Management Unit 2

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Chapter 6: Strategic Management

Levels of Strategy

Corporate-Level Strategy

Business Level Strategy (aka Competitive-Level Strategy)

Functional-Level Strategy

The Strategic Management Process

Establish the mission, vision, and values statements

Assess the current reality

Formulate corporate, business, and functional level strategies

Strategic implementation

Maintain strategic control

Assessing the Current Reality

SWOT Analysis: Strengths, Weaknesses, Opportunities, & Threats

Good 1st step

Gain insight on a company's competitive advantage

Situational analysis

VRIO: Value, Rarity, Imitability, & Organization

Framework for analyzing resource/capability

Determines competitive strategic potential

Forecasting: Predicting the Future

Trend Analysis

Contingency Planning: predicting alternative futures

Benchmarking: Comparing with the best

ex. bar graph comparing top airlines rankings, # of complaints, etc.

Establishing Corporate Level Strategy

Three overall types of corporate strategy:

Growth Strategy: expansion (increasing sales revenue, market share, # of customers, etc.)

Stability Strategy: little or no significant change

Defensive Strategy: reduction of efforts

The BCG Matrix

Stars: Invest

High market growth rate, high market share

Highly desirable

Question Marks: Invest Cautiously

High market growth, low market share

Cash Cows: Redirect Profits

Low market growth, high market share

Dogs: Divest

Low market growth, low market share

Not desirable

The Diversification Strategy

Companies diversify to either grow revenue or reduce risk

Grow revenue because company has new products and services to sell

Establishing Business Level Strategy

Porter's Five Competitive Forces:

Threat of new entrants

Threat of substitute products/services

Bargaining power of buyers

Bargaining power of suppliers

Rivalry among competitors

Porter's Four Competitive Strategies

(Broad) Cost-Leadership Strategy: Keeping costs & prices low for wide market

(Broad) Differentiation Strategy: Offering unique & superior value for wide market

Cost-Focus Strategy: Keeping costs & prices low for narrow market

Focused-Differentiation Strategy: Offering unique & superior value for narrow market

Executive's Approach Toward Strategy Development

What does the playing field look like now?

What has the competition been up to?

What have you been up to?

What's around the corner?

What's your winning move?

Strategic Implementation: Creating, Executing, & Controlling Functional-Level Strategies

Execution: Getting Things Done

Roadblocks: Misaligned organizational culture, conflicting functional objectives, etc.

Maintaining Strategic Control

Monitoring strategic implementation & taking action

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Chapter 8: Organizational Culture & Structure

Aligning Culture, Structure, & HR Practices to Support Strategy

3 strands in a rope - need to be tightly woven together for success

Organizational Culture: shared assumptions, affect how work gets done

Organizational Structure: who reports to whom, who does what

HR Practices: how the organization manages its talent

Leadership creates alignment between these

The 3 Levels of Organizational Culture

Level One: Artifacts - physical manifestations of culture

Level Two: Espoused Values - stated values, philosophies, & norms, what organizations say they believe in

Level Three: Basic Assumptions - core values of the organization (implicit, deeply-held, often unstated)

How Employees Learn Culture

Symbols, Heroes, Rites & Rituals

Major Features of Organizations: Four proposed by Edgar Schein

Common Purpose: means for unifying members

Coordinated Effort: individuals working together for common purpose

Division of Labor: work specialization for greater efficiency

Hierarchy of Authority: the chain of command

Major Features of Organizations: Three most authorities agree on

Span of Control: Narrow (or Tall) versus Wide (or Flat)

Authority: Accountability, Responsibility, & Delegation

Centralization versus Decentralization of Authority

The Organization Chart

Vertical hierarchy of authority: who reports to whom, how many levels of management

Horizontal Specialization: who specializes in what work, how many workers divided into departments/divisions

Eight Common Types of Organizational Structure

Traditional designs: simple, functional, & matrix structures

Simple: only 1 hierarchical level of management beneath owner

Functional: employees are grouped by specialties/job functions; promotes efficiency & deep expertise

Divisional: employees grouped by product line, customer type, or geographic region; creates mini-organizations

Matrix: employees report to 2 managers (functional & project/product) at the same time

The horizontal design: eliminating functional barriers to solve problems

Team based structure, eliminates hierarchy, focus on cross functional workgroups

Designs that open boundaries between organizations: hollow (aka network), modular, and virtual structures

Hollow: lean structure, org keeps core operations in-house but also outsources non-core processes to external partners

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Chapter 9: Human Resource Management

HR Management: Managing an Organization's Most Important Resource

ALL organizations use HR practices to some extent

Best places to work: offer progressive/valued programs, policies, & procedures

Effective HRM = putting employees first

Internal & External HR Fit Promote Strategic HR Management

Internal Fit: different HR practices work together in harmony

Recruitment, selection, compensation, performance management, etc.

External Fit: HR activities as a whole aligned with org culture & structure to support/execute business-level strategy

Role of Human & Social Capital

Human Capital: knowledge, skills, & experiences that bring individuals to an organization

WHAT people know

Social Capital: relationships, networks, trust & connections that help people work together

WHO people know

Strategic HRM gets the right people, competencies, connections in the right positions at the right time

What is the Best Approach to Strategic HRM?

Talent Management

Strategic approach to attracting, developing, & retaining high-potential employees

Affect - workers singled out as "stars" experience increased job satisfaction, engagement, & commitment to organization

Cognitions - workers respond to organizations' elevated perceptions with higher self-efficacy & increased fulfillment

High Performance Work Systems

Set of HR practices designed to maximize employee performance, innovation, & organizational effectiveness

Recruitment: How to Attract Qualified Employees

Internal Recruitment

External Recruitment

Hybrid Approaches: Referrals & Boomerangs

How Fit Figures into Recruitment

Selection: How to Choose the Best Person for the Job

Selection: the process of screening applicants & choosing best candidate

Background Information, Interviews, Employment Tests

Managing an Effective Workforce: Compensation & Benefits

Wages/Salaries (aka Base Pay) , Incentives, & Benefits

Onboarding & Learning & Development

Onboarding: structured process to help newcomers learn the ropes, understand expectations, & integrate smoothly

Negative onboarding: decreased productivity & job satisfaction, lower customer satisfaction, higher costs & turnover

Positive onboarding: increased commitment & job satisfaction, higher customer satisfaction, & lower turnover

Learning & Development (aka training): helping people perform better

Worth the investment

The Learning & Development Process:

Assessment, Objectives, Selection, Implementation, Evaluation

Performance Management

Step One: Define Performance (set clear goals and expectations)

Step Two: Monitor & Evaluate Performance (measure progress & outcomes)

Step Three: Review Performance (discuss with employee, provide feedback, identify improvement areas)

Step Four: Provide Consequences (administer rewards or punishment)

Performance Appraisals: Are they Worthwhile?

Can sometimes consist of tense conversation that leaves both parties feeling unsatisfied

Constructive feedback is the best

Feedback should be development oriented

Two Kinds of Performance Appraisal:

Objective Appraisal: based on facts & numbers, harder to challenge legally, measurable/verifiable results

Subjective Appraisal: trait appraisals , behavioral appraisals, personal judgments

Who Should Make Performance Appraisals?

Peers, Subordinates, Customers, & Self

Multi-Source Feedback: Appraisal by multiple sources

Forced Ranking: Grading on a curve

Effective Performance Feedback

Most managers unintentionally inflate their employees performance ratings

Problem-solving approach, avoid criticism, treat employees with respect

Specific & direct in describing current performance & improvement desired

Get employees input

Follow up

Legal Requirements of HRM: Must Know Info for Every Manager

Labor Relations

Compensation & Benefits

Health & Safety

Equal Employment Opportunity

Workplace Discrimination, Affirmative Action, Sexual Harassment & Bullying

Important US Federal Laws & Regulations: LABOR RELATIONS

1975 Privacy Act: gives employees legal rights to examine letters of reference concerning them

1986 Immigration & Reform Control Act: requires employers to verify eligibility for employment of all new hires

2003 Sarbanes-Oxley Act: prohibits employers from demoting or firing employees who raise fraud accusations to a federal agency

Important US Federal Laws & Regulations: COMPENSATION & BENEFITS

1974 Employee Retirement Income Act (ERIS): sets rules for managing pension plans, provides federal insurance to cover bankruptcy

1993 Family & Medical Leave Act: requires employers to provide 12 weeks of unpaid leave for medical/family reasons (childbirth, adoption, etc.)

1996 Health Insurance Portability & Accountability Act (HIPPA): allows employees to switch insurance plans when changing jobs and receive new cover regardless of preexisting health conditions (prohibits group plans from dropping ill employees)

The Social Security Act of 1935: established US retirement system

The Fair Labor Standards Act of 1838 (FLSA): established minimum living standards for workers engaged in interstate commerce; banned child labor; federal minimum wage

Important US Federal Laws & Regulations: HEALTH & SAFETY

1970 Occupational Safety & Health Act (OSHA): establishes minimum health & safety standards

1985 COBRA: requires an extension of health insurance benefits after termination

2010 Patient Protection & Affordable Care Act: employers with over 50 employees must provide health insurance

Important US Federal Laws & Regulations: EQUAL EMPLOYMENT OPPORTUNITY

1963 Equal Pay Act: men and women paid equally

1964 Civil Rights Act: prohibits discrimination based on race, color, religion, sexual orientation, sex, or national origin

1967 Age Discrimination in Employment Act: prohibits discrimination in employees over 40 years old; restricts mandatory retirement

1990 Employees with Disabilities Act: prohibits discrimination against qualified employees with mental or physical disabilities

1991 Civil Rights Act: permits suits against employers for punitive damages in cases of intentional discrimination

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Review/Important Info:

Diversification Strategy: moving into new lines of business, grow revenue or reduce risk

Related Diversification Example: purchasing a new business related to the company's existing business portfolio

Executives (C-Suite) should focus on: What Products or Services Should we Offer? or What Businesses are we in?

Cost-Leadership Strategy: keep costs and prices low, and below those of competitors, and target a wide market

3 Key Principles of Strategic Positioning:

1. Creation of Unique & Valuable Position

2. Trade-offs in Competing

3. Creating a "fit" among activities

Benchmarking: process by which a company compares performance with other high performing companies

Contingency Planning: preparing backup plans for unexpected events

Matrix: TWO command structures (horizontal & vertical)

Authority: right to make hiring and firing decisions, give orders, utilize resources

Basic Assumptions: core values, hard to change, not visible to public

Four Major Organizational Culture Types

Clan Culture: internal focus, values flexibility over stability or control, wants employees to have strong sense of identification and commitment, feeling of "family"

Adhocracy Culture: dynamic, innovative, values creativity, risk-taking, & adaptability

Market Culture: competitive, results-driven, productivity, winning, achieving measurable goals

Hierarchy Culture: structured, formal culture, values stability, clear and efficient procedures and processes

Interview Styles

Unstructured: conversational, free flowing, no fixed questions

Behavioral Description: asks about past behaviors to predict future behaviors

Situational: proposes future scenarios

Differentiation: offering unique, high value products to wide market

Focused Differentiation: offering unique products to niche market

Cost Focused: low prices to niche market

Value-Focused: unique, high value products, to niche market