Management 101 Final
Fragile Structures
employees only communicate amongst themselves and with one other division; problem when you need the insight of several other divisions; foster camaradierie across divisions
flat organization
fewer levels of authority relative to company size
Political/Legal Segment
how a society creates and exercises power, including rules, laws, and taxation policies environmental regulations, Americans with Disabilities Act, deregulation of utilities, increases in minimum wage, and corporate governance
Organizational Language
how employees talk to each other, describe customers, express anger, and greet stakeholders all serve as symbols of cultural values
Supporting change
people need multifaceted support to implement change need adequate training for new processes, leeway in taking risks, changes in pay systems to reflect change, etc
Compliance resistance
person agrees to the change even though they haven't bought into it. without their active support the change may fail and they will have the opportunity to say "i told you so" "i have no choice because this is what management wants"
Silence resistance
person appears to have no reaction to what you've offered, but this does not mean they are consenting "i'll speak up if I have any problems"
confusion resistance
person claims to not understand the logic of the change effort no matter how many times you've explained it "i don't think you've thought this through"
Attack resistance
person demonstrates hostility to both you and your project, you may take it personally "you're always coming up with new things to do, don't we already have enough?"
time resistance
person has something more important to do, uses this as an excuse to delay implementing change "i have more important things to do, i'll get to this later"
methodology resistance
person questions how you developed your solution. spending energy theorizing is a way of avoiding moving forward "it just doesn't make sense to me"
Collecting Social Network Data
1) Ask people to: list names of team members 2) Questions can be about relationships: -who do you consider to be a friend -who do you go to for advice -who do you talk to frequently -Who do you trust -who do you talk about behind their backs 3) between any set of actors: -individual people -groups -organizations
Causes of Network Formation
1) Physical and Temporal Proximity: how physically close to each other you are, how similar your schedules are 2) workflow and hierarchy: more likely to form networks with those you work closely with as well as subordinates and superiors 3) Actor similarity: tendency of individuals to associate and bond with similar others 4) personality: having personalities that work well together tends to create networks
Barriers to Entry
1) Supply-side economies of scale -arise when firms producing larger volumes enjoy lower costs per unit bc they spread costs over more units, have more efficient technology, or command better terms from suppliers -force potential entrants to either enter in a large scale or accept a cost disadvantage 2) Demand side benefits of scale -also known as network effects -arise when buyers willingness to pay for a product increases with the number of other buyers who patronize a company (buyers trust larger companies more) -discourage entry by limiting the willingness of customers to buy from a newcomer while reducing the price the newcomer can command until it builds up a large customer base 3) Customer Switching Costs -costs buyers face when changing suppliers -switching costs include altering product specifications, retraining employees to use new products, or modifying processes or info systems -larger switching costs make it harder for an entrant to gain customers 4) Capital requirements -need to invest large financial resources to compete can deter new entrants -especially great if capital is required for unrecoverable expenditures like up front advertising or R&D -if industry returns are attracted and expected to remain so, investors can usually provide entrants with funds they need 5) Incumbency advantages independent of size -stem from proprietary technology, preferential access to best raw material sources, preemption of best geographical locations, established brands, or cumulative experience enabling incumbents to produce more efficiently 6) unequal access to distribution channels -if retail channels are limited and existing competitors have them tied up, industry entry is tougher -sometimes new entrants create distribution channels of their own 7) Restrictive govt policy -occurs when govts limit entry into industry through licensing agreements and restrictions on foreign investment -liquor, taxis, airlines -can heighten other entry barriers through extensive patenting rules protecting proprietary technology, environmental/safety regulations, etc -can also make entry easier through subsidies (especially true in funding research) thereby reducing scale economies
Industry analysis
1) define the relevant industry 2) identify the participants and segment them into groups if appropriate 3) Assess the underlying drivers of each competitive force to determine which are strong, which are weak, and why -strength of forces affect prices, costs, and investment required to compete 4) determine overall industry structure and test the analysis for consistency 5) analyze recent and likely future changes in each force, both positive and negative 6) identify aspects of industry structure that might be influenced by competitors, by new entrants, or by your company also need to understand the appropriate time horizon (use full business cycle for the particular industry, usually 3-5 years). focus on avg profitability in this time horizon use as much quantitative data as possible look at industry as a whole, analyze interactions between forces
Pitfalls of industry analysis
1) defining industry too narrowly or broadly 2) making lists instead of engaging in rigorous analysis 3) paying equal attention to all forces rather than digging deeply into most important ones 4) confusing effect (price sensitivity) with cause (buyer economics) 5) using static analysis that ignores trends 6) confusing cyclical or transient changes with structural changes 7) using the framework to declare an industry attractive or unattractive rather than using it to guide strategic forces
Kotter Model for implementing change
1) establish a sense of urgency -examine market and competitive realities -identifying and discussing crises, potential crises, and opportunities 2) Forming a powerful guiding coalition -assembling a group with enough power to lead the change effort -encourage the group to work together as a team 3) creating a vision -creating a vision to help direct the change effort -developing strategies for achieving that vision 4) Communicating the vision -using every vehicle possible to communicate the new vision and strategies -teaching new behaviors by the example of the guiding coalition 5) Empowering others to act on the vision -getting rid of obstacles to change -changing systems or structures that seriously undermine the vision -encouraging risk taking and nontraditional ideas, activities, and actions 6) Planning for and creating short term wins -Planning for viable performance improvements -creating these improvements -recognizing and rewarding employees involved in the improvements 7) Consolidating improvements and producing still more change -using increased credibility to change systems, structures, and policies that don't fit the vision -hiring, promoting, and developing employees who can implement the vision -reinvigorating the process with new projects, themes, and change agents 8) Institutionalizing new approaches -articulating the connections between the new behaviors and corporate success -developing the means to ensure leadership development and succession
Steps of Network Analysis
1) have employees answer survey questionaires 2) cross check the answers, only count those answers that are verified by both parties (if one person says they talk to another person regularly but the other person doesn't, do not count this answer) 3) process information using a computer program to generate a detailed network map
Impacts on of industry analysis on strategy
1) positioning the company -build defenses against competitive forces -find segment of industry where competitive forces are weaker and exploit it -analyze entry and exit decisions 2) anticipating and exploiting shifts in forces -notice new opportunities that arise with shifts in forces, find ways to defend against potential new threats (apple entering the scene -new needs are opened up and new ways to serve existing needs 3) shaping the balance of forces to create a new industry structure favorable to the company -lead industry to new ways of competing that alter the five forces for the better -trying to get competitors to follow so entire industry is transformed -innovator can benefit most from this shift
Social Networks
A set of actors and the relationships or ties among them; provide opportunities and constraints as patterned relationships among multiple actors affect behaviors, attitudes, cognitions, etc; useful advantages include private information, access to diverse skills, and power
Faces of Resistance
Different resistance strategies people use to combat change
Business Strategy
How to compete within a given market/industry a stream of decisions about how organizational resources will be configured to meet demands, constraints, and opportunities within the context of organizaton's history how should a firm position itself to influence and cope with industry forces, make a profit, and protect this position from competitors
Matrix Structure
Managers group people and resources in two ways: by function and by product grouping by functions allows them to learn from one another and become more skilled and productive grouping by product teams allows people from various functions to work together to develop a specific product 2 managers/bosses: a functional one (assigns individuals to a team and evaluates performance from a functional perspective) and a product one (evaluates performance on the team) functional employees assigned to product teams change as specific skills that team needs change advantages: -greater flexibility -communication across functions to ensure efficiency and effectiveness disadvantages: -potentially conflicting bosses -confusion in the reporting process -confusion over which boss is in charge of which employees and for how long
Grouping Jobs
Managers typically start with grouping jobs by departments, then move to a functional structure to use organizational resources effectively may eventually choose to move to a divisional structure, matrix, or product team structure if the organization becomes difficult to control
Price Sensitive Buyers
Occurs if: 1) the product they purchase represents a significant fraction of its cost structure or procurement budget (things are expensive, like mortgages) 2) buyer group earns low profits and is strapped for cash 3) quality of buyers' products is little affected by industry's product 4) industry product has little effect on buyer's other costs (buyers are focused on price bc product does not cut their costs); opposite is true if service can save buyer's money or where poor performance is costly generally apply equally to consumers and b2b transactions intermediate customers who purchase the product but are not the end user (assemblers or distribution channels) gain extra bargaining power when they can influence purchasing decisions of customers down the line producers try to diminish channel clout through exclusive arrangements or gaining a preferential position with end users
Out-Degree Centrality
Outgoing ties from an actor as reported by self; an actor with high out degree centrality is characterized as influential; such actors may be relatively able to exchange with others or disperse information quickly to many others
Environmental Scanning
Surveillance of a firm's external environment to predict environmental changes already underway alerts the organization to critical trends and events before changes develop a discernible pattern and before competitors recognize them 1) listen to what customers want, ask what they are looking for 2) pay attention to trade publications related to your industry 3) follow trends online 4) organize focus groups to find out what people are thinking
Competitive Intelligence
a firm's activities of collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors strengths and weaknesses understand competitors to succeed over them may lead to unethical behavior be careful not to ignore new competitors and other environmental changes
cross functional team
a group of managers brought together from different departments to perform organizational tasks artificial boundaries between departments disappear, narrow focus on departmental goals is replaced with a general interest in working together to achieve organizational goals members of these teams report only to the product team manager or to one of his direct subordinates head of functions have only an informal, advisory relationship with members of product teams; their job is only to counsel and help team members, share knowledge among teams, and provide new technological developments that can improve team performance teams are small, 5-7 people advantages: -speeds up rate of product innovation
function
a group of people working together who possess similar skills or the same kind of knowledge, tools, or techniques to perform their jobs manufacturing, sales, and r&d are examples
Network Brokerage
a high degree of brokerage means you connect otherwise disconnected clusters
Network Centrality
a measure of the location of actors in their networks
bow ties
a network where many players are dependent on a single player but not each other; center players have tremendous power, if they leave connections between isolated groups collapse, when they stay processes become rigid and slow as the person is torn between the desires of these camps and becomes overwhelmed; find a way to take pressure off of that person and insure that dependency is distributed
integrating roles
a role whose only function is to increase coordination and integration among functions or divisions to achieve performance gains from synergies usually filled by senior managers become more important in complex organizations
Actors
also called nodes, represent any discrete entity in the network such as a person or units
Adaptive culture
an organizational culture in which employees are receptive to change, including the ongoing alignment of the organization to its environment and continuous improvement of the internal process encouraging innovation helps create this organization's survival is viewed in terms of ongoing adaptation to the external environment gives employees a strong sense of ownership roles need to be flexible strong learning orientation; being receptive to change necessarily means that the company supports action-oriented discovery and employees embrace learning opportunities
functional structure
an organizational structure composed of all depts that an organization requires to produce its goods or services (pier one delineating between finance & administration, merchandising, stores, planning and allocations, and human resources) advantages: -when people who perform similar jobs are grouped together, they can learn from observing one another, thus becoming more specialized and performing at a higher level -encourages cooperation -easier for managers to monitor and evaluate performance -lets managers create the set of functions they need to scan and monitor the competitive environment and obtain information about how it is changing -helps managers develop a strategy allowing the organizations to adapt to changing situations Disadvantages: -managers in different functions find it difficult to communicate and coordinate with one another when they are responsible for several different kinds of products (especially as the organization grows both domestically and internationally) -functional managers often become preoccupied with supervising their departments and achieving departmental goals that they lose sight of organizational goals, thereby hurting organizational effectiveness
Divisional structure
an organizational structure composed of separate business units within which the functinos that work together to produce a specific product for a specific customer creates smaller, more manageable units within an organization more flexible than functional structure Product structure: organized according to the type of good or service provided geographic structure: organized according to the area of the country/world in which they are operating Market structure: organized according to the type of customer they focus on
Complementary Products and Services
arise when customer benefit of two products combined is greater than the sum of each product in isolation (computer hardware and software) important when they affect demand for a product presence of strong complements is not necessarily good or bad, depends on how they affect the forces barriers to entry went down when producers of complementary operating systems provided tool sets making it easier to write apps need for appropriate fueling stations makes it difficult for cars using alternative fuels to substitute for conventional vehicles (flipside is itunes hastening substitution from CDs to digital music can positively affect rivalry by raising switching costs or negatively by neutralizing product differentiation (similar effects on buyer and supplier power)
War stories resistance
bring up failures of past efforts "this didn't work before, it won't work now"
Experience as an obstacle
business people have become specialists and their brains have been altered for these purposes (plasticity) key way to keep up potential for change is to keep up the brain's machinery for learning focus on learning new skills to keep yourself open to change fifth day strategy - everyone works in a different discipline once a week
The Power of Buyers
can force prices down, demand better quality/more service (upping costs), and play industry participants off each other hurts industry profitability powerful if buyers have negotiating leverage relative to industry participants, especially if they are price sensitive occurs if: 1) there are few buyers or each one purchases in volumes that are large relative to the size of a single vendor (occurs in industries with high fixed costs like offshore drilling, telecommunication equipment, and bulk chemicals) 2) industry products are standard or undifferentiated 3) buyers face few switching costs 4) buyers can credibly threaten to integrate backward and produce industry products themselves (soft drink producers making their own packaging at the expense of packing manufacturers)
Consolidating improvements and creatig still more change
cannot declare the war to be won, this is catastrophic until changes sink deeply into a company's culture (can take up to 10 years), new approaches are fragile and subject to regression if victory is declared early, regression almost inevitably happens premature celebration of victory kills momentum it is often a combination of change initiators and resistors that create the premature victory -initiators are overenthusiastic at signs of progress -resistors are then quick to spot an opportunity to stop change and join in, point to the victory as a sign that the war is won instead of declaring victory, leaders of successful change use the credibility afforded by short term wins to tackle even bigger problems
Institutionalizing change in organization's culture
change sticks when it becomes "the way we do things around here" until change is rooted in social norms and shared values, they are subject to degradation as soon as the pressure for change is removed two important factors in institutionalizing change: 1) conscious attempts to show people how the new approaches, behaviors, and attitudes have helped improve performance (when people are left to make connections, their connections are sometimes inaccurate) -helping people see the right connections requires constant communication 2) taking sufficient time to make sure that the next generation of top management personifies the new approach (requirements for promotions should change) -poor succession decisions are possible when the board of directors are not an integral part of the renewal effort
changing culture
changing cultures is an immense challenge but sometimes necessary as the external environment changes can occur by implementing rewards aligning with new culture or hiring people whose values align with the culture
The Economic Segment
characteristics of the economy like national incomes and monetary conditions indicators include interest rates, unemployment rates, the consumer price index, the GDP, and net disposable income example: interest rate increases have a negative effect on residential home construction but have a neutral effect on industries producing consumer necessities (groceries, drugs)
Task force
committee of managers from various functions/divisions who meet to solve a specific, mutual problem; also called ad hoc committee helpful when two functions or divisions share many common problems and liaison roles do not provide sufficient coordination temporary cross functional teems are permanent versions of these structures
Uses of network analysis
effectively manage teams, identify leaders, and promote effective information sharing in organizational settings; friendship at work is one of the strongest drivers of productivity, commitment, and retention
impracticality resistance
emphasize impracticality of the solution in the "real world" "this won't work here"
Defining the Industry
companies need separate strategies for each distinct industry, so a company must be careful when defining their industry must be the industry in which competition actually takes place defining industry too broadly obscures differences among products, customers, or geographic regions defining industry too narrowly overlooks commonalities and linkages across related products or markets that are crucial to competitive advantage boundaries depend on the scope of its products and services (is motor oil for cars in the same industry as motor oil for trucks?) and geographic scope (where does the majority of competition occur?) if industry structure for products is similar, then they should be treated as being in the same industry if structure is markedly different, then they should be separate if differences in one force are huge or if there are many differences across forces, then they are probably different industries
shared values
conscious beliefs used to evaluate what is good or bad, right or wrong
Socialization agents
coworkers/supervisors who help bring a new hire into the organizational culture may use a buddy system for sources of information and social support
social glue
culture bonds people together and makes them feel like a part of the organizational experience. culture fulfill's employees' needs for social identity helps to attract staff and retain top performers
Culture content alignment with environment
culture content must be aligned with external environment to help organizational efectiveness
Sense making
culture helps employees make sense of what goes on and why things happen in the company makes it easier for employees to understand what is expected of them
control system
culture provides a means of social control influencing employee decisions and behavior operates unconsciously
Basis of rivalry
depends on whether rivals are competing on the same dimensions
Irregular communication patterns
employees only communicate with members of other groups and not among themselves; creates a lack of cohesion; may result from factionalism, in which case discuss what's happening with peripheral members of the faction to uncover the root of the problem and find solutions; when it's not about factionalism try to foster camaraderie through shared activities
Encouraging others to act on the vision
entails removing obstacles in the way of the new vision the more people involved in this step, the better obstacle can be the organization structure (narrow job categories) performance appraisal systems may make people choose between the new vision and their own self interests worst case scenario is bosses who refuse to change and make demands that are inconsistent with the overall vision in the first half of transformation, not all obstacles can be avoided, but the biggest ones must be confronted and eliminated action is essential to empower others and to maintain the credibility of the change as a whole
stories and legends
exactly what you think, stories that reaffirm the organization's culture can recount heroic deeds or ridicule past events deviating from the culture describe how things should or should not be done effective when they describe real people, are assumed to be true, and are known by employees throughout the organization
Changing supplier or buyer power
example: airlines can now sell directly to customers, thus enabling them to bargain down agent's commissions example: consolidation of retail channels for appliances through things like home depot increased buyer power of distributors from producers like general electric
shifting threat of new entry
expiration of a patent can unleash new entrants proliferation of products in ice cream industry has filled up limited freezer space in grocery stores, so it's hard for new makers to get access to distribution strategic decisions by competitors also have a major impact (wal mart's high cost inventory control technologies, thereby increasing economies of scale and making it hard for small retailers to enter
Technology and Innovation
factor, not a force advanced technology doesnt always make industries attractive or unattractive low tech industries with price insensitive buyers, high switching costs, or high entry barriers from scale economies can be way more profitable than sexy industries
Government
factor, not a force have to analyze govt policies and how they affect the five forces patents raise barriers to entry and boost industry profit potential policies favoring unions raise supplier power and diminish profit potential bankruptcy rules can lead to intense rivalry as companies can reorganize rather than exit
Industry Growth Rate
factor, not a force high growth industries tends to mute rivalry by offering opportunities for all competitors creates low barriers to entry gives suppliers lots of power doesnt guarantee profitability if customers are powerful or substitutes are attractive
General environment
factors external to an industry and beyond a firm's control that affect strategy can be difficult to predict trends and events in the general environment (like what the Fed is going to do next six segments: demographic, sociocultural, political/legal, technological, economic, and global
Communicating the vision
failure here usually comes from not talking about the vision enough, or the vision is communicated but visible senior executives behave in ways that are antithetical to the vision (in the latter, belief in the communication dwindles) particularly difficult if there are short term sacrifices including job losses (gaining support is tough when downsizing is part of the vision) executives who communicate well incorporate messages into their hour-by-hour activities use every possible channel, especially those wasted on nonessential information all senior executives must also walk the talk for this to succeed, high level urgency helps attain this, as does consistent feedback nothing undermines change more than behavior by important individuals that is inconsistent with their words
Establishing a Great Sense of Urgency
failure usually comes because executives underestimate how hard it can be to drive people out of their comfort zones executives can also become paralyzed by downside possibilities - results from too many managers and not enough leaders transformation often begins and goes well when an organization has a new head who is a good leader and understands the need for change bad business can catch people's attention but also reduce money that can be used to implement the change; opposite is true with good business a frank discussion about factors must be a part of this; can be helpful for an outsider to bring this since people shoot the bearer of bad news goal is to make the status quo seem more dangerous than launching into the unknown potential strategy: manufacture a crisis urgency is high enough when 75% of management is convinced that business as usual is unacceptable
Shifting Threat of Substitution
generally changes with advances in technology creating new sustitutes or shifting price-performance comparisons microwaves became substitutes for ovens when their price dropped with new technology
Demographic Segment
genetic and observable characteristics of a population, including levels and growth of age, density, sex, race, ethnicity, education, geographic region, and income
decentralizing authority
giving lower level managers and nonmanagerial employees the right to make important decisions about how to use organizational resources helps keep organizations flat fixes problems of slow and distorted communication fewer managers are needed, instead they act as a coach and facilitator keeps organization flexible even as the organization grows and becomes taller too much decentralization has disadvantages -too much authority for small teams makes these teams pursue their own goals at the expense of organizational goals -lack of communication among functions/divisions, preventing synergies of cooperation from materializing if managers are in a stable environment, using well understood technology, and producing stable products, there is no pressing need to decentralize authority, and top managers can maintain control of organizational decision making decentralizing authority is helpful in uncertain, changing environments with high tech companies
Intensity of rivalry
greatest if: 1) competitors are numerous or are roughly equal in size and power, making it difficult to avoid poaching business 2) industry growth is slow 3) exit barriers are high (highly specialized assets or management's devotion to a particular business) 4) Rivals are highly committed to the business and have aspirations for leadership, especially if they have goals beyond economic performance in specific industries (state owned competitors have goals of employment and prestige, units of large companies are interested in image, etc) 5) firms cannot read each other's signals well bc of lack of familiarity with each other, diverse approaches to competition, or different coals
information brokers
have high levels of brokerage, become very powerful, act as superconnectors between disparate groups, good to cultivate relationships with these people
Expected Retaliation
how potential entrants believe incumbants will react vigorous reaction makes profit potential of an industry smaller higher when incumbents have responded vigorously in the past, incumbents have resources to fight back (excess cash, productive capacity, or clout with distribution), incumbents are likely to cut prices to retain market share at all costs or the industry has high fixed costs (thus creating motivation to drop prices to fill excess capacity), or industry growth is so slow that newcomers can gain volume only by taking it from incumbents
Impact of networks
improve job satisfaction and commitment, individual performance, group performance, and citizenship behavior; also help people obtain and utilize power, gain leadership, and get ahead; most people have small, dense networks composed of immediate colleagues, family and friends all with strong ties - but these networks are not helpful because everyone knows similar information; Strategic connections rely on quality over quantity and the strength of weak ties - reactivate dormant ties, build some through activities outside of work, and use weak ties to find jobs
Rivalry among existing competitors
includes price discounting, new products, advertising campaigns, and service improvements depends on intensity with which companies compete and on the basis on which they compete can be profitable if competitors go after different segments with different mixes of price, products, services, features, and brand identities
In-Degree Centrality
incoming ties to an actor as reported by others; actors with high in degree centrality are characterized as prominent, serves as a measure of importance; provides objective data vs traditional self reported measure (which is subjective due to inflation and bias)
psychological contract
individual beliefs about the terms and conditions of a reciprocal exchange agreement between that person and another party (the employer in most work situations) transactional: more short term economic exchanges with well defined responsibilities in a narrow set of obligations relational: long term attachments encompassing a broad array of subjective mutual obligations
Changes in industry structure
industries are always slightly changing changes can come from outside or within and can have profit bolstering or reducing effects can shift any of the five competitive forces, think about it through that lens
The Global Segment
influences from foreign countries like foreign market opportunities, foreign competition, and expanded capital markets currency, exchange rates, increased global trade, the economic emergence of china, trade agreements among regional blocs (NAFTA, European Union), and Tariff agreements
Technological Segment
innovation and state of knowledge in industrial arts, engineering, applied sciences, and pure science; and their interaction with society lead to new products and services while improving how they are produced and delivered to end users can create entirely new industries and alter boundaries of existing industries
Network Betweenness
link between nodes in a network, different from brokerage because this is on the individual level; these actors serve as bridges; reflects power
Ties
linkages between actors, which are formed by some type of connection, relationship, or interaction occurring between actors
Network Closure
many connections between all units within a network, building trust within a network so everyone goes to everyone
Tall organizations
many levels of authority relative to company size disadvantage: -organization's structure is less flexible and managers' responses to changes in the organizational environment are slowed -communication problems arise as it takes longer for decisions made in upper management to make their way down -intense accountability makes managers indecisive or makes them avoid decisions entirely -commands can be distorted through transmission down the hierarchy, miscommunication -indicates that the organization is employing many managers, which are expensive
Realistic Job Preview
method of improving organizational socialization in which applicants are given a balance of positive and negative information about the job and work context
ceremonies
more formal than rituals planned activities conducted specifically for the benefit of an audience include publicly rewarding or punishing employees or celebrating the launch of a new product or newly won contract
Scenario Analysis
more in depth appraoch to forecasting that involves experts' detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment Develop alternative futures based on different assumptions and come up with strategies for these futures consider broader market context and more potential changes than forecasting would yield
Price competition
most destructive form of rivalry in terms of profitability most liable to occur if: 1) products or services are nearly identical and there are low switching costs for buyers 2) fixed costs are high and marginal costs are low 3) capacity must be expanded in large increments to be efficient (leading to price cutting to get rid of overcapacity 4) product is perishable (need to cut prices and sell while product still has value) competition on other dimensions like product features, delivery time, and support services is less likely to erode profitability because it improves customer value and supports higher prices -can also improve value relative to substitutes or raise barriers of entry if competitors aim to meet the same needs of customers, it becomes a zero-sum game
difficulties in changing people's personal actions
most people, even when confronted with the prospect "change or die" will not change their behavior conventional wisdom says that crisis should motivate change, but even severe heart disease doesn't motivate nearly enough behavior change happens mostly by speaking to people's feelings rather than speaking to technical expertise
Framing Change
motivating from a perspective of fear doesn't work (denial sets in, people go back to their old ways) focus less on fear and more on positive emotions (instead of emphasizing the fear of dying, focus on the joy of living) -emphasis for smokers on how not smoking will make them feel better now, not on how if they don't quit they will die people use frames, not facts, to guide decisions -it is extremely difficult to break these frames story must be simple, easy to identify with, emotionally resonant, and evocative of positive experiences if addressing many people -can be more nuanced and complex when it is a small group of people with a similar mind-set and shared values
Creating a powerful guiding coalition
need some minimum mass of powerful people buying in to stimulate change never includes all senior executives bc some people just won't buy in, but generally the coalition is pretty powerful in terms of titles, info, expertise, relationships, and reputations coalition must grow for change to be successful operates outside of normal hierarchy bc some members are not a part of senior management minimum level of trust and communication must be established (retreats are a good option) failure usually comes from underestimating the difficulties of producing change
shared assumptions
nonconscious taken for granted beliefs; implicit mental models, ideal prototypes of behaviors
Network Degree
number of connections one node has to other nodes
Network Closeness
number of links it takes to reach everyone else in the network, reflects efficiency
span of control
number of subordinates who report directly to a manager
cultural artifacts
observable symbols and signs of an organizations culture help to keep the culture in place four categories: 1) organizational stories and legends 2) rituals and ceremonies 3) language 4) physical structures and symbols
Imploded Relationships
occurs when departments have few links to other groups; employees do not cultivate relationships with other colleagues; counter this by having lunch and learns or power breakfasts with people in different departments
Holes in the network
occurs when there is no relationship in a place where you would expect to find one; pose a problem to the people who should have a relationship that forces them to foster one; build camaraderie
self-similarity principle
occurs when you make most of your network contacts; usually you choose people who resemble yourself in terms of experience, training, worldview, etc; executives do this a lot; limits access to discrepant information
Liaison Roles
one manager is given the responsibility of coordinating with the other coordinating is part of the liaison's full time job
hierarchy of authority
organization's chain of command: relative authority that each manager has
Product Team Structure
organizational structure in which employees are permanently assigned to a cross functional team and report only to the product team manager or to one of his direct subordinates no dual reporting/two boss structure
Attraction-selection-attrition theory
organizations have a natural tendency to attract, select, and retain people with values and personality characteristics that are consistent with the organization's character, resulting in a more homogeneous organization and a stronger culture
Avoiding a corporate cult
organizations with cult like cultures are less effective than those with moderately strong cultures because they lock people into mental models, thereby blinding them to new opportunities and unique problems in corporate cults, people overlook subtle misalignments between organization's activities and their changing environment cult like cultures also suppress dissenting subcultural values, and subcultural diversity is important for generating constructive conflict
integrating mechanisms
organizing tools that managers can use to increase communication and coordination among functions and divisions more necessary in complex companies to free up the CEO from solving everyday conflicts necessary in divisional, matrix, or product team structures
Shared Activities Principle
potent networks are formed through high stakes activities connecting you with diverse others; activities evoking passion in participants, necessitating interdependence, and that have something at stake produce the best networks; such activities build trust and share in celebration or commiseration, thereby creating bonds of loyalty; also allows people to break out of hierarchical roles
authority
power to hold people accountable for their actions and to make decisions concerning the use of organizational resources
The Power of Suppliers
powerful suppliers can charge higher prices, limit quality or services, or shift costs to industry participants, thereby capturing more value for themselves include labor suppliers can squeeze profitability out of an industry that cannot pass on cost increases in its own prices microsoft is an example of a powerful supplier in computer software Supplier group is powerful if: 1) it is more concentrated than the industry it is selling to (microsoft has a near monopoly while pc assemblers are fragmented) 2) supplier group does not depend heavily on the industry for revenue (occurs if suppliers serve many industries) 3) industry participants face switching costs in changing suppliers (occurs if companies have invested heavily in specialized equipment or learning how to use a suppliers equipment OR if firms have located production lines next to a suppliers manufacturing facilities) 4) suppliers offer differentiated products (pharmaceuticals with dif drugs that have dif benefits have lots of power over hospitals and drug buyers) 5) there is no substitute for what the supplier group provides (pilots unions) 6) the supplier group can credibly threaten to integrate forward into the industry (supplier can enter the market)
minimum chain of command
principle stating that top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources relies on empowering employees and giving more jobs to higher managers
bicultural audit
process of diagnosing cultural relations between companies and determining the extent to which cultural clashes will occur helpful with acquisitions and mergers oragnizational cultures can merge through assimilation (employees at the acquired company willingly embrace values of the acquiring organization, works best if acquired company has a weak, dysfunctional culture while acquiring company culture is strong), deculturation (acquiring company imposes culture and business practices on acquired organization, may be necessary when acquired firm's culture doesn't work, difficult to apply bc of resistance), Integration (combine the two or more culture into a no composite culture preserving best features of both, slow and potentially risky but helpful if companies have relatively weak cultures or have many overlapping values), and separation (companies agree to remain distinct entities with minimal exchange of cultures, best when merging companies are in unrelated industries or operate in dif countries)
Rituals
programmed routines of daily organizational life that dramatize an organization's culture how visitors are greeted, how often senior executives visit frontline staff, how people communicate with one another, how much time employees take for lunch, etc
Moralizing resistance
puts the blame for the problem on others, deny that they have to do anything differently "if they would do their jobs, this wouldn't be a problem"
Radical Change
radical, sweeping, comprehensive changes are easier for people than small, incremental ones -moderate change makes people feel like they are sacrificing but not seeing real results means need to be drastic in order for change to stick and people to follow it it is also always important to identify, achieve, and celebrate quick, positive results for the vital emotional lifts that they provide -will nourish faith in the change effort, emotionally reward hard workers, keep critics at bay, and build momentum -must be visible, timely, unambiguous, and meaningful
strength of culture
refers to how widely and deeply employees hold the company's dominant values and assumptions in strong cultures, most employees and subunits submit to the dominant values, which are institutionalized through well established artifacts strong cultures are long lasting weak cultures are apparent when dominant values are held at the top, are barely discernible in artifacts, and are in flux strong culture is not necessarily good
Structure
refers to patterns of relationships or interactions among units or individual
Porter's Five Forces
reveal why profitability is what it is 1) Threat of new entrants 2) Bargaining Power of Buyers 3) Threat of substitute products or services 4) Bargaining Power of suppliers 5) Rivalry among existing competitors If forces in the industry are intense, companies are not super profitable (airlines); if they are benign, then they can be profitable (soft drinks, toiletries, software, etc) strongest competitive forces determine the profitability of an industry
communication network
reveals employees who talk about work related matters regularly
trust network
reveals which employees share delicate political information and back one another in a crisis
New Bases of Rivalry
rivalry generally intensifies over time (growth slows, technology diffuses, consumer tastes converge) not inevitable, competition in casino industry has been a positive sum game directed towards niches and geographic segments altered by merges and acquisitions introducing new capabilities and ways of competing technological innovation also reshapes rivalry (advent of internet in retail brokerage lowered marginal costs, reduced differentiation, and increased rivalry) sometimes companies try to merge to eliminate rivals, but this can attract new competitors as well as backlash from customers and suppliers
Advice Network
shows prominent players in an organization on whom others depend to solve problems and provide technical info
Physical structures and symbols
size, shape, location of a building may suggest things about a company's culture, as will the layout symbols like wall hangings, desks, chairs, layout of the office, etc
SWOT
strengths, weaknesses, opportunities, and threats provides raw materials - basic conditions both inside and surrounding the company strengths and weaknesses are internal, opportunities and threats are external build on strengths, remedy weaknesses or work around them, take advantage of opportunities, and protect firm from threats
Threat of Substitutes
substitutes are always present but are easy to overlook because they appear to be different from the industry product (neck ties and power tools are substitutes for people shopping for father's day gifts) high substitutibility sets a ceiling on prices, industry must distance itself through performance, marketing, etc Threat is high if: 1) substitute offers attractive price-performance tradeoff to the industry's product (better relative value of the substitute) 2) buyer's cost of switching to substitutes is low
complex structures
tend to be more flexible, but they have trouble linking and coordinating different functions and divisions each different function or division has a different viewpoint and different goals; employees positions get in the way of the profitability of the entire company problems with linking and coordinating increase as the number of functions/divisions increase
Environmental Forecasting
the development of plausible projections about the direction, scope, speed, and intensity of environmental change purpose is to predict change managers tend to ignore gray areas, thereby neither defending against threats nor taking advantage of opportunities (example: failure of Digital Equipment Corp to recognize the rise in personal computers
Organizational socialization
the process by which individuals learn the values, expected behaviors, and social knowledge necessary to assume their roles in the organization both a learning process and adjustment process as new employees make sense of the workplace dynamics and adapt to their environment stages: 1) pre employment socialization (searching for info about the organization and job, form employment relationship; rely on indirect info about what it's like to work in the organization, which is often distorted; applicants engage in impression management to avoid revealing negative things while employers are reluctant to ask certain questions that can scare off applicants) 2) encounter (newcomer stage, employee tests how well their preemployment expectations fit reality; reality shock - stress resulting when employees perceive discrepancies between preemployment expectations and on the job realities) 3) role management (employees strengthen relationships with coworkers and supervisors, practice new role behaviors, and adopt attitudes and values consistent with new positions in the organization
Organizational Culture
the values and assumptions shared within an organization dominant cultures exist, which are values and assumptions shared most consistently by members also have subcultures in different divisions, regions, and occupational groups -can either reinforce the dominant culture, differ from it without conflicting with it, or exist as countercultures embracing values directly opposing the organization's dominant culture -subcultures maintain the organization's standards of performance and ethical behavior (countercultures are an important source of surveillance and critical review of the dominant order; they encourage constructive conflict and creative thinking) -subcultures also serve as the spawning grounds for emerging values that keep the firm aligned with evolving needs of customers, suppliers, communities, and other stakeholders
Informal Networks
think of them as the nervous system of an organization; allow people to cut through formal reporting procedures, kickstart new initiatives, and work effectively and quickly at getting tasks done; highly adaptive networks that skip entire functions to get work done; when managers understand how the informal network operates, they are able to more effectively utilize power
Old mindset
this person vigorously defends the current way of doing things and point out ways in which the current way is superior to the proposed change "this is the way we have always done it"
Environmental Monitoring
tracks the evolution of environmental trends, sequences of events, or streams of activities enables firms to evaluate how dramatically trends are changing
Geographic structure
type of divisional structure an organizational structure in which each region of a country or area of the world is served by a self-contained division helps when organizations expand rapidly both at home and abroad; different regions pose different problems global geographic structure: managers locate different divisions in each of the world regions where the organization operates, most likely when pursuing a multidomestic strategy because customer needs vary widely between country/region Global product structure: each product division (not the country and regional managers) takes responsibility for deciding where to manufacture its products and how to market them in countries worldwide; more likely wen customers abroad are willing to buy the same kind of product or slight variations thereof -product division managers manage their own global value chains and decide where to establish foreign subsidiaries to distribute and sell their products to customers in foreign countries Advantages: -gives managers flexibility to choose the range of products that meet the needs of regional customers Disadvantages: -cuts communication across functions
Market Structure
type of divisional structure organizational structure in which each kind of customer is served by a self-contained division; also called customer structure most likely when the most pressing issue is to group functions based off of the type of customer buying the products; tailor products to customer's unique demands advantages: -allow businesses to cater products to customer's unique demands -managers can b flexible in making decisions in response to customers' changing needs disadvantages: -impedes communication within functions of the company
Product Structure
type of divisional structure organizational structure in which each product line or business is handled by a self contained division each division has a complete set of all functions functional managers report to divisional managers, and divisional managers report to top or corporate managers Advantages: -allows functional managers to specialize in only one product area so they can build expertise and fine tune skills in this particular area -divisional managers can become experts in their industry, so they can choose and develop a business-level strategy to differentiate their products or lower their costs while meeting the needs of customers -frees corporate managers from the need to supervise directly each divisions day-to-day operations; lets corporate managers create the best corporate-level strategy to maximize organization's future growth and ability to create value; less mistakes because they can take an organizationwide view -enables corporate managers to better evaluate divisional manager performance -divisional managers can better respond to their customers and adapt to a changing task environment Disadvantages: -cuts communication across functional lines across the entire organization; only functional discussion happens within divisions
enacted values
values that most leaders and employees truly rely on to guide their decisions and behavior - this is what represents culture
espoused values
values that organizations want others to believe guide the organization's decisions and actions
Sociocultural Segment
values, beliefs, and lifestyles of a society (higher percentage of women in the workforce, dual income families, increase in temporary workers, greater concern for healthy diets and fitness, greater interest in the environment, and postponement of having children) affect sales in industries
Creating a vision
vision should be easy to communicate and appealing to customers, stockholders, and employees clarifies the direction in which the organization needs to move without a sensible vision, transformation effort dissolves into a list of confusing and incompatible projects that can take the organization in the wrong direction or nowhere at all failed transformations often have lots of plans and programs but no vision if you can't communicate the vision to someone in five minutes or less that signifies both understanding and interest, this phase needs more work
Expand overall profit pool
way to shape industry increase the overall amount of economic value generated by the industry in which buyers, suppliers, and rivals can all share goal is to increase overall demand, eliminate waste, and reduce intrinsic costs occurs when channels are more competitive or when an industry discovers latent buyers that are not being served example: soft drink companies relying on bottlers helped everyone collaboration between firms and suppliers can eliminate unnecessary costs, enabling higher prices or greater demand through lower prices
Redividing Profitability
way to shape the industry tries to increase share of profits to industry competitors instead of suppliers, buyers, substitutes, and keeping out entrants determine the forces constraining industry profitability and address them (make it easier to switch among suppliers by standardizing specifications for parts, expanding services that raise buyers' switching costs or reaching buyers in new ways to neutralize power of distribution channels, invest in unique products to avoid price competition, elevate fixed costs of competing to scare off entrants, offer better value than substitutes through new features or more accessibility ill advised changes, however, can undermine the industry structure (IBM ceding ownership of operating systems to microsoft and intel when it standardized PCs, leading to price based rivalry and shifting power to suppliers)
Planning for and creating short term wins
without short term wins, many people give up or actively join the ranks of those who have been resisting change win must be unambiguous, cannot be something that those opposing change can discount this is an active process, managers must look for ways to obtain performance improvements, establish goals in the yearly planning system, achieve the objectives, and reward the people involved with recognition, promotions, and even money little can be left to chance pressure to create short term wins is useful to increase credibility and create momentum within the change effort, especially if the transformation will take a long time to be completed commitments to produce short term wins help keep the urgency level up and forced detailed analytical thinking that can clarify or revise visions
proximity principle
workers prefer to populate their networks with the people they spend the most time with (colleagues in their department, etc); bad because the world is organized by like things, so limits access to diverse viewpoints and diverse skillsets
is culture important
yes, most of the best companies have strong cultures, sometimes almost cult like strong culture is not necessarily good
