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WK12.1 Agenda
• Project presentation• Olympic Evaluation• Exam Part II next Friday August 27, 2010
MIB, BBA 2010
MIB, BBA 2010 2
WK12.2 Agenda
• Evaluation & Suggestion• Exam Part II next Friday August 27, 2010• Lecture• Mind map
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Strategy Implementation
• Formulation vs. Implementation~ Idea vs. Work Result
• Success story, Failure story?• A strategic plan which is executed through
programs, budgets, and procedures.• Key Implementation Questions
1) Who will implement the plan?2) What must be done to align with the company’s
operations in the new direction?3) How is strategy to be implemented?
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1.) Who will implement the plan?• VP of functional areas• Directors of divisions• SBUs• Plant managers• Project managers• Unit heads• Supervisors• Employees• Communication is the key.• Involve all levels in the
formulation and implementation
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2.) What must be done?
ProgramsAction orientedMatrix of change-Feasibility-Sequence of execution-Location-Pace & nature of change-Stakeholder evaluations
Budget: approve?Procedures:
detailed activities that must be done to
complete the programs
Synergy-Shared know-how-Coordinated strategies-Shared tangible resources: share facility or R&D-Economies of scale or scope-Pooled negotiating power: bargaining power-New business creation
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3.) How is strategy to be implemented?• Structure follows strategy: Always?
1. New strategy is created.2. New administrative problems
emerge.3. Economic performance
declines.4. New appropriate structure is
invented.5. Profit returns to previous
level.• Example: KU structure vs. UBU
structure• Corporate, business, functional
strategy?• Video Clips
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Organizational Life Cycle
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Changing Structural Characteristics of Modern Organizations
Old Organization Design• One large corporation• Vertical communication• Centralized, top down
decision making• Work/quality teams• Functional work teams• Minimal training• Specialized job design
focused on individuals
New Organization Design• Mini business units and
cooperative relationships• Horizontal communication• Decentralized participative
decision making• Outsourcing and virtual
organizations• Autonomous work teams• Cross functional work teams• Extensive training• Value chain, team focused job
design
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Six Sigma: Quality & Efficiency• A business philosophy that uses
data and statistical tools to systematically improve quality and process to achieve the highest level of customer satisfaction.
• Motorola: reduce the defects to 3 parts/million
• DMAIC• 5S: workplace organization
methodology(sorting, setting in order, sweeping, standardizing, sustaining)
• Kaizen: eliminate waste in all systems of an organization through improving standardized activities and processes MIB, BBA 2010
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Designing Jobs: Satisfaction & Motivation
• Job enlargement: more work
• Job rotation: more variety
• Job enrichment: more autonomy and control
• Use job characteristics model in job redesigning to improve job performance through job enrichment
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International Issues in Strategy Implementation
MNCsInternational Strategic Alliances(add value, contribute key strength but protect core competencies)
Stages of International Development1. Domestic company2. Domestic company with export
division3. Domestic company with
international division4. MNC with multidomestic emphasis5. MNC with global emphasis
• Centralization vs. Decentralization• Product-group structure: Global product,
similar product around the world• Geographic-area structure: Customized
product for each region
GlobalStandardized
Strategy
Transnational Strategy
International Strategy
Localization Strategy
MIB, BBA 2010
Pressure for local responsiveness
Pres
sure
s fo
r cos
t red
uctio
ns
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Strategy Implementation: Staffing and Leading
• Staffing: focuses on the selection and use of employees (hiring, firing, and training).
• Leading: emphasizes the use of programs to better align employee interests and attitudes with a strategy.
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Staffing follows strategy, Hiring & Training
Hiring: New skills, specific attributes
Training: Growth(Higher Productivity)
Training: Retrenchment (Waste Reduction, Overall cost savings)
Training: Differentiation (Service business)
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Manager & StrategyBusiness Strength/Competitive Position
Industry Attractiveness
Strong Average Weak
High
1.Growth Dynamic Industry Expert
2.Growth Dynamic Industry Expert
3.Retrenchment Turnaround Specialist
Medium
4. Stability Cautious Profit Planner
5. Profit6.Retrenchment Turnaround Specialist
Cautious Profit Planner
Low
7. Growth Diversification Analytical Portfolio Manager
8. Growth Diversification Analytical Portfolio Manager
9.Retrenchment Bankruptcy Professional Liquidator
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Executive Selection
– Executive Succession• Insiders• Outsiders: No heir, Turnaround
– Identifying Abilities and Potential• Performance appraisal system• Assessment centers: IBM, GE, SEARS• Job rotation: mix experiences
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Strategy & Managing Corporate CultureAssessing Strategy &Culture Compatibility• Compatible with
current culture?• Cultural flexibility • Organizational
change possible• Commitment to
strategy implementation
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Managing Culture After an Acquisition
• Communicate the rationale for strategic changes.
• Integration: give and take, Renault&Nissan
• Assimilation: adopts the dominant acquiring culture
• Separation: no cultural exchange
• Deculturation: destructive method, confusion and stress
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Example of an Action Plan• Specific actions to be
taken• Dates to begin and end
each action• Person responsible for
carrying out each action• Person responsible for
monitoring • Expected financial and
physical consequences of each action
• Contingency plan
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Other Leading Topics• Management By
Objectives• Total Quality
Management (TQM):prevention
• Hofstede Dimension
• Put the right man at the right job at the right time
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WK12.3 Agenda
• Lecture on evaluation & control• Mind map• Mission Possible Exercise• Monday bring your note book for case study.• Exam part II next Friday August 27, 2010.
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Evaluation & Control• Performance data and activity reports • How should we start? What’s the evaluation process?
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1.)What to measure?• Performance is the end result of activity.• Appropriate measures depends on the objective
of the strategy.– Air Asia, CPF – UBU, RU, CU
• Measures: financial, customers, process, innovation and learning, human resource, IT, community
• Measure controls at all three levels(Corporate, Business, Functional)
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2.) Appropriate Measures
Appropriate Measures
Variables Selections
Leading (input)
Lagging (output)
Behavioral
Method & Standards
Traditional (Financial)
Others
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2.)Appropriate Measures• Leading indicator, Input Controls: lead to the desire result, can
predict the result and can fix the result– Control chart
• Lagging indicator, Output Controls: post mortem study, can not fix or change anything – Profit and loss, Market share, ROI, ROE
• Behavioral Controls: when performance results are hard to measure but the cause and effect between the activities and results is clear.(ISO 14000)
MIB, BBA 2010
Lagging Indicator
Cash Flow
Customer Satisfaction
Student Knowledge ~Exam Result
Leading Indicator
Accounts Receivable Turnover
Waiting Time/ Respond Time
Real study hours (Behavior control)
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2.) Appropriate Measures• Traditional Financial Measures• ROI: Net Income Before Tax/Total Asset• Comprehensive number to include all revenue, costs,
and expenses• Can be compared across companies• Sensitive to depreciation, focus on short term, reflect
business life cycle more than the management effectiveness
• EPS, ROE, Operating cash flow, Free cash flow• Not adequate measures for corporate performance• Dot.com measurement examples
MIB, BBA 2010
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2.) Appropriate Measures• Other standard measures– Stakeholder Measures: impact of the corporate
activities on stakeholder interests• Ex: Air Asia New Advertisement Campaign
Stakeholder
Customer
Suppliers
Employee
Measurement
#of new customers, # of orders, # of complaints
Delivery Time, Delivery Amount
Turnover rate, Job Satisfaction Rate
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2.) Appropriate Measures• Other standard measures: Shareholder Value• Shareholder Value=PV of future CF+Value of
the company if liquidated, create wealth? Economic Value Added: invest in the project
only if the profit is above the cost of capitalEVA=after tax operating income- (investment in assets x
weighted average cost of capital%)Cost of capital: interest payback for debt, shareholders’ earningMarket Value Added: Market Value of a corporation -
the capital contributed by shareholders and lendersOhishi EVA, Thai Bev MVA?
MIB, BBA 2010
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2.) Appropriate Measures• Other Standard Measures:
Balanced Scorecard for the four areas – Financial: ROI, ROE, Cash Flow,
sales growth– Customer: market share,
customer satisfaction, #of complaints, brand recognition, etc.
– Internal business process: inventory turnover, waste reduction, respond time, cycle time, down time, etc.
– Innovation & Learning: turnover rate, job satisfaction
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2.) Appropriate Measures• Other Standard Measures: Top management
and the board of directors– Short Term: Profitability such as ROI, ROE, EPS– Long Term: Corporate direction, Team building,
Leadership, – Measures should come from the vision and
mission and can include safety or quality as well.
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2.) Appropriate Measures– Other Standard Measures: Measures for
divisional and functional performance: • Responsibility centers(cost, revenue, expense, profit,
and investment): evaluate separate from the corporate
– Other Standard Measures: Benchmarking1. Locate the significant point, area or process.2. Select the measurement.3. Select the benchmark company.4. Calculate the gap and find the cause of the gap.5. Develop the program to close that gap.6. Implement.
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3-5)Measure and correction
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International Measurement IssuesInternational transfer pricing: -Not for performance evaluation-To minimize tax (high price in high tax country to report lower profit to pay lower tax)
Repatriation of profit: send money back to the parent company through dividends, royalties, and management fees
Piracy, counterfeit copies of brand name products
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Strategic Information System• Enterprise Resource Planning (ERP)– Wiki definition: an integrated computer-based
system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources
– Software provider: SAP, PeopleSoft, Oracle• Divisional and functional IS support– PRISM by Merrill Lynch, MRPERP
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Problems and Guidelines• Problems in Measuring
Performance • Negative Side Effects:
– Short-term orientation: no time for long term evaluation, just need good result for the present
– Goal displacement• Behavior substitution:
quantifiable measures drive out non quantifiable measures, SEARS repair bill, University research number, student number
• Suboptimization: unit optimization detriment the organization goal, Marketing vs. Manufacturing, Liberal art & other faculties
• Measurable Controllable
• Guidelines for Proper Control – Appropriate number of
controls 80:20 (monitor only 20% of the factors)
– Monitor meaningful activities and results regardless of the difficulty in measurement, cooperation measurement?
– Timely, leading variables– Long and short-term– Pinpointing exceptions:
correction action for results outside tolerance
– Reward meeting/ exceeding standards
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Strategic Incentive ManagementWeighted-factor method: Excellent, ME, NI
High growth measures: market share, sales growth
Low growth measures: ROI, cash generateLong-term evaluation method: Stock or
performance units reward to top management who stay with the company and perform well.
Strategic funds method: development expense is separate from operation expense, BBA
Separate strategic fundsdevelop weighted factor chart for each SBUMeasure performance
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Mind Map Summary
Strategy
Structure Staffing Culture Control
MIB, BBA 2010
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Mission Possible Exercise
• State your mission.• Write your strategy, implementation, and your
control measurement.• Summarize to your friend and present to the
class.