To accompany contemprory strategy analysis concepts techniques application chapter17slides

Current Current Trends Trends in in Strategic Strategic Management Management OUTLIN E • The New Economy • New Directions in Strategic Thinking • Redesigning the Organization • New Modes of Leadership st The Turbulent 21 The Turbulent 21st Century Century Collapse Collapse of ofNew New Economy Economy • Corporate CorporateScandals Scandals ••Enron, Enron,WorldCom, WorldCom,Parmalat Parmalat ••Jack Welch’s retirement Jack Welch’s retirementpackage package Dot.com •Dot.combubble bubblebursts bursts •TMT recession •TMT recession International competition intensifies • China as Workshop of the World • Outsourcing to LDCs The TheCurse Curse of of Terrorism Terrorism ••Sept Sept.11, 11,2001 2001 •Suicide •Suicidebombings bombingsin in Israel, Iraq, Saudi Israel, Iraq, Saudi Arabia, Arabia,Turkey, Turkey, Afghanistan Afghanistan Decline of Multilateralism War War ••Invasion Invasionof ofAfghanistan Afghanistan &&Iraq Iraq •Civil was in •Civil was inCongo, Congo, Liberia, Liberia,Sudan Sudan •Collapse of Doha round • Trade wars between US, EU, China •Weakening of UN Unstable Unstable Currencies Currencies US$ US$declines declinesby by>50% >50%against against Euro Euro2002-04 2002-04 Age Age of of Disbelief Disbelief Fear Fearof ofDisease Disease •SARS, •SARS,Mad MadCow, Cow,Bird BirdFlu Flu US USLabor Labor Productivity: Productivity:Changes Changesin inNon-Farm Non-FarmOutput Output per perHour HourWorked Worked from fromYear Year ago ago Quarter, Quarter,1995-2003 1995-2003 Q1 Q2 Q3 Q4 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Bureau of Labor Statistics Return Returnon onEquity Equityof ofUS USManufacturing Manufacturing Corporations, Corporations,1990-2003 1990-2003 18 16 14 12 10 ROE ( %) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: US Bureau of the Census The The value value of of mergers mergers and and acquisitions acquisitions worldwide worldwide 4.5 3.5 2.5 $ trillion 1.5 0.5 1990 1992 1994 1996 1998 2000 2002 Source: Thomson Financial Securities Data Directions Directionsin inStrategic Strategic Management Management Practice—Trends Practice—Trendsof ofthe the 1990s 1990s Key Trends of the 1990s: •Quest for shareholder value •Adjusting to increased turbulence & more intense competition Influential Strategy Concepts: •Modern financial analysis —shareholder value, economic profit, option theory •Core competences and intangible assets •Dynamically competitive markets —“hypercompetition” •Competitive advantage through alliances, networks, and standards Major Themes of Business Strategy: •Cost cutting—squeezing overhead, business process reengineering, increasing labor productivity •Outsourcing/refocusing/ divestment •Performance management and incentive alignment Forces Shaping Company Strategies 2001-04 Future Sources of Profit Limits of downsizing/cost cutting Where are future sources of profit? Concepts & Theories The Business Environment •Uncertainty •Stalling of economic liberalization •Intense competition Technology •Resources & capabilities as Continued advances in ICT basis for competitive advantage •Knowledge-based theory of the firm Demands of society •Option theory •Social & environmental responsibility •Complexity theory •Ethics & fairness •Quest for meaning Emerging Developments STRATEGY •Multiple competitive advantages/multiple capabilities •Innovation / New Product Development / New Business Development •Alliances & networks MANAGEMENT SYSTEMS • Knowledge management (incl best-practice transfer) • Redesigning incentive systems • Rethinking performance management • Capturing human creativity ORGANIZATION STRUCTURE • Reconciling flexibility & integration • Modular structures • Multidimensional structures • Informal organization & self-organization The The Need Need to to Redesign Redesign Organizations Organizations THE PAST Emphasis on control THE FUTURE Emphasis on co-ordination Single performance goal Multiple performance goals Decisions located centrally Decisions located where relevant knowledge exists Simple structures, unified line of command Multidimensional structures Diffused authority, but clear responsibilities Organization by design Self organization Emerging Emerging Organizational Organizational Forms Forms Organizing for capability development Shifting emphasis of organization design from control to coordination From unitary to parallel structures Separate coordination structures for different processes E.g 3M’s product development structure; separate structures for TQM and change management Process-based organizations Organizing around business processes Organizing around corporate processes - entrepreneurial process - competence building process - renewal process Project-based organization E.g engineering cos., consulting firms, also manufacturing cos e.g Oticon Network and virtual organization E.g electronics in Silicon Valley, clothing and packaging equipment in Italy New New Models Models of of Leadership: Leadership: What What Competencies Competencies do Top Top Managers Managers Need? Need? THE LEADERSHIP NEEDS OF ORGANIZATIONS The ability to: • • • • • • • build confidence build enthusiasm cooperate deliver results form networks influence others use information THE REQUIRED COMPETENCIES OF BUSINESS LEADERS • business literacy • creativity • cross-cultural effectiveness • empathy • flexibility • proactivity • problem-solving • relation-building • teamwork • vision ... 1990s: •Quest for shareholder value •Adjusting to increased turbulence & more intense competition Influential Strategy Concepts: •Modern financial analysis —shareholder value, economic profit,... Leadership: What What Competencies Competencies do Top Top Managers Managers Need? Need? THE LEADERSHIP NEEDS OF ORGANIZATIONS The ability to: • • • • • • • build confidence build enthusiasm... for capability development Shifting emphasis of organization design from control to coordination From unitary to parallel structures Separate coordination structures for different processes E.g