Anna Rosinus Strategic management Process (3) source: Wheelen, Hunger (2012) Programs Activities needed to accomplish a plan Budgets Costs of the programs Procedures Sequence of steps needed to do a job Environmental Scanning Strategy Formulation Strategy Implementation Evaluation and Control 2. Environmental Scanning & Industry Analysis 3. Internal Scanning & Organisational Analysis 4. Strategy Formulation a. Situation Analysis & Business Strategy b. Corporate Strategy c. Functional Strategy & Strategic Choice 5. Strategy Implementation a. Organising for Action b. Staffing & Directing 6. Evaluation & Control 121
Transcript
Anna Rosinus
Strategic management Process (3)
source: Wheelen, Hunger (2012)
Programs Act ivit ies needed to accomplish a plan
Budgets Costs of the programs
Procedures Sequence of steps needed to do a job
Environmental Scanning
Strategy Formulation Strategy Implementation
Evaluation and Control
2. Environmental Scanning & Industry Analysis
3. Internal Scanning & Organisational Analysis
4. Strategy Formulation a. Situation Analysis & Business
Strategy b. Corporate Strategy c. Functional Strategy &
Strategic Choice
5. Strategy Implementation a. Organising for
Action b. Staffing & Directing
6. Evaluation & Control
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Strategy Implementation what are the different steps in strategic management?
staffing follows strategy selection and management development problems in retrenchment
leading managing corporate culture action planning management by objectives total quality management
„what to expect?“
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Strategy Implementation and Staffing recruiting & staff management in general
hiring new people with new skills
firing people with inappropriate skills
training and development training existing employees to learn new skills
preparing existing employees for future positions
management “selection” matching the manager to the strategy
finding executives with an appropriate mix of skills and experiences
tradition/culture
how to match people and strategy?
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repairing a car then …
…and now
Anna Rosinus
corporate communication then …
…and now
Anna Rosinus
Strategy Implementation and Recruitment definition of tasks
job profiles
internal vs. external recruitment
=> training vs. on boarding
permanent vs. temps (freelancers etc.)
maintenance of networks
how to find the right people for the new strategy?
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Hiring Practice at Zappos company is known for aiming at the ultimate customer experience when Zappos hires new employees, it puts them through an intensive
four-week training program, immersing them in the company's culture, strategy, and processes
then, about one week in, Zappos makes what it calls "The Offer," telling newbies, "If you quit today, we will pay you for the amount of time you have worked, plus a $2,000 bonus."
PLEASE GUESS HOW MANY NEW EMPLOYEES TAKE THE OFFER? …only 2% to 3% of people take the offer
retrenchment— close company professional liquidator
retrenchment— save company turnaround specialist
strong weak
hig
h
low
average
aver
age
business strength/competitive position
indust
ry a
ttra
ctiv
enes
s growth—concentration
stability
growth—diversification
retrenchment— close company
retrenchment— save company
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Succession Planning = replacing people in key positions, top managers or even the founder of
the company internal* vs. external search comparison of potential internal and external candidates how to find internal candidates?
management appraisal programs analysing people below the top management provision of financial incentives
* career paths/promotion opportunities can serve as a way to attract future employees
how to replace a key position, top manager or even the founder?
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Dieter Zetsche CEO and chairman of
Daimler AG since 2006 joined Daimler in 1976
Martin Winterkorn CEO of Volkswagen and
Porsche AG since 2007 (09) joined VW group in 1981
Norbert Reithofer CEO and chairman of BMW AG since 2006 joined BMW AG in 1987
John Donahoe president and CEO of eBay
Inc. since 2008 joined eBay in 2005
Jeff Bezos founder, Chairman, President
and CEO of amazon.com since 1994
Tim Cook CEO of Apple Inc. since
2011 (+ in 2004 & 2009)
joined Apple in March 1998
Satya Nadella CEO of Microsoft since 2014 joined Microsoft in 1992
Mark Zuckerberg co-founder, chairman &
CEO of Facebook, Inc. since 2004
Anna Rosinus
as part of their strategic program "Fit for Growth" Vodafone intends to cut
around 600 jobs in Germany, as it grapples with harsh competition and lower revenues…
"We have started voluntary job cuts. Nobody is forced to accept the offer,“ in total cost reductions shall amount to Euro 100m on the other hand Vodafone plans to invest Euro 400m in future growth, e.g.
for the acquisition of Kabel Deutschland, in network extension, in service improvements or customer acquisition
other measures to reduce costs are offshoring, not paying regular wage increases and the cancellation of the christmas party
Problems in Retrenchment: Downsizing = the planned eliminated of positions or jobs “negative touch” can damage the morality of the remaining employees might harm the knowledge base of an organization successful downsizing requires…
focus on the elimination of unnecessary work instead of across-the-board layoffs, e.g. by…
…outsourcing/contracting of work that others can do cheaper consider and plan for long-run efficiencies cautious and sensitive communication of actions and their reasons investment in the remaining employees balancing out job elimination by development of value added jobs
how to reduce the existing workforce?
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Strategy Implementation and Leadership effective strategy implementation requires leadership
leadership includes…
…making people use their abilities and skills most effectively and efficiently to achieve organisational objectives
…exercising control
…developing and communicating a vision and strategic direction
…shaping the organisational culture (e.g. Ray Kroc – Mc Donald’s, Steve Jobs – Apple)
how does a company’s leader contribute to strategy implementation?
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Strategy Implementation and Leadership leadership types:
how does a company’s leader contribute to strategy implementation?
administrator (organisational systems and principles)
autocrat (top-down decision making, force of personality, and centralisation of power)
strategic leader (clear strategic direction and considerable decentralisation of decision-making)
Anna Rosinus
Leadership Styles understanding and commitment e.g. small-group briefings and delegation of
responsibilities PERSUASION
widespread involvement of employees on what and how to change COLLABORATION
retaining overall control delegation of elements of the change process PARTICIPATION
leaders make most decisions use authority to direct change DIRECTION
how to lead change?
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Strategy Implementation and Corporate Culture corporate culture = traditions, and accepted work practices and also
defines how managers and workers treat each other and can expect to be treated
culture makes distinctive competences persist
corporate culture should support mission and strategy – culture follows strategy
culture affects a company’s ability to shift its strategic direction
strong cultures are resistant to change
“strategically appropriate”, adaptive or inert cultures
how does corporate culture influence strategy implementation?
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1) is the planned strategy
compatible with the current
culture?
YES
NO
tie changes into the culture
2) can the culture be modified to make it more
compatible with the new strategy?
YES
3) is management willing and able to make major and organisational
changes and accept probable delays?
No
manage around the culture by
establshing a new structural unit to implement the new strategy
4) is management still committed to implementing the
strategy?
YES
find a joint-venture partner or contract with
another company to carry out the
strategy
formulate a different strategy
sour
ce: W
heel
en, H
unge
r
NO
NO
decision tree: fit between culture and strategy
YES apply minor changes to the culture
UPDATED
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Post Merger Integration = (among others) managing diverse cultures following an acquisition
what about corporate culture in case of external growth?
INTEGRATION equal merger into a new corporate culture, a “balanced give and take”
ASSIMILATION domination of one culture over the other
SEPARATION both cultures are kept but in separate units
DECULTURATION the acquiring firm imposes its culture and practices
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Management by Objectives (MBO) by Peter Drucker in 1954
process of participative goal setting
cascading logic for goal setting
development of action plans* ()
setting, establishment, and communication of individual objectives
periodical review of performance
how to follow up on implementation?
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*Action Plan puts a program in place defines…
…what actions are going to be taken? …by whom? …when or during what time frame? …with what expected results?
action plan elements (1) specific actions (2) start and end dates (3) person(s) responsible (4) person(s) responsible for monitoring timelines and effectiveness (5) expected financial and physical consequences (6) contingency plans
what has to be done, by whom, when and “how much”?
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the
actio
n pl
an
the
prog
ram
sour
ce: s
light
ly a
dapt
ed fr
om W
heel
en, H
unge
r
PROGRAM OBJECTIVES: to run a new advertising and promotion campaign for the Christmas season
EMPLOYEES ADDRESSED: Jan Lewis, Marketing Manager & Rick Carter Marketing Assistant
1 2 3
action plan elements - not included in this example
4 6
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Total Quality Management (TQM) = philosophy committed to customer satisfaction and
continuous improvement TQM’s objectives
better, less variable quality in product quicker response to customer needs & greater flexibility
concerning customer requirements lower cost through quality improvement; elimination of work that is not
value adding essential ingredients of TQM programs are…
intense focus on customer satisfaction consideration of internal as well as external customers accurate measurement of critical variables continuous improvement of products, services (and processes) empowerment of employees (based on trust and teamwork)
how to implement hybrid strategies (cost leadership + differentiation)?
chapter 3
chapter 4a
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Management Consulting (1/2) support for many different tasks of the strategy process:
strategy formulation
planners, coordinators, or facilitators of change processes
external as well as internal input (strategy workshops)
strategy implementation/execution (planning means of strategic change)
why using external consultants? neutrality
signal importance
build trust
how to get support in strategy processes?
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Management Consulting (2/2) types of companies:
large, diversified organisations
medium-sized management consultancies
boutique consultancies
…are different in terms of areas of consulting expertise, e.g. specific industries
functional areas
regions
how to get support in strategy processes?
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Test Yourself: Brainteaser 1. How many cats are there in Germany?
2. How much toothpaste is sold in England in a year?
3. How many marriages have been contracted in June 2006 in Germany?
4. How many trains are there on the London Underground?
pick two of the following questions and try to answer it – please do NOT google!
Anna Rosinus
1) How many cats are there in Germany?
HOW TO? on average you know 100 people and 5 of them have a cat, meaning 1 cat per
20 persons there are 82 million people in Germany, i.e. around 4,1 million have a cat maybe (and again on average) there is more than a cat per household and in
addition the average person is more likely to have a cat than your friends => let‘s round up to 5 million
besides cats living with people (in private households) there might be „homeless“ cats or some might be living in institutions such as zoos etc. => let‘s add 10-20%
=> there are between 5.5 and 6 million cats in Germany the real answer? according to the Zentralverband zoologischer Fachbetriebe in
the 2000s there have been 6,7 million cats in Germany
answers
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2) How much toothpaste is sold in England in a year? HOW TO?
we as a 2 people household use nearly 1 tube of toothpaste per month this makes 5 tubes per person per year, i.e. 1 liter in England there are around 50 million people => 50 million liters the real answer? 46.3 million liters
answers
Anna Rosinus
3) How many marriages have been contracted in June 2006 in Germany? HOW TO?
(A) institutions (Standesämter) there are around 500 cities in Germany that have on average two offices normally all 30 minutes a marriage takes place, the opening hours are 9 a.m.
to 12 p.m. on Saturdays this makes 8 marriages per Saturday (in summer all time slots will be used), on
a typical weekday there are less assumingly per week there are around 10 marriages let’s take 4 weeks (due to holidays this might be a good estimate) => 40 per
month multiplied by 1000 offices => 40k, but as the June 2006 includes the
06/06/06 let’s add another 10k => 50k the real answer? 49 500 (B) people getting married (between 20 and 30, xy% of population etc.)
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Anna Rosinus
4) How many trains are there on the London Underground?
HOW TO? first the number of individual routes is needed, let’s estimate 20 distinct
routes on average a round trip might take 2hrs 30mins the train frequency (i.e. how often does a train of a distinct line arrive at a
station) differs between 20 to 30 per hour at busy, central stations and 4-5 at further out stations
on average all 6 minutes (equivalent to 10 trains per hour) during peak time might be reasonable
if one train needs 2.5 hours for a round trip, during one hour there are 25 trains needed to realise the timetable
25 trains à 20 routes = 500 the real answer? very close to 500, there are between 5 and 91 trains are
needed depending on the line, 11 lines, 1.2 billion passengers “In 1884 there were over 800 trains running around”
measure variables that influence future profitability
e.g. inventory turnover ratio (retail) or customer
satisfaction
when to measure and what?
e.g. turnover or net income
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Steering Controls in Practice: Vapiano please think of possible steering controls a restaurant manager could use in order to get an indication of its restaurant’s performance over a year…
group work
Anna Rosinus
practical application: steering controls in retailing now and then
Anna Rosinus
practical application: steering controls in retailing now and then
Anna Rosinus
practical application: steering controls in retailing now and then
Anna Rosinus
Types of Controls input controls (resources)
knowledge skills & abilities values & motives
behaviour controls (how things are done) policies & rules SOP’s & directives/orders
output controls ( end result) objectives targets milestones
are there different ways to control performance?
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Types of Controls is there a clear connection or relationship
between activities and results?
behaviour controls
is output measurable?
output controls input controls
which one to use?
YES NO
YES NO
Anna Rosinus
Traditional Performance Indicators how to measure performance?
Traditional Financial Performance Indicators
Return on Investment
(ROI)
Earnings per Share
(EPS)
Return on Equity (ROE)
= net income before
taxes total amount invested
in the company (typically measured by
total assets)
= net earnings amount of
common stock
= net income total equity
Operating (Profit) Margin
= operating income
(net income) sales revenues
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Traditional Performance Indicators for Apple practical application
Return on Investment
(ROI)
Earnings per Share
(EPS)
Return on Equity (ROE)
= net income before
taxes total amount invested
in the company (typically measured by
total assets)
= net earnings amount of
common stock
= net income total equity
Operating (Profit) Margin
FY13 Apple Inc. (figures in million US $)
total net sales $170,910
cost of sales $106,606
gross margin $64,304
operating expenses: research and development (r&d)
$4,475
selling, general and administrative (sg&a)
$10,830
total operating expenses $15,305
operating income $48,999
other income/(expense), net $1,156
income before provision for income taxes $50,155
provision for income taxes $13,118
net income $37,037
shareholders' equity $123,549
number of shares (k) 925,331 total assets $207,000 total shareholders’ equity $123,549
= $ 50,155m $ 207,000m
=24.23%
= $ 37,037m 925,331k
=$ 39.754
= $ 37,037m $123,549m
=29.98%
= $48,999m
($ 37,037m) $170,910m
=28.67% (21.67%)
= operating income
(net income) sales revenues
Anna Rosinus
Performance Indicators measurement results depend on the performance indicators used…
source: onvista.de, retrieved 2013
Apple Microsoft
EBIT-margin 28,47% 34,43%
RoE 29,97% 27,69%
EpS 29,24 1,94
price-to-earnings ratio (P/E ratio)
14,11 14,11
market capitalisation per turnover
2,95 4,00
turnover per employee [USD] 1.489.792,50 578.520,29
comparison with previous slide: difference in Apple’s EpS is based on different time frames as well as computation methods
Strategy Map how to visualise the links between the different perspectives?
Anna Rosinus
Balanced Scorecard for Subway group work
financial (what are our financial goals and objectives?)
customer (how do customers view us?)
internal business perspective (what must we excel at?)
innovation and learning (can we continue to improve and create value?)
Anna Rosinus
Example Balanced Scorecard/Strategy Map: VW do Brazil
practical application
how to visualise the links between the
different perspectives?
Anna Rosinus
Strategy Map how to visualise the links between the different perspectives?
Anna Rosinus
Strategy Map for Subway take the Balanced Scorecard you have developed some minutes ago and turn it into a Strategy Map by drawing the links between the single perspectives e.g. team building measures enhance collaboration amongst
employees which reduces sandwich preparation time what in turn increases customer satisfaction and retention and thereby the turnover (it might also reduce the cost level)
homework
Anna Rosinus
Information Systems ERP (Enterprise Resource Planning), e.g. SAP
accounting and controlling department
surveys, e.g. for customer and/or employee satisfaction
CRM (Customer Relationship Management) system
Project Management Systems
etc.
where to get data from?
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Problems in Measuring Performance
short-term orientation
important behavior for goal achievement not measured (goal displacement)
one unit optimizes performance at the expense of another unit
lack of quantifiable objectives
inappropriate information systems or inability to use them properly
what are potential pitfalls?
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POWER OF DATA VISUALISATION
Anna Rosinus
Guidelines for Controlling Properly guarantee minimum amount of information needed
