The Congruence Model

Business strategy

a set of decisions about how to configure the organization's resources in response to the demands, threats, opportunities, and constraints within the context of the organization's history

Threat of Substitutes

a substitute performs the same or similar a similar function as an industry's product by a different means. Easy to overlook because they may not be direct substitutes.

Environment

(all factors, including institutions, groups, individuals, events, etc., outside of the boundaries of the organization being analyzed, but having a potential impact on that organization) Imposes demands Imposes constraints Provides opportunities

2 strategies Business design that has five parts

-Customer selection -Unique value proposition -Value capture -Strategic Control -Scope

Benefits of the model

-Provides graphic depiction of organization as a social and technical system -Doesnt favor any particular approach to organizing -Helps understand dynamics of change -Helps organize thinkings about organization -Competition exists among direct competitors, customers, suppliers, potential entrants, and substitute products -If the forces are intense, almost no company earns attractive returns on investment -Industry structure drives competition and profits

ANalyzing the Organization's Problems

1. Identify symptoms 2. Specify the input 3. Define output 4. Determine Problems 5. Describe organizational components 6. Assess COngruence 7. Generate hypotheses about problem causes 8. Identify Action Steps

Strategy

Corporate strategy Business strategy

Input

Includes the elements that constitute the set of givens with which it has to work Environment Resources History

Basic Organizational Components

Input Strategy Output

Topic

Strategy

Forces that Shape Competition/threat of entry

barriers to entry expected retaliation power of suppliers the power of buyers threat of substitutes rivalry among existing competitors

work

basic and inherent work to be done by organization and its parts

Units within the system

behaviors/performance of the various departments, division, and teams that make up an organization

people who perform the work

characteristics of individuals in the organization

Expected retaliation

how potential entrants believe incumbents may react will also influence their decision to enter or stay out of an industry

Industry structure determines what?

industry's long-run profit potential because it determines how the economic value created by the industry is divided (how much is retained by companies in the industry, how much is bargained away by customers,limited by substitutes, or constrained by potential new entrants)

Corporate strategy

involves portfolio decisions about which businesses the company ought to be in

Total System

output measured in terms of goods and services produced, revenues, etc.

Output

pattern of activities, behavior, and performance of the system at the following levels Total System Units within the system Individuals

The power of buyers

powerful customers can capture more value by forcing down prices, demanding better quality or more service, and generally playing industry participants off against one another, all at the expense of industry profitability

Power of Suppliers

powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services, or shifting costs to industry participants.

Rivalry among existing competitors

rivalry includes price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry

barriers to entry

supply-side economies of scale demand side benefits of scale customer switching costs capital requirements incumbency advantages independent of size unequal access to distribution channels restrictive government policies

The organization's performance rests upon what?

the alignment of each of the components--the work, people, structure-- with all of the others. "the fit"

Individuals

the behavior, activities, and performance of the people within the organization

Tighter the fit (greater the congruence)....

the higher the performance

Transformational process draws upon what?

the input implicit in the environment, resources and history to produce a set of output

The degree to which the strategy, work, people, formal organization, and culture are tightly aligned will determine what?

the organization's ability to compete and succeed

History

the patterns of past behavior, activity and effectiveness of the organization that may have an effect on current organizational functioning

Threat of Entry

the risk that potential competitors will enter an industry

Resources

various assets that the organization has access to, including human resources, technology, information, etc., as well as less tangible resources (recognition in the market, etc)

4 key components of organization

work people who perform the work formal organization informal organizatio

the informal organization

emerging arrangements including structures, relationships, etc.

formal organization

formal structures, processes and systems that enable individuals to perform tasks