Summary. H.J. Leavitt model of organization. Model of organization: organizational structure. Model of organization: people

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1 H.J. Leavitt model of organization Summary Mission goals and objectives Goals hierarchy Tasks Goals, objectives & Tasks People Individual values, beliefs, attitudes, motives, competencies Group behaviour Teams culture chart Levels of hierarchy, span of authority Formalization Centralization Specialization structure Technology Complexity of technology Technology routineness Information, equipment, techniques, processes, know-how Principles of Business/ slide no 2 Model of organization: people Model of organization: organizational structure The most important resource of organization Individual and team work Know how knowledge management culture individual beliefs, motives, behaviour Structural components: divisions, departments, positions Relationships: reporting, consulting, functional Principles of Business/ slide no 3 Principles of Business/ slide no 4 structure definition structure a set of components that can be used to shape the organization. The result of their usage is a specific arrangement of the organization and their interrelationships. Organization structure the degree of complexity, formalization, specialization and centralization in an organization. Serves as the regulatory role: reduces the organizational complexity sets the general framework of behavior in organizations Model of organization: technology Technology - the information, equipment, techniques and processes required to transform inputs into outputs. Main technology is usually defined by: physical objects like products and equipment used to produce them; processes involved in production methods; specific knowledge required to develop and use equipment and methods for the production of a product (know-how) Principles of Business/ slide no 5 Principles of Business/ slide no 6 1

2 Model of organization: organizational goals goals are interrelated set of ambitions, aspirations and desired effects of varying degrees of concreteness. goals are hierarchical system: Strategic goals Tactical goals Operational goals Principles of Business/ slide no 7 TECHNOLOGICAL key elements ECOLOGICAL SUBSTITUTES STRATEGIC PARTNERS GLOBAL REGULATORS OWNERS BOARD OF DIRECTORS EMPLOYEES CULTURE PHYSICAL ENV. COMPETITORS & PROSPECTIVE COMPETITORS POLITICAL-LEGAL CUSTOMERS SUPPLIERS ECONOMIC SOCIOCULTURAL The general (external) The task (specific) The internal Principles of Business/ slide no 8 The Leavitt s Model Who is the Manager? Goals & Tasks Management People Management functions: planning organizing leading Goals & Tasks Management People Manager someone whose primary responsibility is to carry out the management process. Structure Technology controlling Structure Technology Principles of Business/ slide no 9 Principles of Business/ slide no 10 What Do Managers Do? Management Process Management - a set of activities (including planning and decision making, organizing, leading, and controlling) directed at an organization's resources (human, financial, physical, and information), with the aim of achieving organizational goals in an efficient and effective manner. Resources Raw Materials Human Resources Capital Technology Information Controlling Management functions Planning Leading Organizing goals achieved Effectively Efficiently Planning Controlling Organizing Leading Management functions are interrelated and interdependent. Planning - Defining goals, establishing strategies to achieve goals, and developing plans to integrate and coordinate activities. Organizing - Arranging and structuring work to accomplish organizational goals. Leading - Working with and through people to accomplish goals. Controlling - Monitoring, comparing, and correcting work. Principles of Business/ slide no 11 Principles of Business/ slide no 12 2

3 Skills Managers Need Distribution of time per function by organizational level Robert Katz and others describe four critical skills in managing: Technical skills - knowledge and proficiency in a specific field Human skills - the ability to work well with other people Conceptual skills - the ability to think and conceptualize about abstract and complex situations concerning the organization Principles of Business/ slide no 13 Principles of Business/ slide no 14 Efficiency vs. Effectiveness Effectiveness: doing those tasks that help an organization reach its goals (= doing the right things) Efficiency: concerned with the means, efficient use of resources like people, money, and equipment (= doing the things right) Planning Planning is often called the primary management function because it establishes the basis for all the other things managers do. It s concerned with ends (what is to be done) as well as with means (how it s to be done). Principles of Business/ slide no 15 Goals and Objectives Elements of Planning Desired outcomes for individuals, groups, or entire organization Provide direction and evaluation performance criteria Plans Documents that outline how goals are to be accomplished Describe how resources are to be allocated and establish activity schedules Key Steps of Planning DETERMINING THE ORGANIZATION S MISSION AND GOALS Define the business Establish major goals FORMULATING STRATEGY Analyze situation and develop strategies IMPLEMENTING STRATEGY Allocate resources and responsibilities to achieve strategies Principles of Business/ slide no 17 Principles of Business/ slide no 18 3

4 Strategic vs. Operational Planning Strategic Management Process STRATEGIC PLANNING OPERATIONAL PLANNING Are we doing the right things? Are we doing the things right? External Analysis: Opportunities & Threats Strategic Planning Identify the organization s mission, current goals and strategies Reassess the organization s goals (or even mission) Formulate Define Strategic Programmes Implement Internal Analysis: Strengths & Weaknesses Strategic Control Principles of Business/ slide no 19 Principles of Business/ slide no 20 Specific/ Task Analysis (Business-level) Michael Porter s five forces model This analysis is not only to determine the current attractiveness of the business, but also provide information about the future direction of its growth and profit prospects. Suppliers Bargaining Power of Suppliers Threat of New Entrants New Entrants Industry Competitors Intensity of Rivalry Substitutes Threat of Substitutes Bargaining Power of Customers Customers Principles of Business/ slide no 21 Specific/ Task Analysis (Business-level) Threat of New Entrants The ease or difficulty with which new competitors can enter an industry Threat of Substitutes The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitute products and services Bargaining Power of Buyers The degree to which buyers have the market strength to hold sway over and influence competitors in an industry Bargaining Power of Suppliers The relative number of buyers to suppliers and threats from substitutes and new entrants affect the buyer-supplier relationship Current Rivalry Intensity among rivals increases when industry growth rates slow, demand falls, and product prices descend Principles of Business/ slide no 22 IDENTIFY ORGANIZATIONAL IDENTIFY ENVIRONMENTAL INTERNAL ANALYSIS EXTERNAL ANALYSIS SWOT Analysis Strengths Weaknesses Opportunities Threats SWOT Analysis The combined external and internal analyses to identify a strategic niche that the organization can exploit Strengths Any activities the organization does well or any unique resources that it has Weaknesses Activities the organization doesn t do well or resources it needs but doesn t possess Opportunities Positive trends in the external Threats Negative trends in the external Principles of Business/ slide no 23 Organization Valubale Strengths Critical Weaknessess Formulating Corporate-level : SWOT Analysis and Grand Corporate Growth Corporate Stability Abundant Opportunities Corporate Stability Corporate Retrenchment Critical Threats Good strategies are those that support the mission and: exploit opportunities & strengths, neutralize threats, avoid weaknesses. There are three main types of corporate strategies: growth, stability, and retrenchment Principles of Business/ slide no 24 4

5 Formulating Corporate-level : The BCG Matrix Mission BCG Matrix strategy tool to guide resource allocation decisions (between different SBUs) on the basis of market share and growth of SBUs Stars: Heavily invest Question Marks: Sell off or turn into stars Cash Cows: sustain and Milk for cash Dogs: Sell off or liquidate Low Anticiated Growth Rate High Stars Question Marks Cash Cows Dogs High Share Low Market Principles of Business/ slide no 25 A sentence describing a company's function, markets and competitive advantages Defines: what an organization is, why it exists, its reason for being. At a minimum: who primary customers are, identify the products and services. Principles of Business/ slide no 26 The hierarchy of goals The hierarchy of goals Principles of Business/ slide no 27 Principles of Business/ slide no 28 Operational Planning Planning Tools and Techniques Are we doing the things right? Strategic Planning vs. Operational Planning al scanning Competitor intelligence Scenario building Forecasts Benchmarking Budget Operational planning tools: Scheduling Gantt chart PERT network Breakeven analysis Linear programming Project management Principles of Business/ slide no 30 5

6 PERT Network Gantt chart A B = activity B cannot begin until activity A has been completed Principles of Business/ slide no 31 Principles of Business/ slide no 32 Market Segmentation Marketing mix: 4P Market Segmentation Segment choice Positioning Principles of Business/ slide no 33 Principles of Business/ slide no 34 Principles of Business/ slide no 35 6

7 Product Product everything the seller can offer on the market Physical attributes: colour, smell, size Non-material attributes: subjective and objective feelings prestige, health, jealousy Principles of Business/ slide no 37 Pricing strategy Premium Pricing - price higher than the competitors. For something unique about the product or when the product is first to market good strategy for companies entering the market with a new market tomaximize revenue during the early stages of the product life cycle Penetration Pricing - designed to capture market share by entering the market with a low price relative to the competition to attract buyers. To raise awareness and get people to try the product. For crowded market category. Economy Pricing - a very basic, low-cost approach to marketing in order to to keep prices low and attract a specific segment of the market that is very price sensitive. Price Skimming - to gain maximum revenue advantage before other competitors begin offering similar products or product alternatives If product is really significant better than competition Psychological Pricing - for instance, $99 is psychologically "less" in the minds of consumers than $100 Principles of Business/ slide no 38 Place Distribution of products with proper quality Where, when, how many and how often? Indirect Distribution - use of an intermediary (transaction, suport, logistic help) Direct Distribution - direct from the manufacturer to the consumer (complete control) 39 Principles of Business/ slide no 39 Promotion Communication betweeen sellers and customers The main goal: influence on customers to accept offered products Advertising - communication through mass media, usually paid Public Relations - developing a positive relationship between the organization and the media and the public (creating favorable publicity and minimizing the impact of negative situations) Sales Promotion - designed to create a short term increase in sales. (i.e. money off coupons, discount codes etc.) Personal Selling - sales interaction between the firm's representative and a consumer on a one to one basis Principles of Business/ slide no 40 AIDA model how marketing works Make people attentive and conscious of product Make people interested in product Create consumer need and way of satisfying Buying or other demended actions Principles of Business/ slide no 41 Principles of Business/ slide no 42 7

8 4P and the product life cycle Financial aspects of BP Principles of Business/ slide no 43 Profit and Loss Different names profit and loss statement, income statement, pro forma income statement, P&L (short for profit and loss ) Explanation of how the business made a profit (or incurred a loss) over a certain period of time. Lists all of revenue streams and expenses Typical parts: revenue (also called sales) cost of sale or cost of goods sold (COGS) gross margin, which is your revenue less your COGS Gross Margin Operating Expenses = Operating Income Cash Flow Explanation of how much cash business brought in, how much cash it paid out, and what its ending cash balance was Typically per-month. Questions: What happens when you send out an invoice to a client, but they don t pay it by the due date? What happens when you pay your own bills late, or early? Businesses run on cash there are no two ways around it. Principles of Business/ slide no 45 Principles of Business/ slide no 46 Balance Sheet BP structure A snapshot of business s financial position at a particular moment in time, how are you doing? How much cash do you have in the bank, how much do your customers owe you, and how much do you owe your vendors? The balance sheet is standardized, and consists of three types of accounts: assets (accounts receivable, money in the bank, inventory, etc.) liabilities (accounts payable, credit card balances, loan repayments, etc.) equity (for most small businesses, this is just the owner s equity, but it could include investors shares, retained earnings, stock proceeds, etc.) It s called a balance sheet because it s an equation that needs to balance out: Assets = Liabilities + Equity 1. Idea understandable for others 2. Vision and mission 3. Executive summary idea and milestones, Key Performance Indicators (KPI) main drivers 4. Market / product analysis Unique Selling Points why the idea is different from others; competitive advantage Principles of Business/ slide no 47 Principles of Business/ slide no 48 8

9 BP structure 5. Action Plans what to do and how to do 6. Investments (recources) people, infrastructure, money 7. Customers and suppliers (with verification) B2B, B2C 8. Risk analysis (partners incl.) 9. Financial aspects (P&L, CF, BS) 10.Conclusions 11.Sensivity analysis critical market conditions No. Final test results Final test Grade Final Grade _ ,0 5,0 5,5 _ ,0 5,0 5, ,0 4,5 4,5 _ ,0 4,5 5,0 _ ,0 4,0 4,0 _ ,0 4,0 4, ,0 3,0 3,0 _ ,0 3,0 3, ,0 3,0 3, ,0 2,0 2,0 Principles of Business/ slide no 49 9