Dr Georgios Kapogiannis Engineering Project Management and Finance Week 16.

Dr Georgios Kapogiannis

Engineering Project Management and Finance

Week 16

Last Week• Client, • Business Need, • Profit, • Project Management Life Cycle (RIBA 2013 Plan of

Works)

This Week• Project Management Competences, • Stakeholder Analysis, • Competitive Advantage• Strategic and Change Management Models and

Techniques (SWOT, PESTLS, Porter)

Competences

PM Competences

The ICB defines 46 competence elements covering the technical competence for project management (twenty elements), the professional behavior of project management personnel (fifteen elements) and the relationships with the context of the projects, programs and portfolios (eleven elements). Each competence element consists of a title, a description of the content, a list of possible process steps and experience criteria required for each IPMA level.IPMA developed the ICB from National Competence Baselines and then enhanced it in a continuous improvement process. A key benefit for clients is that the basis for the competences is not specific to particular companies, organizations, disciplines, sectors of the economy or countries. The cultural aspects of a country can be included in a National Competence Baseline (NCB).

Why?

Competent and Qualified Project Managers

They can be qualified via

CIOB, RICS, PMI (PMP) and APM (Prince 2).

Stakeholder Analysis

Stakeholder Analysis Categorisation – In Boyd and Chinyio (2006)

Client’s Role• The Client with the help of professional advisers

– Sets the project brief– What the mission is and the justification– The broad approach with key dates– The scope what is to be included/excluded– Approves the project organisation structure and establishes

procurement strategy– Sets the design brief / approves final design– Ensures safe completion of the construction/development

within the targets previously set– etc

An EXAMPLE• The University as a Client • Experienced Client? Estates, Librarians?• Who exactly is the Client? Who’s

perspective?– Contractor – University– University – Student (and staff and external

visitors etc etc)

• Internal project manager

Resources• On module’s website• Graham Winch (2002), ‘Managing

Construction Projects’, Blackwell Publishing Page67

Internal Stakeholders• Internal Stakeholders• Demand side• Supply side• Client• Financiers• Client’s employees• Client’s customers• Client’s tenants• Client’s suppliers• Architects• Engineers• Principle contractors• Trade contractors• Material suppliers

External Stakeholders• External Stakeholders• Private• Public• Local residents• Local landowners• Environmentalists• Conservationists• Archaeologists• Regulatory agencies• Local government• National government

Good Relationships

Consider Power and Interest

Influences

Initial Questions• Who is the REAL Client?• What influence does the Procurement Strategy have

on Client involvement …and• How could this affect the Project Manger?• Can analytical tools e.g. Stakeholder Analysis be

used to help analyse and manage relationships? Are there risks?

Competitive Advantage

Definition

An advantage over competitors gained by offering

consumers greater value than competitors offer

Professor Porter is the Key Contributor

http://www.isc.hbs.edu/Pages/default.aspx

The Case of Intel

• Has dominated the chip industry

• Success is directly related to Intel’s competitive strategy

• Strategy focuses on superior value and product leadership

• Heavy focus on product and advertising innovation and R&D investments

• Changing market needs have challenged Intel to adapt

http://www.youtube.com/watch?v=1RAkZUt2rA4

In Construction

https://www.youtube.com/watch?v=SbYCISAhpME

So

The process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid.

How to analyse

Identifying Competitors• Firms face a wide range of competition• Be careful to avoid “competitor myopia”• Methods of identifying competitors:

– Industry point-of-view– Market point-of-view

• Competitor maps can help

Assessing Competitors• Determining competitors’ objectives• Identifying competitors’ strategies

– Strategic groups• Assessing competitors’ strengths and

weaknesses– Benchmarking

• Estimating competitors’ reactions

Selecting Competitors to Attack or Avoid

• Strong or weak competitors– Customer value analysis

• Close or distant competitors– Most companies compete against close

competitors• “Good” or “Bad” competitors

– The existence of competitors offers strategic benefits

Are these companies competitors?

Winning Competitive Strategies

– Overall cost leadership• Lowest production and

distribution costs– Differentiation

• Creating a highly differentiated product line and marketing program

– Focus• Effort is focused on serving

a few market segments

Porter

5 Forces

Threat of New Entry• the existence of barriers to entry • economies of product differences • brand equity • switching costs • capital requirements • access to distribution • absolute cost advantages • learning curve advantages • expected retaliation • government policies

http://en.wikipedia.org/wiki/Barriers_to_entry

Competitive Rivalry• number of competitors • rate of industry growth • intermittent industry overcapacity • exit barriers • diversity of competitors • informational complexity and asymmetry • brand equity • fixed cost allocation per value added • level of advertising expense

Supplier Power• supplier switching costs relative to firm

switching costs • degree of differentiation of inputs • presence of substitute inputs • supplier concentration to firm concentration

ratio • threat of forward integration by suppliers

relative to the threat of backward integration by firms

• cost of inputs relative to selling price of the product

Buyer Power• buyer concentration to firm concentration

ratio • bargaining leverage • buyer volume • buyer switching costs relative to firm

switching costs • buyer information availability • ability to backward integrate • availability of existing substitute products • buyer price sensitivity • price of total purchase

Threat of Substitution• buyer propensity to substitute • relative price performance of substitutes • buyer switching costs • perceived level of product differentiation

Strategic and Change Management Models and Techniques

Historical Note

Whilst the study of strategy as a business discipline is relatively recent, the word itself, deriving from the ancient Athenian political position of strategies, has a history which stretches back over 2,500 years. In its original conception, strategy had much to do with the State and, in particular, the conduct of war: the elected strategos from the different districts of Athens together comprised the strategic, or council of war.

Interestingly, the wheel has perhaps come full circle with the increasing application of business strategy concepts to public sector organisations

The Concept of Strategy

• In their book, “Exploring Corporate Strategy”, Gerry Johnson and Kevan Scholes approach the question “what is strategy?” by attempting to find characteristics that distinguish strategic decisions from other decisions taken within the organisation

• Above all, Johnson and Scholes argue that strategic decisions are complex, involve a high degree of

uncertainty and affect the organisation as a whole.

Characteristics of Strategy IStrategy is about:• affecting the long term direction of the

organisation. • achieving an advantage, frequently over the

competition. • the scope of the organisation’s activities. • of an organisation to its environment. • building on an organisation’s resources and

competences.

Characteristics of Strategy IIStrategy is about:• the requirement for major resource changes

within an organisation. • having an impact on operational decisions

across the organisation. • the values and expectations of the organisation.

Characteristics of Strategy III• In “Defining the Concept of Strategy” Arnoldo

Hax comes up with a similar range of issues to Johnson and Scholes. Hax sees the dimensions of strategy as:

Characteristics of Strategy IV• a coherent, unifying and integrative pattern of

decisions. • a means of establishing an organisation’s

purpose. • a definition of a firm’s competitive domain. • a matching of opportunities and threats to

strengths and weaknesses to achieve competitive advantage. (over who? RSL?)

• a system for differentiating managerial tasks at corporate, business and functional levels.

• a definition of the contribution the firm intends to make to its stakeholders.

Characteristics of Strategy V• Based on these characteristics and dimensions,

both Johnson and Scholes, and Hax arrive at definitions of strategy, recognising that these definitions are not unique nor all encompassing. In the words of Johnson and Scholes:

• “Strategy is the direction and scope of an organization over the long term: which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets and to fulfil stakeholder expectations.”

Characteristics of Strategy• Whilst Hax says that: • “Strategy becomes a fundamental framework through

which an organization can assert its vital continuity, while at the same time purposefully managing its adaptation to the changing environment to gain competitive advantage. Strategy includes the formal recognition that the recipients of the results of a firm’s actions are the wide constituency of its stakeholders. Therefore the ultimate objective of strategy is to address stakeholder benefits – to provide a base for establishing the host of transactions and social contracts that link a firm to its stakeholders.”

Levels of Strategy

• In most organisations it is possible to observe that strategies exist at different levels, with the nature of the decisions changing at each of these levels. Usually, these differences reflect the various hierarchical levels of the organisation structure. Typically, three broad levels can be identified as illustrated in Figure 1:1.

Levels of Strategy1. Corporate2. Business3. Functional/ Operational

Levels of Strategy

• The corporate strategy is linked to the most senior level of the organisation’s management structure, typically the Board of Directors for the whole organisation. Decisions at this level tend to be concerned with the overall purpose and scope of the organisation, and in managing the expectations of key stakeholders, particularly shareholders. Frequently, decisions revolve around balancing and prioritising the demands for resources coming from the divisions and operating companies.

Levels of Strategy

• Business strategies are the province of the divisions (e.g. Asset Management) and/or operating companies within the organisation, often referred to as strategic business units. This level of strategy is frequently referred to as competitive strategy because the focus is upon competitive activity such as the development of new products/services and new market opportunities.

Levels of Strategy

• Finally, functional or operational strategies are linked to operating functions of the organisation, frequently at the level of individual business units, but often transcending hierarchical levels to cover the organisation as a whole; the human resources strategy or finance strategy being possible examples. Some authors believe that main purpose of operational strategies is to ensure implementation of corporate or business level strategies though, as we will see, this view has its limitations.

Levels of Strategy

• The primary concern of strategic management is with corporate strategies and business strategies, though implications for functional strategies cannot be ignored. Further, as we shall see, the divisions between these different levels of strategy are permeable, with each affecting and being affected by the other levels.

Frameworks: Understanding Strategy

• STRATEGY AS ANALYSIS-CHOICE-IMPLEMENTATION

• Whilst definitions and descriptions of the levels of strategy are useful, the focus is upon what it is, rather than what it does. A number of frameworks are available to help to understand further the nature of strategy as a managerial process. Two of these frameworks, analysis-choice-implementation and process-content-context are explored below.


• After establishing the characteristics of strategic decisions, Johnson and Scholes outline a model of the elements of strategic management, which underpins the structure of their textbook.

Frameworks: STRATEGY AS ANALYSIS-CHOICE-IMPLEMENTATION


Johnson and Scholes argue that the process of managing strategy involves three elements:

• strategic analysis - understanding the strategic position of the organisation.

• strategic choice - the formulation and evaluation of potential courses of action.

• strategy implementation - the planning and managing of required change.


• Strategic Analysis• Understanding the strategic position of the

organisation involves an assessment of how the environment affects the organisation; understanding the strategic capability of the organisation, based on its resources and competences; and understanding the organisation’s purpose and the expectations of key stakeholders.


• Strategic Choice• Johnson and Scholes argue that strategic choice can

be conceived in terms of: • Identifying the bases of choice - particularly how the

firm creates an advantage, how it balances its activities, and its aspirations for the future.

• Generating options - the directions in which the organisation could move and by what methods.

• Evaluating and selecting options - the extent to which options meet tests of suitability, feasibility and acceptability.


Strategic Implementation• How strategy is translated into action is the third

element of Johnson and Scholes’ framework of strategic management. They argue that this involves consideration of issues like organisational structure, resource planning and the management of strategic change.


STRATEGY AS PROCESS-CONTENT-CONTEXT • Whilst the analysis-choice-implementation model

can provide useful insights into the elements of strategic management, it is not the only framework which is useful in this regard. The title of Bob De Wit and Ron Meyer’s textbook points to an alternative model of the dimensions of strategy: process; content and context.

Frameworks: STRATEGY AS PROCESS-CONTENT-CONTEXT


Strategy Process • The process by which organisations develop

strategy - formulating strategies, taking strategic decisions and ensuring strategic change - is a key dimension of strategic management. At one level, it provides a link back to Johnson and Scholes’ framework of the elements of strategic management.


• Johnson and Scholes’ emphasis that their model does not assume a linear form of three sequential stages raises the central debate about strategy process - the extent to which strategy is a planned or incremental process. In most organisations strategy arises out of a mix of both formal planning and a mix of decisions and actions taken in response to events and organisational pressures.


Strategy Content • The analysis of strategy content tends to concentrate upon

issues of rationality: does the strategy make sense? Many authors caution against the dangers of an over-concentration on such issues as in practice this risks losing the creativity on which success is likely to be built. In essence, their argument reinforces the message that content and process dimensions of strategy cannot be separated. Indeed, a three-dimensional view of strategic management also involves consideration of the context dimension as well.


Strategy Context • If process is the “how”, and content the “what”, the

context can be seen to be the “where, when, who and why” of strategic management.

• For many organisations, the growing internationalisation of the industries and markets is having a significant effect upon their strategy: the impact of the global context cannot be understated. Same for UK RSLs, recent article

TOOLS AND TECHNIQUES OF STRATEGIC ANALYSIS

• The development of strategy within an organisation requires the application of a range of tools and techniques. By their nature they tend to be analytical, but it would be too restrictive to say that they are all limited to the first element of the analysis-choice-implementation model mentioned above.


• Many techniques are used to assist in the analysis and evaluation of different options (choice) and others can assist in identifying problems in changing the organisation, designing new structures or assisting in resource allocation and control (all elements of implementation).


• For example, the technique of SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis can be used to asses the external and organisational environments, evaluate strategic options and identify resource gaps.

• PESTLES could be used to understand external environments and how these could impact your business/project

PESTLES

Summary

• The nature of strategy as a subject has meant that it is not possible or desirable to provide a single definition of strategy or strategic management, rather a variety of aspects have been outlined:

• The characteristics of strategy and strategic decisions.

• The levels of strategy. – The analysis-choice-implementation framework. – The process-content-context framework.

Summary

• In passing, a number of the central debates and issues of strategy were highlighted:

• Is strategy a planned or incremental process? • How do organisations achieve competitive

advantage? And over who in the case of non-profit?

• How do complex, multi-business organisations achieve synergy?

• What is the impact of context upon strategic management?

Summary

• The overall frameworks of strategic management also assist in creating an understanding of where and how to use particular tools and techniques of Strategy.

References• G Johnson & K Scholes (2002) Exploring Corporate

Strategy Text & Cases, 6th edition Harlow: Prentice Hall

• B De Wit & R Meyer (1998) Strategy: Process, Content, Context, 2nd edition London: International Thompson Business Press

• A Hax, “Defining the Concept of Strategy” in B De Wit & R Meyer (1998) Strategy: Process, Content, Context, 2nd edition London: International Thompson Business Press

This Week• Project Management Competences, • Stakeholder Analysis, • Competitive Advantage• Strategic and Change Management Models and

Techniques (SWOT, PESTLS, Porter)

Dr Georgios Kapogiannis Engineering Project Management and Finance Week 16.

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Transcript of Dr Georgios Kapogiannis Engineering Project Management and Finance Week 16.