Environmental assessment

Michael Porter Five Competitive Forces Model: approach to analyze the nature and intensity of competition in a given industry in terms of five major forces:

Rivalry. Extent to which competitors use tactics as price competition, product innovations, advertising, service, etc.

Bargaining power of customers. Customers force price reductions or negotiate increases in product quality and service at the same price.

------ of suppliers. Suppliers threaten price increases and/or reductions in quality of goods or services.

Threat of new entrants. Bid prices down or cause incumbents to increase costs in order to maintain market position.

Threat of substitute products or services. Availability of substitutes limits the prices that can be charged.

Portfolio Strategy Approaches

Analyze organization’s mix of businesses in terms of bouth individual and collective contributions to strategic goals.

Approaches:

BCG (Boston Consulting Group) growth-share matrix. – Compares various businesses in an organizations’ portfolio on the basis of relative market share and market growth rate. (Stars, Question marks, Cash Cows, Dogs)

The GE business screen – General Electric and McKinsey and Co. – a nine-cell matrix that is based on long-term industry attractiveness and on business strength

Product/market evaluation matrix – a 15 cell matrix (by Hofer) – businesses are plotted according to their strengths, or competitive positions, and the industry stage in a evolutionary product/market life cycle.

Decision making – the process through which managers identify organizational problems and attempt to resolve them.

Model of process:

Identify the problem –

Scanning, categorization, diagnosis stages

Generate alternative solutions –

Importance of alternatives

Evaluate and choose among alternative solutions –

Consideration of feasibility, quality, acceptability, costs, and reversibility

Implement and monitor the chosen solution.

Careful planning, design of follow-up mechanisms

Types of problems decision-makers face

Crisis problem – a serious difficulty requiring immediate action

Non-crisis problem – an issue that requires resolution but does not simultaneously have the importance and immediacy characteristics of a crisis

Opportunity problem – a situation that offers a strong potential for significant organizational gain if appropriate actions are taken.

Types of models of decision making

The rational model – managers are almost perfect information handlers and, therefore, make optimal decisions.

Nonrational models – information gathering and –processing limitations make it difficult for managers to make optimal decisions.

Group decision-making –

Adv – more info is gathered on an issue, an increased number of alternatives potentially can be developed, greater acceptance and understanding of the final; decisions are likely, members develop knowledge and skills for future use.

DisAdv – time consuming, disagreement may delay decision making, and cause hard-feelings, discussion may be dominated by one or a few group.

Planning – crucial management function that charts major organizational directions. However, even the most carefully devised plans at the strategic, tactical and operational levels mean little if organization does not have effective means for carrying them out. – Organizing comes into play.

Organizational structure – to be developed in order to have subordinates, delegation of responsibilities, etc.

O.S. – The formal pattern of interactions and coordination designed by management to link the tasks of individuals and groups in achieving organizational goals

Four elements:

1. The assignment of tasks and responsibilities

2. Combining individual positions into units, and of units into departments and larger units – to form an organizational hierarchy

3. Various mechanisms required to facilitate vertical coordination, such as the number of individuals reporting to managerial position, delegation of authority

4. Various mechanisms needed to foster horizontal coordination – task forces

Organizational chart – a line diagram that depicts the broad outlines of an organization’s structure.

Vary in detail, but typically show in a visual form the positions of departments, reporting relationships, official channels for communicating information. Some charts show titles associated with the positions, as well current holders.

Organizational design – the process of developing an organization structure

The scalar principle – states there should be a clear line of authority from the position of ultimate authority at the top to every individual in the organization.

Work specialization – the degree to which the work necessary to achieve organizational goals is broken down into various jobs.

Job design – the specification of task activities associated with a particular job.

Approaches to job design:

Job simplification –the process of configuring jobs so that jobholders have only a small number of narrow activities to perform.

Job rotation – the practice of periodically shifting workers through a set of jobs in a planned sequence. Cross-training workers.

Feedback – the degree to which the job provides for clear, timely information about performance results. Autonomy.