synergy

EB

CS

BU 1 BU 2 BU 3


horizontalsynergy

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Why is horizontal synergy difficult to realize?

• Leading (‘general’) managers use 1950s-’70s insights (Ansoff/portfolio models - BCG etc)

• Information flows vertically, not horizontally• Within units focus on customers/market - not

on collegues in other units/departments• Bonus/incentive structure focused on own +

unit performance, not based on collaboration across organization

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‘Portfolio management’ approach versus ‘Synergy management’ approach

Synergy

high

low

Diversificationlimited high

synergymanagement

portfoliomanagement

‘CORPORATE RESTRUCTURING’

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strategic

importance

urgency horizontalsynergy

support insideorganization

basic conditions

lower cost position and/or differen-tiation for WHOLE company. Company instead of BUs is leading

‘fertile ground’ for horizontalsynergy strategy is necessity: BU/general management !!!

HRM/IT/IS-systems;culture; quality BU-ma-nagement etc

Is horizontal synergy astrategic priority? What is the weight of horizon-tal synergy as a strate-gic priority? Do we ha-ve enough time to act?

Circumstances determining horizontal synergy

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Leading firms have a very strong set of principles which heavily influence their behavior/culture

Goldman Sachs 14 business principles 1. Our clients’ interests always come first. Our experience shows that

if we serve our clients well, our own success will follow. 2. Our assets are people, capital and reputation. If any of these are

ever lost, the last is the most difficult to regain. 3. We take great pride in the professional quality of our work. We

have an uncompromising determination to achieve excellence in everything we undertake.

4. We stress creativity and imagination in everything we do. While re-cognizing that the old way may still be the best way, we constantly strive to find a better solution to a client’s problem.

5. We make an unusual effort to identify and recruit the very best per-son for every job.

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Leading firms have a very strong set of principles which influence their behavior/culture (2)

Goldman Sachs 14 business principles 6. We offer our people the opportunity to move ahead more rapidly

than is possible at most other places. We have yet to find the limits to the responsibility that our best people are able to assume.

7. We stress teamwork in everything we do. We have no room for tho-se who put their personal interests ahead of the interests of the firm and its clients.

8. The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations.

9. Our profits are a key to our success. They replenish our capital and attract and keep our best people. It is our practice to share our profits generously with all who helped create them.

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Leading firms have a very strong set of principles which influence their behavior/culture (3)

Goldman Sachs 14 business principles 10. We consider our size an asset that we try hard to preserve. We

want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contri-bute greatly to our success.

11. We constantly strive to anticipate rapidly changing needs of our clients and to develop new services to meet those needs.

12. To breach a confidence or to use confidential information impro-perly or carelessly would be unthinkable.

13. Our business is highly competitive, and we aggressively seek to expand our client relationships.

14. Integrity and honesty are the heart of our business.

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Resources

• Human resources (human ‘beings’)HRM

• Financial resources FM• ICT resources IM• Knowledge/ideas KM

GM requires a‘holistic approach’

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To summarize

Societal environment

Industry environment

Internal environment

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Policy formation

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Mission: what’s in a name?

The purpose/reason for the organization’s existence. Alternatives:

A broad mission A narrow mission

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Mission: examples

Broad mission We provide transportation vehicles to

people throughout the world

Narrow mission We build exclusive cars for the US and

Europe

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Vision (example) To become the leading European supplier of

oriental products

East India Companies, Netherlands (1602)

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Vision (example) To make a contribution to the world by ma-

king tools for the mind that advance human kind

Apple

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Vision (example) To become the leading consumer marketing

company in the USA and internationally

Sara Lee Corporation

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Vision (example) We want to be the leading supplier of PCs

and PC servers in all customer segments

Compaq Computer

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Vision (example) Campina wil als cooperatieve onderneming

met succes zuivel- en zuivelverwante pro-ducten van hoge kwaliteit op de markt brengen voor de consument en de industrie

Campina

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Vision (example) We want to provide value to our customers

- to make their lives better via lower prices and greater selection; all else is secondary

Wal-Mart

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Vision (example) We want to honorably serve the community

by providing products and services of superior quality at a fair price to our customers

Motorola

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Vision is important according to Executives

• 1,500 senior leaders/870 CEOs• 20 different countries• Key traits/talents and skills by year 2000

‘Strong sense of vision’ is most important TRAIT (98%!)AND

‘Strategy formulation to achieve a vision’ is most important SKILL(gap of 25% with other skills)

Source: Korn Ferry/Columbia University (1989)

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What about skills and ability of managers?

More than 90 percent of managers reported

a lack in confidence in their own skills and ability to formate and implement a vision

Source: Korn Ferry/Columbia University (1989)

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Visions can help organizations .....

Make better strategic/operational decisions faster focus - “It’s easy to say what you’re going to do. The

hard thing is figuring out what you’re not go-ing to do” (Michael Dell)/offers direction

acquire required and wanted resources (employees /skills/investors)/stimulates development of certain capabilities (‘direction’)

Promotes/accelerates change vision as ‘change road map’ (IBM)

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Visions can help organizations (2) .....

Basic element for strategic plan the ‘building block’ strategic management process integrates short-term actions which have to be pro-

ductive to long-term interests ‘compass’ for decentralized/global corporations It motivates and inspires individuals/groups their effort contributes to a larger picture employee pride and motivation >> performance Public Affairs-tool

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Visie en visioen

Visie = Visioen

Collectief Individueel +Individueel!

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What is a vision?Source: Jagersma (2007)

It is a guide to corporate priorities that re-flects a fact-based view of the future and sets forth aspirations that are demanding but achievable

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Mission or vision?

Mission =

What is our Business?

Source: Peter Drucker (1973)

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Vision + mission + et cetera: what’s in a name?Source: Jagersma (2007)

Question Answer

Who are we? Mission

Where are we heading? Vision

How do we get there? Strategy

How do ‘I’ contribute? Targets/Bonus/ Incentives (APs)

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‘Vision rollout process’ (‘VRP’) =

A process in which relevant employees meet in small groups - with their peers, supervisors, and /or more senior managers - to learn about the vision + discuss what it means for them

Technique to encompass the ‘three requirements’ Two basic forms: A cascade rollout, which moves through func-

tions or units down the company/organization A horizontal rollout, which involves peer group

meetings

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Objectives and goals: what’s in a name?

Objectives are ‘qualitative’ by nature (long- range and short-term objectives)

Goals are quantified objectives

Achievement should result in fulfilling of VISION

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Specific objectives/goals

• Profitability• Quality ([T]QM/EFQM)• Efficiency (low-cost operations)• Teamwork/productivity• Effectiveness (customer orientation)• Flexibility• Corporation: ‘good place to be’• .....

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Specific examples

• Achieve a ROI of 10% for the period 2008-’09 (short-term goal)

• Become number one in global automotive market share by 2012 (long-term objective)

• Increase domestic car and truck market share by more than 5,15 procent by Q3 in 2013 (long-term goal)

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Strategy: what’s in a name?

• Corporate strategy• Business strategy• Competitive strategy• Functional strategy

1 Hierarchy2 Interrelated3 Coordination/Integration

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Corporate strategy: what’s in a name?Source: Jagersma (2008)

A corporate strategy states:• How and where the corporation will growth /divest

activities (external coordination) and• How the corporation will optimize its internal orga-

nization (internal coordination) ..... and therefore will achieve its vision and ob-

jectives/goals Corporate strategy ‘describes’ how an organization intends to

achieve its vision and objectives/goals

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Corporate strategy: questions to be answered

• Should we stay in the same business(es)?• Should we leave this business entirely or just parts of

it by merging, liquidating, and/or selling part of our corporation?

• Should we try to grow in this business by start-ups, alliances, or M&A?

• Should we try to grow internationally?• Should we grow in another business?• .....

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Business strategy: what’s in a name?Source: Jagersma (2008)

A business strategy states:• How and where the BU will growth/divest activi-

ties (external coordination) and,• How the BU will optimize its internal organization

(internal coordination) ..... and therefore will achieve its vision and ob-

jectives/goals Business strategy ‘describes’ how a business unit intends to

achieve its vision and objectives/goals

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Competitive strategy: what’s in a name?Source: Jagersma (2008)

Five dimensions an integrated set of actions aimed at achieving a sustainable reputation

in an industry (segment) that is over competitors in serving markets by finding alternatives to produce a better

relationship between cost and benefits for customers.

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Competitive strategy: five key wordsSource: Jagersma (2008)

Key words Implications for general manager

Actions Do something different than ‘business as usual’

Sustainable Find long-term position not easily duplicated Reputation Achieve lower cost or more benefits

for same cost or both Competitors (Re)action(s)? Customers Understand why they buy

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Three characteristics of good competitive strategies

Customer:clear product/market definition (i.e., business/value proposition)

Market

Product

1

2

exclusive massnational

global

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Three characteristics of good competitive strategies (2)

Company: cost/benefit leadership (relati-ve and real or perceived)

Benefitsmore

Costmore expensive

industry averagebetter positioning

worse positioning

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Three characteristics of good competitive strategies (3)

Competitors: sustainability Customers’ needs/preferences change continuous-

ly Competition is dynamic process: own actions in-

fluence those of competitors (‘game theory’)

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Types of sustainable competitive advantage

Structural advantages resource access (Gazprom; BHP Biliton et cetera) market dominance (eBay) switching barriers (Microsoft) governmental effects - regulation (Telmex) Reputation corporate image (Amex) corporate identity (Rabobank; Goldman Sachs)

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Types of sustainable competitive advantage (2)

Business system/value chain superiority superior performance in one function(s) (Merck;

McKinsey; ‘outsourcing virtuosos’) Metaskills innovation (Apple) organizational skills - time-based competition (3M) adaptability (Nokia)

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A good competitive strategy will tell you .....

Which Customer segments to emphasize What Competitors count in each segment How long the Company’s advantage can be

expected to last: sustainability of position

What to do functionally?

Functional strategies

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Functional strategy: what’s in a name?

An integrated set of actions aimed at achieving a sustainable competitive advantage in a functional element of the value chain/business system, that is over competitors

Marketing/sales strategyLogistics strategy

R&D strategyTax management strategy

HRM strategy .....

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4

Policy implementation

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Policy implementation: what’s in a name?

The process by which decisions are put in-to action by action programs/actions

operational execution

ANNUAL PLANS

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Action programs: what’s in a name?

• What is needed (resources) to realize specific functional objectives and goals (what to do; how to do it; when to do it; and what do we need?)

• Embedded in annual plans of business units /departments of Corporate Center/HQ (bud-get)

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Policy evaluation/control

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Introduction

To measure is the first step to improve

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Evaluation and control: what’s in a name?

The process in which strategies, choices, de-cisions, actions etc and performance results are monitored so that actual performance can be compared with desired performance

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Evaluation and control: tools

BBS/EFQM/INK

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Evaluation and control: (1) BBS (Kaplan and Norton, 1992)

FinancialPerspective

(How do we look to shareholders?)Goals/Measures

Innovation +Learning

Perspective(Can we continue to im-prove + create value?)

Goals/Measures

Internal Business

Perspective(What must we excel

at?)Goals/Measures

CustomerPerspective

(How do customers see us?)

Goals/Measures

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Evaluation and control: (2) EFQM / INK-’Model Nederlandse Kwaliteit’ (MANS, 1995)

Ondernemingsresultaten

Waarderingdoor personeel

Waarderingdoor klanten

Waarderingdoor maat’pij

Management van processen

Middelenmanagement

Personeelsmanagement

Beleid & Strategie

Leiderschap

Resultaatelementen

Organisatieelementen

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General Management: to summarize

What were/are our aspirations? (Mission and Vision)

How much to grow/contract? (Objectives and Goals)

Which initiatives do we need? (Strategy and Action Programs)

What is our ‘platform’? (SWOT) to achieve our aspiration(s)

Pol

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mba in perspective fundamentals in general management

Documents