MD4003

MANAGEMENT,
THEORY & PRACTICE

David Forrest
Dforrest2@uclan.ac.uk
Introduction

Introduction to Management & Organisations
Pre-scientific management
Scientific management

What is Management?

Is Management Leadership?

Ricky Gervais The Office 2001
(Start at 19 minutes in. )

Doing things right rather than doing the right
thing.
What is an Organisation?
A group of people sharing a common goal
(strategy?)

History of Organisations
Until the end of the Victorian era the only
large organisations were the Catholic church
and National armies. (Grant.)
Only large commercial organisations were
Trading Companies such as Dutch East India
Company and the British East India Company
(Grant.)
The Size Problem
Size introduces specialization and division of
labour (e.g. Adam Smiths pin factory.)
But this increases the need for coordination
and control a hierarchy. Management?
Hierarchy then develops Bureaucracy (Weber
and Fayol.)
Bureaucracy?
The rise of the modern corporation
Span of control (Concept originally came from
the military.)
How many people report to the person above
them.
1:3 originally
Now 1:10 ?? (Flatter organisations, Use of IT)
Developments in Management Science

Military Influence (Still there.)
The rise of scientific management
Pre-Scientific Management A
Victorian Work Scene!
Scientific Management Frederick
Taylor
Scientific Management Frederick
Taylor
Very influential (even today, work study, time
control in call centres.)

Negative aspects:

Charlie Chaplin "Modern Times." (1936)



Scientific Management Henri Fayol
Scientific Management Henri Fayol
(Handy)
Henri Fayol
Scientific Management Thomas
Watson - IBM
Scientific Management Frederick Taylor

Week 2 Developments in Management
Science
Note the inverted commas!
(Classical/Scientific, 1900's -)
Human Relations, 1920's
Systems, 1940's -
Contingency, 1970 -

Pre-Scientific Management A
Victorian Work Scene!
Pre-Scientific Management A
Crimean War Scene (1850s) !
Classical/Scientific, 1900's -

Key Factors: Organisation , Division of labour
Work Study, Productivity, Span of Control
Key Workers: Frederick Taylor (Bethlehem
Steel, work study approach), Henri Fayol
(French, Fayol's wheel)
Influences: Military, Scientific

Human Relations, 1920's -

Key Factors: Encourage cooperation, Work group
participation
Individual wants and needs, Work group behaviour.
Key workers: Elton Mayo (Hawthorne
experiment- founder of HR school), Maslow
(Psychologist, Hierarchy of Needs), Hertzberg (2 factor
theory, 1959 (Motivational factors and hygiene
factors)) McGregor,1960, (Theory X and Y);
Key Influences: Social psychology, sociology


Maslow
Herzbergs Two Factor Theory
Herzbergs Two Factor Theory
Herzbergs Two Factor Theory

Hygiene or maintenance factors presence
prevents dissatisfaction but does not
motivate.

Motivational factors motivate!
Systems, 1940's

Key Factors: Combines Classical and HR
schools , People + task + technology,
organisation as a socio-technical system.
Key workers: Burns (UK, Scottish companies.)
Trist (UK, Tavistock Institute, coal mine studies
etc)); Joan Woodward ( UK, Studies of small
manufacturing organisations,
Key influences: Mathematics, operations
research, systems engineering


Contingency, 1970 -

Key Factors: No one right-way. Adjust
management style to suit situation.
Key workers: Fiedler; span of control,
technology etc.); Blake & Mouton (Managerial
Grid) (Concern for people versus Concern for
results.)

Blake & Mouton Managerial Grid
http://www.coachingcosmos.com
Observation of managers
Henry Mintzberg - Management roles,1973.


Week 3 Business & Corporate level
strategy - CULTURE

Culture - Internal factor, important in
understanding history and culture which can
help or hinder strategy.

Fits in with Resource Based View (RBV) of
corporate strategy as opposed to the
Positioning view e.g. Porters 5 forces.


The Boiled Frog (Handy, I think!)
Exhibit 5.2 Strategic Drift (Johnson & Scholes)
(J & S)
Exhibit 5.4 Cultural frames of reference
Culture
Basic assumptions and beliefs, shared by
members of an organisation. (Schein)

The way we do things round here!

Culture is difficult to manage BECAUSE it is
taken for granted

Culture (Definitions)
In German (& Finnish) kultur the intellectual side
of civilisation but without English connotations of
snobbery.

Chinese (& Japanese) bunka the skilled
production of artefacts after a master of the craft.
(from Holden . N, 2002)

International Cultures (Hofstede)
Hofstede studied International employees of IBM.
Identified 4 key characteristics:
Power Distance measure of equality
Uncertainty avoidance need to control the future.
Individualism as opposed to collectivism.
Masculinity/Femininity
(Masculinity=ambition,quantity,money.)
(Feminity = personal relationships,environment,quality.)

ORGANISATIONAL CULTURE. (Handy)
Power culture (Spider web) e.g.
entrepreneurial & small
Role culture (Greek Temple) e.g. large co.,
bureaucracy
Task Culture (Matrix) e.g. software project
Person culture (Galaxy of stars large &
small!) e.g. University.

Exhibit 5.5 Culture in four layers
PARADIGM - meaning
PARADIGM A set of assumptions, concepts,
values, and practices that constitutes a way of
viewing reality for the community that shares
them, especially in an intellectual discipline.

But also note PARADIGM SHIFT

Exhibit 5.7 The cultural web of an organisation
Cultural Web
Routines daily way we do things round here
Rituals Birthdays, submarine Perisher course,
Friday drinks session, initiation rites
Stories- what so and so would have done.
Symbols cars, titles. Medical consultants
described patients as Clinical Material
Power structures often informal -who lunches,
who socialises
Org. structure the organogram (e.g. line versus
matrix.)
Control systems power and rewards


Week 4 - Strategic management, strategy
formulation
Strategic management, strategy formulation
and implementation
Managerial decision making
Aids for planning and decision making.

What is Strategy?
Put simply - Achieving an objective or
goal.(Grant)
But what about:
Timescale?
Resources?
Scope?
Opposition or competition?
Who does it?




Successful strategy elements (Grant)
History of Strategy
Question:
- What human activity has been
consistently important to people and
has involved large human resources
over long periods of time?
Answer: Warfare!
Sun Tzu ~500BC
Sun Tzu ~500BC
If you know the enemy and know yourself
you need not fear the results of a hundred
battles. . (My comment: SWOT?)

Sun Tzu The Art of War. 500BC


Machiavelli,1469-1527
Machiavelli,1469-1527
Men must either be caressed or else
annihilated; they will revenge themselves for
small injuries, but cannot do so for great ones;
the injury therefore that we do to a man must
be such that we need not fear his vengeance.
(My comment: Youre fired! Management
style!?)

Niccolo Machiavelli The Prince 1515
Clausewitz, 1780-1831
Clausewitz, 1780-1831
Many intelligence reports in war are contradictory;
even more are false, and most are uncertain. (My
comment: His use of the concept of Frictions.)

Pursue one great decisive aim with force and
determination. . (My comment: Used later in
Blitzkrieg or even market segmentation!)

Carl von Clausewitz, On War, 1832




Eisenhower, 1890-1969
Eisenhower, 1890-1969
In preparing for battle I have always found that plans are useless,
but planning is indispensable.

In the councils of government, we must guard against the
acquisition of unwarranted influence, whether sought or unsought,
by the military/industrial complex. The potential for the disastrous
rise of misplaced power exists and will persist.

Eisenhower. Farewell Presidential Address, 1961

My comment: Ive chosen Eisenhower as an example of the crossover
from military to civilian and corporate life (together with millions of
his fellow Americans) i.e. the influence of the military on our world.


Military Influences
Some concepts from the military:
Strategy and Tactics
Span of Control
To defeat the enemy without actually fighting (Sun
Tzu, 500BC)
Manoeuvring and outflanking (Sun Tzu & plenty of others)
Deception and Military Intelligence. (Sun Tzu & plenty of
others)




Military Influences
The advantage of surprise.
Force concentration and speed of advance
(Clausewitz, Liddell Hart and Blitzkrieg!)
Guerrilla or asymmetric warfare (Mao Tse Tung & plenty
of others.)
No plan survives initial contact with the enemy.
(von Moltke)
Similar to the concept of Frictions by Clausewitz
SWOT (US military briefing system from WW2?)

Military Strategy
Clearly has quite a lot to offer the Corporate
Strategy but:
-Corporate strategy is not to destroy the enemy.
(Grant)
-Who are the customers?! (Local people,
combatants, the world (democracy, freedom etc.)
-Competitive behaviour can be much more complex
and can involve coexistence or collusion to ****
the customer! (See Adam Smiths smoke filled rooms)
A brief history of strategy some overlap!
(Grant, Forrest)

- Pre 1900 Military- (Proponents Sun Tzu, Clausewitz)

- 1900 1940s - Classical school Scientific & Rational
(Proponents -Taylor, US/ Fayol, France/ Weber, Germany)
(Analysis techniques: budgetary control )

- 1950s to 1970s - now -The Planners long range planning
(Proponents Chandler, Ansoff, business schools, large
corporations, governments, consultants) (Analysis techniques:
Ansoff Matrix, PEST, SWOT)

A brief history of strategy some overlap!
(Grant, Forrest)

1970 now. Positioning school matching business to its
external environment. ( Proponents: Boston Consulting
Group, Porter,) (Analysis techniques: Boston Box, Experience
curve, 5 Forces model, 3 Generic strategies, Value Chain,
Diamond (All last 4 by Porter!)

1990 now. Resource Based View (RBV) - internal strengths of
the firm e.g. The Learning Organisation (Senge)) (Proponents:
Prahalad, Grant, Scholes, Senge) (Analysis techniques: Not too
far removed from SWOT!

SOME Also-rans!

1990- 2000, Competitive advantage. Shareholder value. Re-
engineering. Alliances.

1990s Chaos need for self organising organisations
(Proponents Stacey, Peters etc.)

1990s - Darwinism survival of the fittest (Proponents -
Carroll, Morgan)

2000 -2007 Strategies for the new economy. New business
models. New technologies.


Conclusions from history What do we
do now?
We have moved from an era of relative
certainty post WW2 (1945 1970?)to an
uncertain or perhaps chaotic era.

Oddly this is already incorporated into much
military strategy.

Conclusions from history What do we
do now?
Planned or totally centralised (Top-Down
strategy unlikely to be successful .
Need for Emergent strategies.
If it is chaotic, is it worth having a strategy at
all?
http://en.wikipedia.org/wiki/Double_pendulu
m
(End result is not Random but has Bounds and
can be predicted. Analysis is still valuable!)

64
ANSOFF MATRIX.

Exhibit 7.2 Strategic directions (Ansoff matrix)
Source: Adapted from H. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6. (The Ansoff matrix was later developed see reference 1.)
Exhibit 3.4 The experience curve
KEY STRATEGIC CAPABILITIES - Cost efficiency
Exhibit 7.7 The growth share (or BCG) matrix
5 Box (or Forces) Model (Porter,1980)
Generic Strategies (Porter,1980)
Exhibit 3.6 The value chain within an organisation
Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E.
Porter. Copyright 1985, 1998 by Michael E. Porter. All rights reserved
VALUE CHAIN (Porter)
Exhibit 8.3 Porters Diamond the determinants of national advantages
Source: Adapted with permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from The Competitive Advantage of Nations by Michael E. Porter. Copyright 1990, 1998 by
Michael E. Porter. All rights reserved

Week 6 Managing Strategic Change
Strategy & Change
Theoretical foundations of change theory
Individuals response to change
Force Field analysis


Strategy & Change
Strategy is a precursor of change. (Emergent
strategy?)
Context very important a small
entrepreneurial firm can do what a large
corporation cannot.
Change is not (and should not?) be just a top
down thing.

Exhibit 5.2 Strategic Drift
Chaos Theory (Stacey,1992)
Steady state breeds a dangerous managerial
mindset.
Corporations last half as long as humans.
The long term future is not knowable.
Shared single mind set throughout an
organisation is very dangerous.
You need to look at ever changing agendas of
strategic issues.
Need for the Learning Organisation.
Theoretical Foundation Group Dynamics
School
Emphasis on the team and the work group.
Need to change group norms, roles and values
rather than those of the individual.
Very influential and still with us. (e.g.
Organisational Development (Group hug
anyone!)
Key workers Lewin (1940s), Schein, Blake &
Mouton, French & Bell)
Group Dynamics School (Kurt Lewin,1890
1947)

-Action Research
-Force Field Analysis
-Three step change model (Unfreeze-Move-Refreeze)
Theoretical Foundation Systems and
Contingency Approach
Probably grew out of WW2 - very large
diverse organisations working together.
Still very influential.
Researchers - Burns & Stalker ,1961, Trist
1963( Tavistock Institute, UK coal mining
studies) 1961,Woodward(UK),1965

Theoretical Foundation Systems and
Contingency Approach
Organisation also important, People + task +
technology
Org. goals
Sub- systems
Values
Technology
Psychosocial
Managerial

Theoretical Foundation
Culture-Excellence School,1980-1990s
E.g Peters & Waterman, Moss Kanter, Handy
Peters & Waterman- In search of excellence,1982
Based on McKinsey Seven 7s (Strategy,
structure,systems,staff,style,shared-values & skills.)
They challenged the previous rational approach to
management e.g. paralysis through analysis ,
rational irrationality.
Theoretical Foundation
Culture-Excellence School,1980-1990s
Suggested 8 key attributes (Peters & Waterman):
A bias for action
Close to the customer
Autonomy & entrepreneurship
Productivity through people
Hands on, value driven top to bottom
Stick to the knitting
Simple form, lean staff
Simultaneous loose-tight properties shared cultural
values allow freedom.

Suggested approach - Balogun
Perhaps based more on systems approach
using power, technology, culture, group
psychosocial needs.

Also taking context into account.
Exhibit 14.1 Key elements in managing strategic change
Exhibit 14.2 Types of change
Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, 2
nd
Edn, Prentice Hall, Pearson Education Ltd, 1999
Types of Change (Johnson)
Exhibit 14.3 Contextual features of strategic change programmes
The individual and change. Bisto ad
1980s
http://www.youtube.com/watch?v=d5s48ZQk
vo0&feature=related
The Individual and change. - Brassed
Off (1996)
http://www.youtube.com/watch?v=lKx3MUqz
CcQ
Individual response to change Bereavement (Kbler-
Ross,1969)
Force Field Analysis (Lewin,1940s and many since.)
Sees any change as the balance of 2 forces.
One set opposing change, one set supporting
change.
Carried out by change agent (Outsider or
Insider individual or team)
Force Field - Process (Carnall,2003)
1. Define the problem in terms of present situation
(SWot) and what is wanted to achieve.
2. Identify forces for and against (People, resources,
time, external factors, corporate culture.)
3. Underline the forces you judge to be the most
important. For each one list the actions required to
exploit or build upon this force.)
4. Agree on those actions and the resources you will
need.
Exhibit 14.4 A forcefield analysis (For the last but one change in the Forestry Commission!)

Week 7, Managing Strategic Change
The Change Kaleidoscope
Cultural web
Politics
3 step model
8 step model
Change agents
Change levers

Exhibit 5.7 The cultural web of an organisation
The Change Kaleidoscope (Balogun)
Change Kaleidoscope Defines the Context
Time How much urgency is required?
Scope How much change? Realignment or Transformation?
Whole or part of orgn.?
Preservation What?
Diversity Staff homogeneous or diverse? National cultures
or subcultures?
Capability How well equipped are staff & management for
change? Need for training?
Capacity resources for change? Cash, time & people.
Readiness for change?
Power available to orgn.?
Kaleidoscope - Design Choices
Change path see types of change diagram.
(Transformation, Realignment etc)
E.g. Tesco in recent years -Evolution
E.g BA in the 1980s Reconstruction (financial)
followed by Evolution
Change start point Top down, Bottom Up or
Pockets of Good Practice.

Kaleidoscope - Design Choices
Change style- Education & Delegation, Collaboration,
Participation limited collaboration, Direction( by
management), Coercion - imposed.
Change Target what aspect of orgn. output,
behaviours or values.
Change Levers e.g Cultural Web (Paradigm
influenced by technical, political and cultural
subsystems e.g a Systems approach.
Change roles people responsible Leader, external
facilitators, Change action team, functional
delegation e.g to particular dept.
Exhibit 14.5 Styles of managing strategic change
Exhibit 14.6 Organisational rituals and culture change
Exhibit 14.7 Political mechanisms in organisations
Exhibit 14.1 Key elements in managing strategic change
Theory: 3 step model
(Lewin,1947 quoted in Hannagan, 2002)
EQUILIBRIUM Forces balanced
UNFREEZING Trigger upsets equilibrium and people
begin to accept the new situation. Reduce opposing
forces.
e.g Financial / Sales situation known by all
New personnel drafted in
New team appointed Change agents
Clear cultural changes Cultural web
REFREEZING Establish new equilibrium
Dismiss Change Agents?
New norms of (cultural) behaviour


Theory: 8 Step Model (Kotter, 1996)
1. Establishing a Sense of Urgency
Examining market and competitive realities
Identifying and discussing crises, potential crises, or
major opportunities
2. Forming a Powerful Guiding Coalition
Assembling a group with enough power to lead the change
effort
Encouraging the group to work together as a team

Theory: 8 Step Process
3. Creating a Vision
Creating a vision to help direct the change effort
Developing strategies for achieving that vision
4. Communicating the Vision
Using every vehicle possible to communicate the new vision
and strategies
Teaching new behaviours by the example of the guiding
coalition

Theory: 8 Step Process
5. Empowering Others to Act on the Vision
Getting rid of obstacles to change
Changing systems or structures that seriously
undermine the vision
Encouraging risk taking and non-traditional ideas,
activities, and actions
6. Planning for and Creating Short-Term Wins
Planning for visible performance improvements
Creating those improvements
Recognizing and rewarding employees involved in the
improvements

Theory: 8 Step Process
7. Consolidating Improvements and Producing Still
More Change
Using increased credibility to change systems, structures, and
policies that don't fit the vision
Hiring, promoting, and developing employees who can implement
the vision
Reinvigorating the process with new projects, themes, and change
agents
8. Institutionalizing New Approaches
Articulating the connections between the new behaviours and
corporate success
Developing the means to ensure leadership development and
succession

Agents for change
Strategic Leader
Middle Managers importance ignored in
past.
Outsiders:
New Chief Executive
New Management from outside (Exec. Directors)
Consultants
Other Stakeholders
Agents for change Skills needed
(Buchanan,1992)
Goals
Clarity
Sensitivity and flexibility to changes along the way
Roles
Team building ability
Networking
Tolerance of ambiguity in complex environment
Agents for change Skills needed
(Buchanan,1992)
Communication
Communicates at all levels
Listener
Personal enthusiasm
Motivator
Negotiation
Selling plans and ideas to others
With key players for resources
Management
Political awareness
Influencing skills
Helicopter eye view
Change levers
Challenging the taken for granted
Cultural web
Communication & education
HR role
ICT systems
Political systems


Week 8, Managing Strategic Change


Change levers
Carrying it out
Change levers
Challenging the taken for granted
Cultural web
Communication & education
HR role
ICT systems
Political systems

Communication & Education
Verbal & Symbolic
The linchpin of successful change!
(Bainbridge,1996)
Prevents uncertainty and fear.
Channels One to One Briefings, Events, Packs
and brochures, Training Courses, Seminars,
Team Briefings, Email, Intranet, Noticeboard.
Communication & Education
Tests for good communication timing, set
the context, interpret changes, explain what it
means to the individual, appropriate language
(avoid running ideas up the flagpole etc!)
Dont forget the stakeholders!
Symbolic alarm clock in meetings, rubber
door stops distributed (open door policy)

HR role
Building new HR systems
Personal training and development
Ways that staff are selected, appraised and
rewarded

ICT systems
Long running gap between promises and
actual performance but has transformed the
way businesses work e.g Airline web bookings.
Common problems are not really technological
but how people use the technology. (Terminal 5?)
Incremental introduction of systems overlap
Difficult to use and inflexible
Legacy systems
Political systems
Ignore at your peril
Neglected in the literature until the 1980s
(Burnes quoting Gandz & Murray,1980)
Concept of Dominant Coalition
Reticence because it is often seen as
dysfunctional (Machiavellian)?
Political systems
Exhibit 14.8 Turnaround: revenue generation and cost reduction steps
First step - Turnaround
Receptive Contexts for Change
Start with individuals - education, training &
confidence.
Managerial skills middle managers especially (Dont
forget the Wehrmacht!)
Big bang changes. Senior managers know which
levers to pull for rapid results (Bonuses for Bankers.)
Continuous, incremental change. Learning
organisation with stable set of cultural values. (e.g.
Oticon)

Pitfalls -the transition state
Despite the planning no guarantee that the original
path will be followed
Change recipients edit original plans e.g. Easter,
Christmas and Bonfire night!
So in top-down change, senior managers need to
interact more effectively with middle managers.
Lateral communication (w.o.m) also very effective.
Monitoring transition phase (Balogun)
Focus Groups and workshops
Management by walking about and open door
policies
Team meetings
Question and answer sessions
External consultants monitor progress
Staff representatives collate feedback
Staff suggestion schemes
Confidential hot lines
Attitude surveys
Role of change agents during transition
Anticipating the unexpected
Continuity between formulation and
implementation
Overseeing changes
Monitoring progress


Middle managers (Balogun)
Despite attempts to eliminate middle
managers in the 80s and 90s recessions - still
very much alive.
Provide a vital buffer zone and middle-men
Role in global orgns. Extended

Middle managers (Balogun)
Roles:
Communication & interpretation of plans-
TRANSLATION
Reconciliation of divergent demands-MEDIATION
Emotional shock absorbers-BUFFERING
Are recipients themselves-NEGOTIATION

Resistance to change
Not futile but natural!
Reasons for:
Self interest & politics
Psychological reasons the unknown etc.
Emotional reasons denial of need, lack of motivation
Change approach lack of participation
Recipient perceptions lack of trust, not convinced of
need for change
Cultural bias- always done it this way etc
Historical aspects of organisation
Survivor syndrome
Low morale and feelings of guilt following
redundancies
Can be reduced if leavers have been seen to
be treated fairly.
Conclusions
Start from a position of (financial) strength.
Make sure that everyone gets the message
(incl. stakeholders.)
Keep your managers with you
Some political manoeuvring often required
Make sure that things actually happen
Look after the survivors

Week 9, Leadership

Emotional Intelligence (E.I)
Leadership - Theories
Emotional Intelligence
Too clever by half. Anon

Know thyself Plato onwards

Senior managers should be of higher than
average intelligence but not too high. My HR
lecturer at Cranfield.
Emotional Intelligence (E.I)
Development of idea (Chopra & Kanji,2010)
Recognition that use of IQ was an
oversimplification (Gardner ,1983 quoted in
Mullins)
e.g. musical, mathematical, verbal, inter and intra
personal etc.
Suggestion that E I predicts 80% of success in life.
(Goleman,1995)
E.I (www. psychometric-success.com)
But .............. (McCarthy/Forrest,2010)
Is it important in leadership?
Is EI really a dominant characteristic of leaders?
Can someone improve/increase the level of their
EI and become a more efficient leader?
It has been claimed that women have increased
levels of EI than men. Do they make better
leaders?
If yes, why dont we see more female leaders in
the workplace or elsewhere?


Leadership - Definitions
Leaders have followers (Anon)
The Holy Grail in Organization Theory (Handy)

Leadership AND Management
Management is doing things right; leadership
is doing the right things. (Drucker)


Trait theories
Leaders are :
Young, handsome, aristocratic and
male!


Leadership theory Traits
Although in fact Officers Commissions could
be bought until 1871.

It was reported that this practice often
produced excellent officers!
Leadership theory Traits
Extract from Northcote-Trevelyan Report,1853 into Civil
Service Selection. (Apparently based on Imperial Chinese selection
methods!)
Leadership theory Traits (Mullins)
Leaders are born and not made.
The idea that they have characteristics in
common.
In practice these characteristics are very
numerous and very subjective.
Leadership Theory Styles (Mullins)
Authoritarian
Group has to defer to manager

Democratic
Group shares power

Laissez faire
Manager allows group to get on with things . (Not just
a weak manager who washes his hands of
situations.



Week 10, Approaches to Leadership
Trait
Situational and Contingency
Functional
Styles
Emotional Intelligence

Theorists to consider in leadership
(and management):
McGregor X and Y
Likert
Blake and Mouton
Maslow
Herzberg
Vroom
Cometh the hour, cometh the man
Situational leadership (Mullins,2002)
People can often become a leader in the right
situation.
First proposed by Parker Follet in 1941.
Problems are:
-The right person does not respond to the
challenge.
-Organisations cant wait for the right situation.
No one right way Contingency
theory (Mullins,2002)
E.g. Vroom & Yetton,1973:

Decision quality or rationality what effect does
decision have on group performance?

Decision acceptance what effect on
commitment of group to implement the decision.

Time required to make the decision.

Functional Approach

Skills of leadership can be learned,
developed and perfected.
Kotter (1990)
successful companies actively seek out
people with leadership potential and expose
them to career experiences designed to
develop that potential. Indeed with careful
selection, nurturing and encouragement,
dozens of people can play important
leadership roles in a business organisation.

Whitehead (2002)

Leaders are not born but made. And the good
news is everyone can do it. You dont have to
be promoted to a management position. You
can be a leader whatever job you do. You
dont have to be the boss to be a leader.
Action-Centred Leadership (Adair, 2003)
Adair suggests a considerable overlap
between management and leadership. But a
leader must:
Give direction
Provide direction
Build teams
Set an example
Be accepted
Motivation is 50:50 (50 internal:50 external)
Action-Centred Leadership (Adair, 2003)
Task Functions
Achieving objectives of work group
Defining group tasks
Planning the work
Allocating the resources
Organisation of responsibilities and duties
Controlling quality
Reviewing progress
Team Functions
5 to 20 people
Maintaining morale and team building
Cohesiveness of group
Setting standards and maintaining discipline
Systems of communication within group
Training group
Appointment of sub-leaders
Individual Functions
Meeting needs of individual members of
group
Attending to personal problems
Giving praise and conferring status
Reconciling conflict between group needs and
individual needs
Training the individual


Benefits of strategic analysis (Grant)
Decision support.
Provides bounded rationality.
Provides rules of thumb. (heuristic support.)
Coordinating device.
Between different organization members
Provides a target.
Forward looking
Before this decade is out, we will land a man upon
the moon and return him safely to earth. (President
Kennedy.)

Key Analysis Framework (Grant)
The rise of the modern corporation
The Divisionalized Corporation
~ 1920s
_ e.g. DuPont, General Motors
_ Separation of Divisional operational responsibility
from Strategic responsibility at HQ level
1920s to present
Matrix structures
Rise of Management systems (Financial,
Information, Human Resources etc)

Week 2 - Goals , Values & Performance
Financial Goals.
Value creation
Profit what is it, what are its limits?
Other financial considerations
Shareholders & Stakeholders
Corporate Social responsibility
(Illustrate complexity and difficulty using the
example of BP.)
Value creation
Value is what customers are prepared to pay
for goods or services.
Successful firms create enough value to have
some surplus value in the form of profit.
e.g. Sand >>>silicon wafer>>>mobile phone
processor chip (e.g. ARM Holdings)


What is profit?
An (old) joke: 2 x2 is 3.98 to an engineer. 4 to
a mathematician and What would you like it
to be !? to an accountant.
Accounting profit has been discredited in
recent scandals Bank collapses, Enron
etc.etc. (Use of off-balance sheet finance.)
Suggested use of Economic profit which
includes cost of capital. (See Grant.)


Discounted cash flow (DCF) & Value of
firm
Takes account of time value of money.
Assume that a firm gives a stream of cash flow
over a number of years.
Work them all out in terms of Net Present
Value. (NPV)
Add them all up to give value of firm.
For a publicly quoted company this should
equate to stock market value.
Discounted cash flow (DCF) & Value of
firm
In practice DCF doesnt equate much to stock
market value.
Uncertainty about future clash flows
Stock market not having complete information
Unexpected problems (E.g. BP in Gulf of Mexico.)
However we will assume that both are
equivalent and they will be used as the
measure to maximise enterprise value. (Grant)
Goals, Values & Performance
BP
http://www.bp.com/marketingsection.do?categoryI
d=2&contentId=7013628
Look at Gulf of Mexico response.
Look at BP at a glance , Key Facts & Figures
Look at p14 of 2009 Annual Report & Accounts
(Strategy etc
Auditors statement, p111
Notes on Financial statements, p116
.

Shareholders versus Stakeholders
What are shareholder?
What are stakeholders?
Different approaches in different countries.
Anglo Saxon capitalism!
But isnt profit everything!
(Look at Boeing handout.)
Need for long run profitability.
But values and principles are also needed.
Corporate Social Responsibility
A firm should benefit the wider community
(Compare with stakeholder concept)
Opposing views:
Firms should only operate to benefit their owners
the shareholders. (Free market view.)
The firm is a social entity which relies on its
external environment natural world and human
society.

Debate on CSR
Concentration or focus needed for successful
firms.
A bankrupt firm never helped anyone.
To achieve long run success (long term
shareholder value) firms need a Social
Licence to operate.
Week 3- Goals , Values & Performance
Balanced Scorecard
Cases Group answers
Balanced Scorecard
Problem with combining short, medium and
long term strategies? (Ref: BP discussion)
Problem with combining financial with
qualitative goals?
Problem with cascading down strategies
through global, complex organisation?
Solution!? The balanced scorecard.
Week 5 - Industry Analysis
The intensity of competition in an industry is
neither a matter of coincidence nor bad luck.
Rather , competition in an industry is rooted in
its underlying economic structure and goes
well beyond the behaviour of current
competition.

Michael Porter, 1980, Competitive Strategy, Page 3.
Global Profitability (Grant)
Competition Market Structure
(Palmer & Hartley,2006)
Industry Analysis
Michael Porter Interview (2008?)

http://www.youtube.com/watch?v=mYF2_FBCv
Xw
5 Box (or Forces) Model (Porter,1980)
5 Forces Model (Porter)
THE INDUSTRY (Middle box.)
Competition continually acts to drive down the Return on
Investment.
Barriers to entry:
Economy of scale
Product differentiation.
Capital needs
Costs independent of size.( Experience curve, access to raw
materials or suppliers, govt subsidies, patents.)
Access to distribution channels.
Govt policy and regulations.
5 Forces Model (Porter)
COMPETITIVE RIVALRY
Balance of size
Growth rate
Fixed costs
Exit barriers
Degree of differentiation
Maybe not as hot as they would like you to
believe! (e.g. Supermarket Price wars)
For Public Sector often Competition for Resources
5 Forces Model (Porter)

THREAT OF SUBSTITUTES
Price /performance
Even from outside the industry.
BUYERS POWER (not always consumers)
Concentration
Switching cost
Shortening the channel
SUPPLIERS (similar to above.)
Week 6 Competitive Analysis (Grant (6
th

Edn) Ch3,4)

The role of the Internet
Modifications to Porter analysis
Competitive behaviour- Game Theory
Summary (Turned through 90 degrees!) (Grant)
The role of the Internet

In groups, carry out a Five forces analysis on
e-tailers or e-retailers.

Does the Internet represent a new business
area or is it an aid to (existing) businesses?
Modifications to Porter analysis
Complementary products/services.

Only substitute products have been
considered so far.
What about petrol and insurance for a car?
Hardware and software?
Perhaps, add a sixth box for the complement?
Complements
Modifications to Porter analysis
Hypercompetition

(Looking at the central box.)
The assumption that industry structure determines the
competitive behaviour sounds a bit static.
What about entrepreneurship (You're fired!)and
creative destruction?
In practice, many industries are quite static but some
could be described as being Hypercompetitive e.g.
computers and electronics.
More on these in later weeks.


Modifications to Porter analysis
Game Theory
One criticism of Porter analysis is that it
models competitors as independent entities
whose strategies are independent of the
actions of other competitors.
This is not realistic in some situations e.g.
Pepsi versus Coca Cola, Boeing versus Airbus.
For this we need game theory.
Early Examples of Game Theory No 1
Assume that five men who have acquired a
rudimentary ability to speak and to understand each
other happen to come together at a time when all of
them suffer from hunger. The hunger of each would be
satisfied by the fifth part of a stag, so they 'agree' to
cooperate in a project to trap one. But also, the hunger
of any one of them will be satisfied by a hare, so as a
hare comes within reach, one of them grabs it. The
defector obtains the means of satisfying his hunger, but
in doing so permits the stag to escape.
Jean Jacques Rousseau. 1762. THE SOCIAL CONTRACT. Book 1

What would you (they) do?


Early Examples of Game Theory No 2
People of the same trade seldom meet
together, even for merriment and diversion,
but the conversation ends in a conspiracy
against the public, or in some contrivance to
raise prices.
Adam Smith, 1776 Wealth of Nations - Book 1: Improvement in
Productive Powers of Labour

Game Theory
John Nash (of A Beautiful Mind fame) won a
Nobel prize for his contribution to game
theory in 1994 for work which he completed
in the 1950s. (Siegfried , 2006 Beautiful math)
The Image:
http://www.youtube.com/watch?v=0_A2-
9hZHiA

John Nash: The Reality:

Nash Equilibrium
This was Nashs Great contribution:
Nash assumed a non- cooperative every man
for himself situation.
The equilibrium is the situation where each
individual gets the maximum they can without
having to allow for interactions with other players
e.g. Grab the hare in the stag hunt.
e.g. 2 armed superpowers in a mutually assured
destruction (M.A.D!) scenario.
Nash Equilibrium
The important point is that often by collaboration
players will collectively do better than the
equilibrium case e.g. The Stag Hunt and Adam
Smiths cartel.
This introduces the philosophical thought that by
rational thought and collective action humans
can lift themselves above Darwinian survival of
the fittest.
In business terms it produces a combination of
cooperation and competition e.g Co-opetition
(Brandenburger and Nalebuff)
The Prisoners Dilemma
The Scenario: The Police do not have sufficient
evidence to convict both of you and so seek a
confession. You are kept apart from your mate.
They offer:
No confession from either of you 1 year.
Grass your mate 0 years (You go free)
Dont confess but your mate does 5years.
Both confess 3 years .
Draw up table of possible strategies.
Where is the Nash equilibrium?




Contributions from Game Theory
Cooperation
Co-opetion
Participants usually benefit
Deterrence
e.g. Nuclear Arms race (Equilibrium changed by foreign
wars and terrorism.)
e.g. Mafia in the prisoners dilemma.
Commitment
Demonstrates that deterrence is credible.
Burning ones boats
Star Wars strategy versus USSR
Unnecessary advertising spend

Contributions from Game Theory
(Continued)
Changing the structure of the game
Inviting new alliances.
Inviting new competitors e.g. Intel and AMD
Signalling
Misinformation in military strategy e.g. D day
landings
Companies reputation as fierce e.g. P & G,
News Corporation.

Week 7 Competitive Analysis

PESTEL analysis (You have probably done this
before?)
Case study: Manchester United, The Glazer
Takeover (Available online from the Library in
the Robert Grant textbook + Cases)
198
Macro Environment- External forces that affect an
organisation

PESTEL or LE PEST C
Political
Economic, fiscal
Social, cultural
Technological
Environmental
Legal
(For Competition see Porter!)
Using environmental analysis
Concentrate on key killer factors rather than
compiling a long list.
To what extent can organisations shape their
own environment?
199
Week 8 Competitive Analysis 2
& Resource based analysis

Segmentation
Resource based approaches:
(SWOT)
Introduction to resource based analysis
Competitive Analysis 2
Segmentation Analysis market/customer
based.
Strategic groups - corporations with similar
strategies e.g. Budget airlines

Exhibit 2.7 Some bases of market segmentation
Market Segmentation Bases
Exhibit 2.6 Some characteristics for identifying strategic groups
Sources: Based on M.E. Porter, Competitive Strategy, Free Press, 1980; and J. McGee and H. Thomas, Strategic groups: theory, research and taxonomy, Strategic Management Journal, vol. 7, no. 2
(1986), pp. 141160
Strategic Groups
Resource based analysis
Growing view in the 90s that industry attractiveness did not
define why some firms in the Industry did well and others did
not.

Key aspect was the resources and capabilities of the firm.

In some ways this related back to earlier analysis methods such as
SWOT.

Key workers on this topic in the 1990s were Hamel & Prahalad.

http://www.youtube.com/watch?v=WfP-VICbLRA&feature=related


Strategic capability (SWot)
What makes organisations survive and
prosper in the long term. (And the long term
may be shorter than you think!)
Resources
Competencies









Strategic capability (SWot) - Conclusions
Corporate Strengths and Weaknesses are difficult to
analyse because organisations are complex and
subtle.
Perhaps needs a combination of looking in and
looking out.
Role of consultants perhaps?
Resource based view of strategy

The Resource based view of strategy- that the
competitive advantage of an organisation is
explained by the distinctiveness of its
resources and competencies. (Johnson & Scholes)
Exhibit 3.2 Strategic capability: the terminology
Terminology
Exhibit 3.1 Strategic capabilities and competitive advantage
Resources
TANGIBLE:
Physical plant , production, people and finance


INTANGIBLE
Information available, reputation, knowledge,
intellectual property, Branding.



Week 10. Resources and Capabilities 2

Key Strategic Capabilities
- cost efficiency
- can they be imitated or copied?
Value chain analysis
Benchmarking

(See Johnson & Scholes* ( 7
th
edn.) Chapter 3and Grant ( 6
th

edn.) Chapter 5
*Recommended this week
Exhibit 3.3 Sources of cost efficiency
KEY STRATEGIC CAPABILITIES - Cost efficiency
Exhibit 3.4 The experience curve
KEY STRATEGIC CAPABILITIES - Cost efficiency
Strategic Capabilities can they be
copied?
Criteria for Strategic Capabilities
COMPLEXITY
Internal and external linkages activities and
processes
CULTURAL HISTORY
Taken for granted
Involved history a path
Can it be restrictive?
CAUSAL AMBIGUITY
How do they do that?
Exhibit 3.6 The value chain within an organisation
Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E.
Porter. Copyright 1985, 1998 by Michael E. Porter. All rights reserved
VALUE CHAIN (Porter)
VALUE CHAIN (Porter)

What activities create value in an organisation
and what do they cost?
Concept developed by Porter in 1985
Looks at the 5 Primary activities which directly
create a Product or Service.


VALUE CHAIN (Porter)
Primary activities:
Inbound logistics(Materials, storage, stock control,
transport.
Operations (Manufacturing, assembly, packaging )
Outbound logistics(Warehousing, distribution to
customer)
Marketing and sales (Promotion, cash registers,
invoicing, websites)
Service ( Installation, repair, spares)
VALUE CHAIN (Porter)
Support activities:
Procurement. All the processes needed to obtain
resources.
Technology development. R & D and product
innovation but also technology in a broad sense e.g In
a supermarket. shelf life improvements, ready meals
etc.
Human Resources Management (Recruiting, training
people)
Infrastructure (Planning, finance, quality control,
information management. Also the structures and
routines which form the culture of the organisation.


Value chain analysis
What should we do (and not do)?
Where does the profit lie? (e.g. insurance or
finance rather than just making the item.)
Who should we partner with?
Leads to ideas of Supply Chain Management
(SCM)
Exhibit 3.7 The value network
Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E.
Porter. Copyright 1985, 1998 by Michael E. Porter. All rights reserved
BENCHMARKING
Historical Look at your own past
performance. (Complacency?)
Industry/ Sector Industry norms (But what is
the Industry?)
Best in Class wide search for comparison
body. (Can shake up complacency and
introduce radical change.)
Benchmarking - Competitor Profiling
Financials
Marketing
Products / Services
Marketing
Personnel
Media Scanning
New competitors on the horizon (What
industry are you in?)
Long term commitment
COLLABORATIVE BENCHMARKING

Looks at best practice in the industry
Does not have espionage image!
One off or regular process
Good use in Public Sector

Benchmarking - problems
You get what you measure. But what if you
cant measure it?
Benchmarking only looks at inputs, outputs
and resources. Not the underlying causes of
the differences.

Week 12. Principles of Organisation
and Management

History of Organisations
The rise of the modern corporation
Some initial thoughts on organisational
design.
History of Organisations
Until the end of the Victorian era the only
large organisations were the Catholic church
and National armies. (Grant.)
Only large commercial organisations were
Trading Companies such as Dutch East India
Company and the British East India Company
(Grant.)
The Size Problem
Size introduces specialization and division of
labour (e.g. Adam Smiths pin factory.)
But this increases the need for coordination
and control a hierarchy, perhaps.
Hierarchy then develops Bureaucracy (Weber
and Fayol)
Bureaucracy then become a bad thing!
(Resistant to change etc.)
The rise of the modern corporation
Ownership and Control
Trading Cos had separate legal personality were
but difficult to set up. (Act of Parliament etc)
Joint Stock Companies act (1844) gave simple way
of separating legal personality and easy way of
raising finance. (Palmer & Hartley)
Line and staff (19th Civil & Military examples)
Line - operational tasks
Staff - administrators and functional specialists.

The rise of the modern corporation
Span of control (Concept originally came from
the military.)
How many people report to the person above
them.
1:3 originally
Now 1:10 ?? (Flatter organisations, Use of IT)
The rise of the modern corporation
The Divisionalized Corporation
~ 1920s
_ e.g. DuPont, General Motors
_ Separation of Divisional operational responsibility
from Strategic responsibility at HQ level
1920s to present
Matrix structures
Rise of Management systems (Financial,
Information, Human Resources etc)

Further thoughts
Strategy and Implementation. Which is most
important?
Structure follows strategy or strategy follows
structure?

Week 1, Sem 2. Competitive Advantage
What is competitive advantage?
Why does it happen?
How can it be sustained?
Brief look at trading markets.
Generic strategies by Porter.

Definitions
For not for profit organisations, competitive
advantage = being better than your rivals
over a long time period?
For commercial organisations better= long
run profitability?


One Saturday afternoon in downtown Chicago, Milton
Friedman, the famous free-market economist, was
shopping with his wife.
Look, Milton! exclaimed Mrs. Friedman. Theres a
$20 bill on the sidewalk!
Dont be foolish , my dear, replied the Nobel laureate.
If that was a $20 bill, someone would have picked it up
by now. Anon and quoted in Grant.
Napoleon was asked whether he preferred
courageous generals or brilliant generals. Neither,
he replied; he preferred lucky generals.


SO?
You could argue (and some economists do!) that
competitive advantage is a disequilibrium and
at best a temporary phenomenon. So you are in
danger of explaining away all success!
The problem is that as managers of organisations
we have to maintain a competitive advantage.

HOW??
Change
Disequilibrium is going to occur because of
change either external or internal.
External sources of change (PESTEL)
Internal (innovation, entrepreneurialism, (i.e.
your people), resources (e.g. Wal-Mart's size
and logistics capabilities)
Change
Also a A new game strategy which involves
external and internal factors in a new
business model.
Examples (in chronological order):
First Direct (Phone banking)
Direct line Insurance
Amazon
eBay
Facebook

Sustaining competitive advantage
The effect of erosion by competitors can be
reduced by isolating mechanisms (Rumelt quoted
in Grant.)
IDENTIFICATION- are they really any better?
INCENTIVE - will copying actually help me?
DIAGNOSIS Can I work out what they are
doing better?
RESOURCES Can I acquire the same level of
resources?

Strategies based on isolating
mechanisms
IDENTIFICATION - are they really any better?
Private rather than Public Co. (e.g. Mars)
INCENTIVE - will imitating actually help me?
Bluff
Patent proliferation (Xerox copiers had 2000
patents (Grant)
Excess installed capacity (e.g. NutraSweet)(Grant)






Strategies based on isolating
mechanisms
DIAGNOSIS Can I work out what they are
doing better?
Retailing is an open secret- You just walk in and
look! But why are Wal-Mart so successful?

RESOURCES Can I acquire the same level of
resources?
Hint: Coca Cola has a brand value of $72 billion!
(Interbrand, 2010)




Special notes on Trading Markets e.g.
Stock Exchange
Theoretically examples of Perfect
Competition (Many buyers & sellers, no
entrance or exit barriers, free flow of
information.)
Again under these theoretical conditions, we
would have an efficient market e.g. share
prices reflect all available information. No
trader will have a competitive advantage over
any other.
Special notes on Trading Markets
Sources of competitive advantage.
Imperfect information Senior Company
Executives information - Insider dealing?
Transaction costs Reduced management and
research costs e.g. FTSE based unit trusts.
Systematic price trends e.g. Sell in May and
go away!. Chartists etc.
Overshoots market over reactions in either
direction i.e. buy when everyone is selling e.g.
Warren Buffet (2
nd
wealthiest man in world)
Generic Strategies (Porter,1980)
Week 2, Sem 2. Cost Advantage

Identifying cost drivers
Types of cost reduction
Dangers of cost reduction strategies.

Pile It High Sell It Cheap.

Original slogan by Jack Cohen the founder of Tesco.
(Quoted in Wikipedia)
Cost Advantage as a basis for strategy
Price or Cost?
Needs to be cost in the long run.
Dangers of Commoditisation.
Experience curve concept (See next slide)
Perhaps anticipate cost reductions over time
Leads to ideas of market penetration.


Exhibit 3.4 The experience curve
KEY STRATEGIC CAPABILITIES - Cost efficiency
SOURCES OF COST ADVANTAGE (Grant)
Economies of Scale
Concept often associated with manufacturing
but can be seen in many things:
Oil tankers :
20 000 tons in 1945
500 000 today
Dairy Farms:
100 cows (typically) (Wikipedia)
8000 cows (Proposed) (Farmers' Guardian)



Economies of Scale
Advertising campaigns
Large scale TV advertising much more
affordable for large organisations
R & D
Much more affordable for larger
organisations
Could there be dis-economies of scale?
(e.g. Gigantism in the USSR)

Economies of learning
Individual and group level
e.g. Flat screen TV manufacturing by Sharp &
Samsung (Quoted in Grant)

Process Technology and Process
Design
e.g. Production line (Various including Ford, Chicago)
e.g. HaberBosch process (BASF, Germany, 1913)
e.g. Float Glass process (Pilkingtons, Ormskirk)
e.g. Surface Mount Technology (Mobile phones,
Ipads etc)
Input Costs
Location (wage rates etc.)(e.g. China)
Availability of raw materials or supplies.
(Aluminium in Scotland or Iceland.)
Non-union labour.
Cost Analysis
Use Value Chain Analysis (See previous notes.)
Exhibit 3.6 The value chain within an organisation
Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E.
Porter. Copyright 1985, 1998 by Michael E. Porter. All rights reserved
VALUE CHAIN (Porter)
Dangers of low cost strategies
Margin reduction
Inability to reinvest

Cost reduction as an end in itself.
To make it sustainable needs to be in a form which
competitors cant copy.

Week 3, Sem 2. Differentiation
Differentiation versus cost advantages

Differentiation = Modern marketing?

Marketing Strategies and concepts
Generic Strategies (Porter,1980)
Differentiation
Differentiation can be sustainable
unlike cost advantage
Differentiation = Modern marketing?
Modern marketing requires
marketing to be integrated into the
overall strategy of an organisation.

Marketing strategies
4 x Ps (For products)
Price (versus competition)
Product
Branding
Place (Channels/Distribution)
Promotion
Advertising, sales promotion, personal selling, direct

7xPs (For Services)
Above + People, Physical Evidence, Processes
Marketing concepts
Segmentation
Understanding a customer and their needs.
Ability to concentrate resources.

Positioning
In mind of consumer
Marketing concepts
Product Life cycle(e.g. Kellogg's Cornflakes)
Buyer behaviour
E.g. IKEA
Attention
Interest
Desire
Action

Conclusions about Differentiation
Can be sustainable
Threats are low cost entrants
Can work well for small organisations
Increased globalisation can provide
advantages

Week 4, Sem 2. Industry Evolution &
Change.
Change.
Industry Life Cycle
Diffusion of knowledge
Technology convergence
Industry evolution
Inertia



Change
Think about telephones!
Change versus Inertia.
How long do organisations live for?
Discontinuous change or adaptive change.
Exhibit 2.3 The industry life cycle
Industry life cycle (PLC to marketers!)
(Johnson & Scholes)

How general is the PLC concept?
The railway?
Kelloggs Cornflakes?
Clothes?
The Car?
The Mobile phone?

General trend seems to be a contraction of
the PLC. (Grant)
Diffusion of Knowledge
Seed Corn! The start of diffusion research
Gross studied the introduction of hybrid corn in Iowa
in 1943. (Significant agricultural advance.)
Found that first farmers to adopt the new corn (The
Innovators) were of higher socioeconomic status and
travelled more widely.
Farmers chatting spread the idea but process took
about 9 years from awareness to adoption.
Study eventually led to Everett Rogers proposing his
Classification of adopters approach in 1962
Changing peoples ideas - Adopter Categories
(Rodgers, 1962)
Diffusion of technology
Kondratieff proposed idea of long term (50
years) cycles of boom and bust driven by
periods during which technology is exploited
e.g. Steam, Electricity, Computers,
Microelectronics etc.
Technology convergence? (Grant)
Initially many rival, competing designs.
Then convergence into a Product
Architecture.
e.g. The Car, The fast food restaurant, the
mobile phone, The PC, The tablet PC?
Then improvements in process.
Exhibit 9.2 Product and process innovation
Source: Adapted from W.J. Abernathy and J.M. Utterback, A dynamic model of process and product innovation, Omega, vol. 3, no. 6 (1975), pp. 639656
Industries and Darwinian Evolution
(Grant)
Many firms initially
Few large firms, concentrating on the mass
market.
New small entrants, market niches.
e.g. UK Brewers?:
Many local brewers-Victorian era
Few large Brewers
Very large Brewers + Microbreweries (today)


Organisations response to change?
Need to evolve?
Role of managers and all the workforce?

Organisational Inertia (Grant)
Core capabilities can become core rigidities
e.g. mass production in 19
th
C US versus UK
Social and Political structures
e.g. UK educational system and technology?
Conformity between firms
e.g. UK shipbuilding

Organisational Inertia
Limited search and blinkered perceptions.
"I think there is a world market, for maybe five
computers...IBM chief Thomas Watson in 1943

"Computers in the future may weigh no more than
1.5 tons."
-- Popular Mechanics, 1949
(http://www.anecdotage.com/index.php?aid=11509)

If it is not broken dont fix it!

I can see no UK Market for bottled water. David Forrest 1971

Adapting to technological change
Is impact at component or architectural
level?
Component existing firm can prosper e.g. Online
grocery delivery.
Architecture Existing strengths (Brand,
distributors etc) may allow survival or not e.g.
Amazon versus bookshops.
Managing change
Decentralized businesses?
Scenario planning?
Senior management sees the future? E.g.
Steve Jobs
Conclusions

Future is hardly certain but their are patterns.
The need for constant change.


Week 5, Sem 2. Innovation Management 1


Invention and Innovation
Making innovation profitable - Property rights
Which mechanisms are best to protect
innovation?
Alternative entry strategies


Invention and Innovation

Invention
The Eureka moment!
Relatively cheap
Often languishes!

Innovation
The initial production and marketing.
Diffusion into market place
Profitability of Innovation

Property rights
Patents - novel ideas(Usually 20 year term)
Copyrights Artistic, literary, dramatic or musical.
Trademarks Words, symbols or other product
markings.
Trade secrets recipes, formulae, customer lists
e.g. Float glass process, depth control for the
Whitehead torpedo (The Secret!)

Profitability of Innovation
Resources to defend infringements?

Codifiable knowledge
Can be written down and therefore copied

Complex knowledge
E.g. a military aircraft, a processor


Profitability of Innovation

Lead time
How long for competitors to catch up?
Experience curve

Complementary resources
E.g. Plug points for electric cars

Which mechanisms are best to protect
innovation?
Secrecy
Patents
Lead time
Sales/service resources
Manufacturing resources
Evidence (Grant) seems to suggest that Patents
are weakest of these 5 and are decreasing in
strength.

Alternative entry strategies
Licensing
Lower risk and resource need
Outsourcing
May create dependence
Joint venture
Well structured like a marriage!
Strategic Alliance
Risks with informal structure like living together!
Internal commercialization (DIY!)
High resource needs

Week 6, Sem 2. Innovation
Management 2

Leader or follower?
Setting standards
How and when to enter. Lead or
Follow?
Mixed success for the Leader

For success need:
Protection by patent
Lots of resources
No need for complementary resources
Ability to establish THE standard e.g. VHS tapes
Managing risk (Grant)
Technological uncertainty
Evolution
Standards emerging
Market uncertainty
Size & growth
Need to:
Cooperate with lead user
Reduce financial exposure
Be flexible



Feedback on Assignment 1
25 scripts randomly picked and marked so far.
(All subject to moderation.)
70+ 3
60+ 9
50+ 9
40+ 4
20+ 0

Feedback on Assignment 1
Generally impressed by the standard. Most people rose to
the challenge.
Overall conclusion Yes to similarities with limitations.
Discussion good one or several military concepts
discussed with corporate examples e.g.
Deception can make company look unethical or
undesirable
Military have no equivalent to customers (Collateral
Damage!)
Out-flanking e.g. Budget Airlines
Referencing still not good and can be easily fixed. At least
one of 25 did not use Harvard. Others not Alphabetical and
References not Bibliography.

Mintzberg on Strategy v Operations
http://www.youtube.com/watch?v=4srFC0de
4ww

Competing for Standards (Grant)
A format, interface or system
Public e.g. Linux
Private e.g. Microsoft Windows
Can be slow to form e.g. railway track widths
Needed when you need to connect with
others.
Winning standard wars
Assemble your allies first.
Enter early and go far penetration pricing.
Be hugely confident (Game theory)
Managing creativity


The case study??
Conclusions

Perhaps better to be a big follower.

Small, innovative organizations should look to
sell on their ideas, perhaps.


Week 7, Sem 2. Strategies for Mature
& Declining Industries
Defeat or strategic withdrawal dealing with
decline.
Best done smoothly, progressively as possible
(not too fast) and with forward planning.
Broad conclusions but beware confusing
macro with micro often benefits for small
firms, individuals, etc.
Exhibit 2.3 The industry life cycle
Industry life cycle (PLC to marketers!)
(Johnson & Scholes)

Mature Industry Characteristics
(Porter,1980, Competitive Strategy)
Examples are GE, Cadbury Kraft Foods,
McDonalds, Oil Cos etc.
Cost efficiency is most important for mature
industries, so:
Economy of scale can be important
Need for low cost inputs (Hampered by high wages,
feather bedded employment conditions.
Common strategy is buying up mature organisation and then
cutting labour costs (e.g. Private equity funds, AA/SAGA,
Boots now with HQ in Switzerland)
Need for low overheads.
Potential Strategies
Mature industries tend to be driven towards
commoditisation, so differentiate as much as you
can. (e.g. Airlines??)
Innovate if you can.
Trim product lines.
Overseas markets??
Add extra products and services (e.g. Filling
stations as shops, coffee shops in Waterstones.)
Standardise as much as possible (Mintzbergs
Machine Bureaucracy) e.g. McDonalds.

Declining Industries
-Defn: decline in sales over sustained period
New Technology, demographic changes & needs
often cause decline e.g. tobacco, UK potteries,
shoe making, fishing, mens suits, steel??
Problems are:
Management
Excess capacity
Lack of technological change
Fewer competitors
Old plant & workforce
Aggressive price competition
Making decline easier
Spotting and anticipating decline often
difficult (e.g. UK Railways.)
Decline hidden by peaks and troughs.
Reduce capacity smoothly (Government
intervention?)
Barriers to exit are closure costs (redundancy etc),
managerial commitment.)
Disposing of productive assets within the industry
not good for the survivors. (Best to scrap them.)

Strategies for declining industries
Leadership in that market (Allow competitors
to disappear, acquire them, brazen them out.
(Game play))
Niche market segment
Harvest sweat the assets.
Divest quickly sell off early
Strategies for declining industries
Conclusions
Important area for strategy.

Comes to every industry and individual!

Week 8, Sem 2, Vertical Integration
What is vertical integration.
Why it happens?
Forms.
How to choose form.
How the fashion changes:
Then (1970s):
If you want some milk, buy a cow!Sir Roy Watts,
1980,Chief Executive ,British Airways.

Now:
Downsize!
The Virtual Corporation.

322
Scope of firms activities
Product Scope What we offer.
Geographical scope Where we offer it.
Vertical scope How much of it we do
ourselves. (Vertical Integration.)
Transaction versus Administrative
costs:
Transaction costs (within Market Economy):
Finding a supplier, contracts, monitoring, invoicing
e.g. engaging a builder

Administrative costs (within the Firm):
Doing things internally, fixed and variable costs,
transfer pricing e.g. Having IT fix your computer.

Historical Trends
Balance between Transaction & Administrative
costs varies over time almost on a fashion
basis.
19
th
c to 1970s in 20
th
c, bigger and more
vertically integrated.
After this the era of downsizing etc. (Oil
shocks more turbulent business
environment needs speedy response.)
What is vertical integration?
The degree of ownership and/or control exerted
upstream or downstream.
Reasons for:
Physical integration of processes (Long history of this) e.g.
strip steel (No need to reheat the steel.)
Transaction costs minimise
Large no. of suppliers. e.g. Standard components bought out,
specialised made in-house.
Supplier may have distinctive capabilities e.g. IBM in data services,
large manufacturer may be better at supplying a retailer.
Independent supplier may be hungrier (have more incentive)
than In- house.
In-house may be more flexible e.g. Zara
Different types of Vertical
Relationships
Long term contracts (Versus spot contracts e.g.
Crude oil.)
Needed if a relationship is needed and if supplier is
expected to invest.
Vendor partnerships
Close relationship between buyer and supplier e.g.
Japanese motor industry (JIT systems)
Franchising
Rights to reproduce the business elsewhere (Similar to
Licensing)
Choosing between vertical
relationships. Factors include:
Degree of relationship, trust etc.
Allocation of risk.
Incentives structures.
Recent trends
Growing trend for VMSs (Vertically Managed
Systems) or the Virtual Corporation.
And a trend for outsourcing e.g. Indian call
centres, software.
Some reverse trend because of reduced
transaction cost over the internet (e.g.
ecommerce hubs.

Week 9, Sem 2, Global Strategy

Porters Diamond
Drivers for and against globalisation
Organisational forms
Exhibit 8.3 Porters Diamond the determinants of national advantages
Source: Adapted with permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from The Competitive Advantage of Nations by Michael E. Porter. Copyright 1990, 1998 by
Michael E. Porter. All rights reserved
333
334
335
INTERNATIONAL BUSINESS
ENABLING FACTORS:
Technology growth - Transport, Communications.
Removal of Barriers. (GATT rounds, Economic
Integration -EU, Free Trade Areas )
COMMON INHIBITING FACTORS:
P olitical
E conomic tariffs
S ocial in the form of cultural factors
CULTURAL FACTORS
Language verbal & non-verbal
Social interactions (Ageism, male/female, saving face)
Religion Taboos? (Alcohol, pork, days of week.)
Education (Literacy, aspirations.)
Value systems (Attitude towards time, money.)
Aesthetics Colour, design, music etc.

Self- Reference Criteria (Lee, quoted in Carter)
- the unconscious reference to ones own cultural values
- the root cause of most business problems abroad.

Exhibit 8.1 International strategy framework Some key considerations
Exhibit 8.4 Four international strategies
Source: Adapted from M.E. Porter, Changing patterns of international competition. Copyright 1986, by The Regents of the University of California. Reprinted from the California Management Review,
vol. 28, no. 2. By permission of The Regents
340
Globalisation of Markets.

Companies operate as if the world is one large
market, ignoring regional & national
differences.(Levitt, 1983)
Possible examples: Hollywood movies, Nike,
Sony, Toyota, Coca Cola??

Week 10, Sem 2, Diversification
What business are we in?
What business should we be in?
i.e. business scope
Almost inevitable loss of shareholder value!
Historical trends looked at previously
A leveraged buyout specialist at work!

http://www.dailymotion.com/video/xex9rz_g
ordon-gekko-greed-is-good-full-spe_shortfilms

Diversity and performance The Conundrum!
Exhibit 7.2 Strategic directions (Ansoff matrix)
Source: Adapted from H. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6. (The Ansoff matrix was later developed see reference 1.)
Ansoff Matrix
Has very early origins (1957)
Very much concerned with growth (and risk
and reward)
Helps to answer the question Where do we
go from here?
Exhibit 7.7 The growth share (or BCG) matrix
The Boston Box
Developed (among others) by Bruce Henderson who
founded the BCG. Introduced in 1966 but is still used.
Introduced the Portfolio concept.
Cash basis assumes that other financing methods
are not available.
Emphasis on growth rather than more modern
idea of shareholder value.
Not much consideration of risk - Will shareholders
risk be diversified by having several SBUs in one
company all with similar management?
(This consideration leads to later ideas underlying
the Capital Asset Pricing Model, Betas and
Hedging.)


Exhibit 7.8 Directional policy (GEMcKinsey) matrix
Exhibit 7.9 Strategy guidelines based on the directional policy matrix
Exhibit 7.3 Related diversification options for a manufacturer
Note: Some companies will manufacture components or semi-finished items. In those cases there will be additional integration opportunities into assembly or
finished product manufacture
Porters 3 tests for successful
diversification
Attractiveness Industries must be
structurally attractive or capable of being
made so.
Cost of entry test Cost of entry must not
capitalize all the future profits.
Better off test New unit or the parent must
gain competitive advantage.
Reasons for Diversification
Growth, risk reduction and profitability
Transaction(External) versus Administration(Internal)
costs
Better use of resources (Bookshop Coffee shop)
Applying corporate parenting skills more widely (i.e.
LVMH Group Luxury)
Market power cross subsidy etc.
Responding to market decline
Expectations of stakeholders Consultants & Investment
Bankers???!
Fashion.
Corporate Parents ability to: Add value

Envisioning
Coaching
Provide central services and resources
Pool of talented people.
Intervening
Internal capital market

Corporate Parents ability to: Destroy
Value
Adding management / head office overheads
Bureaucracy
Obscuring financial performance (e.g. Enron)
Cross subsidy to less successful SBUs.

Exhibit 7.5 Portfolio managers, synergy managers and parental developers
Source: Adapted from M. Goold, A. Campbell and M. Alexander, Corporate Level Strategy, Wiley, 1994
Diversity and performance The Conundrum!
Related Diversification
Unrelated diversification is always seen as
unsuccessful (Even in Ansoff matrix.)
But what is Related Diversification?

Strategic relatedness: (Grant)
Resource Allocation:
Similar size of project, time spans, risk sources,
management skills.
Strategy Formulation:
Similar key success factors, position on Industry
Life Cycle, competitive positions
Performance management & control:
Similar targets, time horizons.
Conclusions
Diversification always dangerous but so is not
diversifying if you are in a mature industry.
Risk can be reduced with Related
diversification.
E.g. Berkshire Hathaway and Virgin Group (At
time of writing!)

Week 11, Sem 2, Managing the
Multibusiness Corporation

Review of different forms of business
structure.
Concentrate on Multibusiness Divisionalized
form. (Relevant to GE.)
The rise of the modern corporation
The Functional Organisation
Introduced early on and still present.
Can be inflexible and inward looking (Silo
mentality.)
Exhibit 12.2 A functional structure
The rise of the modern corporation
The Divisionalized Corporation
~ 1920s
_ e.g. DuPont, General Motors
_ Separation of Divisional operational responsibility
from Strategic responsibility at HQ level
- Common in Public sector (Parks and Leisure, Social
Services etc.)

Exhibit 12.3 A multidivisional structure
The rise of the modern corporation
1970s to present

Matrix structures
Flexible
Need grown-ups to resolve conflicts.

Exhibit 12.4a Two examples of matrix structures
Exhibit 12.4b Two examples of matrix structures (Continued)
The rise of the modern corporation
1980s to present

Transnational Cos

Often have centres of excellence which share
knowledge with rest of the world.

Think Global, Act Local. (Ohmae)


Exhibit 12.5 Multinational structures
Source: Reprinted by permission of Harvard Business School Press. Adapted from Managing Across Borders: The transnational corporation, 2nd edition by C.A. Bartlett and S. Ghoshal, Boston, MA, 1998.
Copyright 1998 by the Harvard Business School Publishing Corporation; all rights reserved
The rise of the modern corporation
Project Based Structures
Always been around but often now very large.
Finite life span
Very flexible
Can have human costs

Exhibit 12.6 Comparison of structures
Choosing Structures (Johnson & Scholes, p445)
Market- Advantage Test i.e. Structure follows
strategy. (Alfred Chandler)
Parenting Advantage Test (Fits Parenting role
of corporate centre.)
People Test (fits people available.)
Feasibility Test (fits requirements which are
often external e.g. legal forms)
Exhibit 12.3 A multidivisional structure
Divisionalized form - advantages
Clarifies decision making by stratification.
Efficient allocation of capital divisionalized
structure provides internal capital market.
Some resolution of Agency problem (Senior
management being unconcerned about
shareholders.) Senior management should
monitor divisional profitability and thereby
meet shareholders needs.

Exhibit 7.8 Directional policy (GEMcKinsey) matrix
Exhibit 7.9 Strategy guidelines based on the directional policy matrix
Creating value by linkages between
Divisions (Economies of Scope)
Old style conglomerates failed because of lack
of identity or poor (financial) controls.
Multibusiness corporations require integration
and creation of value in and between divisions
Corporate Parenting.

Week 12, Managing Strategic Change
Strategy & Change
Theoretical Foundations of change theory
Individuals response to change
Force Field analysis


Strategy & Change
Strategy is a precursor of change. (Emergent
strategy?)
Context very important a small
entrepreneurial firm can do what a large
corporation cannot.
Change is not (and should not?) be just a top
down thing.

Exhibit 5.2 Strategic Drift
Chaos Theory (Stacey,1992)
Steady state breeds a dangerous managerial
mindset.
Corporations last half as long as humans.
The long term future is not knowable.
Shared single mind set throughout an
organisation is very dangerous.
You need to look at ever changing agendas of
strategic issues.
Need for the Learning Organisation.
Theoretical Foundation Group Dynamics
School
Emphasis on the team and the work group.
Need to change group norms, roles and values
rather than those of the individual.
Very influential and still with us. (e.g.
Organisational Development (Group hug
anyone!)
Key workers Lewin (1940s), Schein, Blake &
Mouton, French & Bell)
Group Dynamics School (Kurt Lewin,1890
1947)

-Action Research
-Force Field Analysis
-Three step change model (Unfreeze-Move-Refreeze)
May the force (field!) be with you!
Theoretical Foundation Systems and
Contingency Approach
Probably grew out of WW2 - very large
diverse organisations working together.
Still very influential.
Researchers - Burns & Stalker ,1961, Trist
1963( Tavistock Institute, UK coal mining
studies) 1961,Woodward(UK),1965

Theoretical Foundation Systems and
Contingency Approach
Organisation also important, People + task +
technology
Org. goals
Sub- systems
Values
Technology
Psychosocial
Managerial

Theoretical Foundation
Culture-Excellence School,1980-1990s
E.g Peters & Waterman, Moss Kanter, Handy
Peters & Waterman- In search of excellence,1982
Based on McKinsey Seven 7s (Strategy,
structure,systems,staff,style,shared-values & skills.)
They challenged the previous rational approach to
management e.g. paralysis through analysis ,
rational irrationality.
Theoretical Foundation
Culture-Excellence School,1980-1990s
Suggested 8 key attributes (Peters & Waterman):
A bias for action
Close to the customer
Autonomy & entrepreneurship
Productivity through people
Hands on, value driven top to bottom
Stick to the knitting
Simple form, lean staff
Simultaneous loose-tight properties shared cultural
values allow freedom.

Suggested approach - Balogun
Perhaps based more on systems approach
using power, technology, culture, group
psychosocial needs.

Also taking context into account.
Exhibit 14.1 Key elements in managing strategic change
Exhibit 14.2 Types of change
Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, 2
nd
Edn, Prentice Hall, Pearson Education Ltd, 1999
Types of Change (Johnson)
Exhibit 14.3 Contextual features of strategic change programmes
The individual and change. Bisto ad
1980s
http://www.youtube.com/watch?v=d5s48ZQk
vo0&feature=related
The Individual and change. - Brassed
Off (1996)
http://www.youtube.com/watch?v=lKx3MUqz
CcQ
Individual response to change Bereavement (Kbler-
Ross,1969)
Force Field Analysis (Lewin,1940s and many since.)
Sees any change as the balance of 2 forces.
One set opposing change, one set supporting
change.
Carried out by change agent (Outsider or
Insider individual or team)
Force Field - Process (Carnall,2003)
1. Define the problem in terms of present situation
(SWot) and what is wanted to achieve.
2. Identify forces for and against (People, resources,
time, external factors, corporate culture.)
3. Underline the forces you judge to be the most
important. For each one list the actions required to
exploit or build upon this force.)
4. Agree on those actions and the resources you will
need.
Exhibit 14.4 A forcefield analysis (For the last but one change in the Forestry Commission!)