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Certification Study Group
Managing Change
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The Nature of Organization
Change Organization Change
Any substantive modification to some part
of the organization (e.g., work schedules,machinery, employees).
Forces of Change
External and Internal
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The Nature of Organization
Change Forces for Change
External forces in the organizations
general and task environments that forcethe organization to alter the way in whichit competes.
Internal forces inside the organization thatcause it to change its structure andstrategy; some internal forces areresponses to external pressures.
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The Nature of Organization
Change Planned Change
Change which is designed and
implemented in an orderly and timelyfashion in anticipation of future events
Reactive Change
Change which is a piecemeal response tocircumstances as they develop
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Managing Change in
Organizations Steps in the Change Process (Lewin Model)
Unfreezing Individuals must be shown why the
change is necessary. Implementing change The change itself is
implemented
Refreezing Involves reinforcing andsupporting the change sothat it becomes a permanentpart of the system.
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Steps in
theChange
Process
Establishment of goals for the change
Recognition of the need for change
Evaluation and follow-up
Diagnosis of relevant variables
Planning for implementation of the change
Selection of appropriate change technique
Actual implementationA ComprehensiveApproach to Change
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Reasons for Resistance to
Change
Barney, Jay B. and
Ricky W. Griffin, The
Management of
Organizations.
Copyright 1992 by
Houghton Mifflin
Company. Used with
permissions.
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Resistance to Change
Uncertainty about the extent andeffects of change.
Threats to self-interests, power, andinfluence.
Different perceptions of change effects
and outcomes. Feelings of loss in disrupted social
networks, power, security, andfamiliarity with existing procedures.
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Overcoming
Resistance toChange inOrganizations
Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright 1992 by
Houghton Mifflin Company. Used with permissions.
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Overcoming Resistance to
Change Encourage active participation in the
change process.
Provide education and communicationabout the change process.
Facilitate the change process by making
only necessary changes, announcingchanges in advance, and allowing timeto adapt to change.
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Overcoming Resistance to
Change Force-field analysis, in which the forces
for and against the change are
delineated and the forces against thechange are minimized, can be used toreduce resistance to change.
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Overcoming Resistance to
Change Force-Field Analysis for Plant Closing at
General Motors
Outmoded production facilities
Excess capacity
Need to cut costs
Reasons for Closing
Possible future needs
Concern about worker welfare
Resistance from unions
Plant
closing
Reasons Against Closing
Figure 7.2
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Certification Study Group
Logical Thinking Patters
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Characteristics of Inductive
Reasoning Unlike deductive reasoning, Inductive
reasoning is not designed to produce
mathematical certainty. Induction occurswhen we gather bits of specific informationtogether and use our own knowledge andexperience in order to make an observation
about what must be true. Inductive reasoningdoes not use syllogisms, but series ofobservations, in order to reach a conclusion.
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Characteristics of Inductive
Reasoning Consider the following chains of observations:Observation: John came to class late this
morning.
Observation: Johns hair was uncombed.
Prior experience: John is very fussy about
his hair.
Conclusion: John overslept
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Characteristics of Deductive
Reasoning A deductive argument offers two or
more assertions that lead automaticallyto a conclusion. Though they are notalways phrased in syllogistic form,deductive arguments can usually bephrased as "syllogisms," or as brief,mathematical statements in which the
premises lead inexorably to theconclusion. The following is an exampleof a sound deductive sullogism.
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Characteristics of Deductive
Reasoning Premise: All dogs have four legs.
Premise: Rover is a dog,Conclusion: Rover has four legs.
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Characteristics of Deductive
Reasoning As long as the first two sentences in this argument
are true, there can be no doubt that the finalstatement is correct--it is a matter of mathematical
certainty. Deductive arguments are not spoken of as"true" or "false," but as "sound" or "unsound." Asound argument is one in which the premisesguarantee the conclusions, and an unsoundargument is one in which the premises do not
guarantee the conclusions. A deduction can becompletely true, yet unsound. It can also be sound,yet demonstrably untrue.
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Certification Study Group
Organizational Planning
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Strategic
Tactical
Operational
ManagerOperations
Vice PresidentOperations
DirectorAdvertising
Vice PresidentMarketing
ManagerAccounting
Vice PresidentFinance
President and CEO
Planning by Organizational
Level
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Time Frames for Planning The Time Dimension of Planning
is based on the principle of commitment.
Planning must provide sufficient time tofulfill the managerial commitmentsinvolved.
Long-range Plans
Intermediate Plans Short-range Plans
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The Nature of Strategic
Management Strategy
A comprehensive plan for accomplishing an
organizations goals.
Strategic Management
A way of approaching business
opportunities and challengesA comprehensive and ongoing
management process aimed at formulatingand implementing effective strategies.
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The Components of Strategy Distinctive Competence
Something an organization does exceptionally well.
Resource Deployment How an organization will distribute
its resources across the areas inwhich it competes.
Scope Specifies the range of markets in which an
organization will compete.
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Types of Strategic Alternatives
Business-level Strategy
How the organization conducts business in
a particular industry.
Corporate-level Strategy
The set of strategic alternatives that an
organization chooses from as it managesits operations simultaneously acrossseveral industries and several markets.
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Types of Strategic Alternatives Strategy Formulation
The set of processes involved in creating or
determining the organizations strategies; itfocuses on the content of strategies.
Strategy Implementation
The methods by which strategies areoperationalized or executed within theorganization; it focuses on the processesthrough which strategies
are achieved.
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Formulation and Implementation
Across Strategic AlternativesCorporate StrategyFormulationDecisions about whichmarkets to compete in
Business StrategyFormulationDecisions about how to
compete in each market
Functional StrategyFormulationDecisions about how toaddress each functionwithin the organization
ImplementationCarrying out the functional-level strategies chosen
for each business function
ImplementationCarrying out the business-level strategies chosen for
each business
ImplementationCompeting in the marketsvia existing operations,
mergers, acquisitions, newventures, divestitures
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SWOT
Analysis
Strengths
Weaknesses
Opportunities
Threats
MissionAn organizations fundamental purpose
Best Strategies
SWOT AnalysisTo formulate strategies that support the mission
Those that support the mission and exploit opportunities and strengths neutralize threats avoid (or correct) weaknesses
Internal Analysis
Strengths(distinctivecompetencies)
Weaknesses Threats
External Analysis
Opportunities
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Using SWOT Analysis toFormulate Strategy
Evaluating Organizational Strengths
Organizational strengths
Distinctive competencies Sustained competitive advantage
Evaluating Organizational Weaknesses
Organizational weaknesses Competitive disadvantage
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Using SWOT Analysis toFormulate Strategy
Evaluating an OrganizationsOpportunities and Threats
Organizational opportunitiesare areas in the organizationsenvironment that may generate
high performance.
Organizational threats areareas in the organizationsenvironment that make itdifficult for the organization to
achieve high performance
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Using a SWOT Analysis to
Formulate Strategy An Example
OpportunitiesHigh growth in marketfor low-cost lodging
StrengthsSolid hotel businessSolid food services
WeaknessesPoor performance incruise ship, travelagency, and themeparks
Weak cash position
ThreatsLow growth in themarket for high-cost lodging
EnvironmentalAnalysis
OrganizationalAnalysis
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Porters Generic Strategies Differentiation strategy
Overall cost leadership strategy
Focus strategy
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Porters Generic Strategies
Examples Differentiation
Nordstroms
Overall Cost Leadership
Wal-Mart
Focus
Gucci
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Strategies Based on Product
Life Cycle The Product Life Cycle
Introduction
Time
Stages
Growth Maturity Decline
High
Low
SalesVolume
Figure 3.3
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Strategies Based on the
Product Life Cycle Product life cycle: a model that portrays
how sales volume for products changes
over the life of products. Introduction Stage
Growth Stage
Mature Stage Decline Stage
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Formulating Corporate Level
Strategies Base Concepts Each business or set of businesses
within such a firm is frequently
referred to as a strategic business unit,or SBU.
Diversification The number of businesses an
organization is engaged in
The extent to which these businesses arerelated to one another
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Formulating Corporate Level
Strategies Single Product Strategy
No diversification involved
Organization sells one product/service ina single market
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Formulating Corporate Level
Strategies Related Diversification
A strategy in which an organization operates inseveral different businesses, industries, ormarkets that are somehow linked.
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Related Diversification Bases of relatedness bases include
common technology, common distribution
networks, common marketing skills,common brand names and reputation, andcommon customers.
Basis of Relatedness Examples
Similar technology Phillips, Boeing, Westinghouse, Compaq
Common distribution and marketing skills RJR Nabisco, Phillip Morris, Procter & Gamble
Common name brand and reputation Disney, Universal
Common customers Merck, IBM, AMF-Head
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Related DiversificationAdvantages of Related Diversification
Reduces organizations dependence on any
one of its business activities and thusreduces economic risk.
Reduces overhead costs associated withmanaging any one business througheconomies of scale and economies ofscope.
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Related DiversificationAdvantages of Related Diversification
Allows an organization to exploit its
strengths and capabilities in more than onebusiness.
Synergyexists among a set of businesseswhen the businesses value together isgreater than their economic valueseparately.
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Formulating Strategy -
Unrelated Diversification Unrelated Diversification
When an organization operates several
businesses that are not associatedAdvantages
Stable performance over time
Resource allocation spread over more thanone industry
Reduced business cycle risk
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Formulating Strategy
Unrelated Diversification Disadvantages
Strategy does not usually lead to highperformance due to the complexity of
managing a diversity of businesses Firms with unrelated strategies fail to exploit
important synergies, thus are at a competitivedisadvantage to firms with relateddiversification strategies
Most organizations have now abandonedthis strategy
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Managing Diversification Major Tools for Managing Diversification
Portfolio management techniques
Methods that diversified organizations use tomake decisions about what businesses toengage in and how to manage these multiplebusinesses to maximize corporate performance.
Two important portfolio managementtechniques
The BCG Matrix
The GE Business Screen
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BCG Matrix Provides a framework for evaluating the
relative performance of businesses in
which a diversified organizationoperates.
Uses two factors to evaluate a firms setof businesses: market growth rate and
market share. The matrix classifies the types of
businesses that a diversified firm can
engage in.
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BCG Matrix It helps managers to develop a better
understanding of how different strategicbusiness units contribute to the overallorganization.
By assessing each SBU on the basis of itsmarket growth rate and relative marketshare, managers can make decisions aboutwhether to commit further financial resourcesto the SBU or to sell or liquidate it.
SBU stands for .
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The BCG Matrix
Relative market share
Cash cows Dogs
High
Low
High Low
Question
marks
Stars
Marketgrowth
rate
Source:Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.
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BCG Matrix Dogsare businesses that have a very small
share of a market that is not expected togrow.
Cashcowsare businesses that have a largeshare of a market that is not expected togrow substantially.
Question marksare businesses that have onlya small share of a quickly growing market.
Starsare businesses that have the largestshare of a rapidly growing market.
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GE Business ScreenA method of evaluating businesses
along two dimensions:
(1) industry attractiveness and (2) competitive position
The GE Business Screen is a more
sophisticated approach to portfoliomanagement than the BCG Matrix
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GE Business ScreenA method of evaluating business in a
diversified portfolio along two dimensions,
each of which contains multiple factors: Industry attractiveness.
Competitive position (strength) of each firm in theportfolio.
In general, the more attractive the industryand the more competitive a business is, themore resources an organization should
invest in that business.
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The GE Business Screen
Competitive position
Low
Winner
Medium
High
Good
Competitive position1. Market share
2. Technological know-how
3. Product quality
4. Service network
5. Price competitiveness6. Operating costs
Industry attractiveness1. Market growth
2. Market size
3. Capital requirements
4. Competitive intensity
PoorMedium
Winner
Profit
producer
Winner
Average
business
Loser
Question
mark
Loser
LoserIndustry
growthrate
In general, the moreattractive theindustry and themore competitive theposition, the more anorganization should
invest in a business.
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Tactical Planning
An organized sequence of stepsdesigned to execute strategic plans
Tactical plans are to battles whatstrategy is to a war
Strategy focuses on resources,environment, and mission, whereastactics focus primarily on people andaction
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Tactical Planning Developing and Executing Tactical Plans
Developing tactical plans
Recognize and understand
overarching strategic plans
and tactical goals
Specify relevant resource and
time issues
Recognize and identify human
resource commitments
Executing tactical plans
Evaluate each course of action
in light of its goal
Obtain and distribute
information and resources
Monitor horizontal and vertical
communication and integration
of activities
Monitor ongoing activities for
goal achievement
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Operational Planning
Single Use Plans A plan that is not likelyto be used again in the near future.
Program plan Project plan
Standing Plans - a plan for activities thatrecur regularly over a period of time
Policy
Standard Operating Procedure
Rules and Regulations
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Contingency Planning
The determination of alternativecourses of action to be taken if an
intended plan is unexpectedlydisrupted or rendered inappropriate.
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Action Point 1:
Action Point 2:
Action Point 3:
Action Point 4:
Develop plans, consideringcontingency events
Implement plans and formallyidentify contingency events
Specify contingency event
indicators and develop plans foreach event
Successfully complete each plan orcontingency plan
The Contingency Planning
Process -An Ongoing Process
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