Overall Organisation and Performance
Chapter 2
Importance of creative thinking to improve the overall success
- new problems might require new solutions (out of the boy thinking)
- aim of problem solving is to create a competitive advantage
- possible steps to a problem solving approach
1. identify the resource gap and obtain these resources
2. explain the impact on the business and consider different solutions
3. choose the best solutions and explain it in depth and breadth
Pros and Cons chart
- advantages and disadvantages are weighed up
- decisions can be made based on the best outcome
Decision Tree
- visual representation of each possible outcome
- helps to look at the outcome of each decision
Value Chain Analysis
- thinking about the different ways the business creates value
- all stages of production have to be reviewed in order to see what does not add value
- in manufacturing it is easier to determine the value added
- service orientated business is more difficult (time, experience, equipment and inputs)
- three step approach
1. determine where value is added
2. activities that add value are retained
3. activities not adding sufficient value are eliminated or improved
SWOT Analysis
- strengths and weaknesses are controlled by the business
- financial strength (capital, profitability, solvency, liquidity)
- quality and creativity of marketing
- brand strength
- location of business
- cleanliness of the store
- quality of the product
- competitive pricing
- strength of management
- skills and experience of employees
- any other internal factor
- opportunities and threats cannot be controlled
- all elements of porter & pestle
The Delphi technique
- opinions of experts are collected without necessarily engaging with them face to face
- the experts remain anonymous
- opinions are expressed critically by avoiding the judgement of others
Resource-Based Approach
- which resources are of strategic importance to the business
- which resources are needed to overcome threats
- availability of resources can result in a competitive advantage (especially scarce
resources)
- resources can be tangible or intangible
Balance Score Card
- focussing on key outcomes and measuring the success
- the key outcomes are important because they create value to the business
- elements are:
- financial perspective - maximum utilisation of assets and minimising costs
- customer perspective - customer’s expectations and loyalty
- internal business perspective - innovative products and operation of management
- learning and growth perspective - how can employees continue to improve and
create value (leadership, responsibility, productivity)
VMOST Analysis
- Vision - where does the business want to be in the future
- Mission - series of steps that guide the business to carrying out its vision
- Objectives - define whether a mission has been accomplished - are objectives SMART
- Strategies - used to guide objectives
- Tactics - encompasses the specific low-level actions taken for strategies do be fulfilled
- benefits
- easily understandable amongst all stakeholders
- provides clarity, agreement and focusses on the future
- downsides
- does not guarantee employee buy-in
- if missions and visions are unachievable the strategy fails
Generic strategies
Low cost strategy
- competitive advantage is created by the lowest prices in the market
- is done by accessing cheap raw materials, efficiency, mass production, technology
- activities that do not offer cost benefits must be discontinued
Focus (niche market)
- all efforts are aimed at a specific market segment
- the unique group will have different needs than others
- those needs must be fully satisfied since there is no room for mistakes
- niche must be big enough and have potential for growth
Differentiation
- all efforts are aimed at providing a unique product which will gain customer loyalty
- uniqueness can be based on - quality, after-sales support, product features,
distribution of market efforts
- it must be difficult for competitors to copy the product
- continuous redevelopment of product is the key to success
Corporate strategies
Corporate situation
- joint venture - two or more businesses enter into an agreement
- merge / takeover - the individual businesses no longer exist separately; competition
board has to approve a merge / takeover
Decline / Defensive strategies
- retrenchment - reducing size and diversity of products; divestiture is selling off
operations because assets are under-utilised
- Liquidation - all assets are sold due to bankruptcy to pay debts
Growth (Ansoff’s growth matrix)
- market penetration - existing market/products are used to expand
- product development - taking a new product or developing an existing one
- market development - taking an already existing product to a new market segment
- diversification - business enters a new market with a new product
Integration strategies
Forward integration
- business takes over one of its distributors to eliminate the middleman
- reduces final selling price
Backward integration
- business buys out supplier or manufactures its own products (eliminates power of
supplier)
- cheaper ensured supply
Horizontal integration
- the business has taken over one of its competitors
- reduces competition in the industry (reduces power of competitor)
Other strategies
Revise business mission/objectives
- no business can afford to wait and see what the future brings
- proactive management to predict the future and demands
- revise mission and objectives immediately to meet the future
Allocate resources differently
- if mission/objectives is revised then resources might also have to be allocated
differently
- actions that do not add value have to be outsources and resources cannot be
allocated to those
TQM and TCS
Total quality management is a process where everybody in the business is committed to
thinking about how all actions of the business impact on the quality of all tasks and
overall customer satisfaction.
- refers to internal customers as well
- training department has to ensure TQM is followed, buy-in from everyone
- quality can be determined by inspections or sampling
- quality can only be improved if there is awareness of something being wrong - through
feedback
Benchmarking
- what is ‘best practice’ in the industry
- measuring business’ performance against ‘best practice’
- underperformance steps are implemented to eliminate underperformance
Financial ratios
- use solvency, ROI/profitability and liquidity to improve the function of the business
Performance appraisals (360°) and self-evaluation
- planning, evaluation and performance tool for employees
- planning - employee and manager discuss and agree on performance targets
- evaluation - employee evaluates his own performance and manager evaluates the
employee’s performance, evaluation may be requested from other parties - 360°
performance appraisal
- feedback - achievement of targets is discussed and action plans are developed to
solve problems
Continuous Skills Development
- business should strive to create a culture where employees are constantly growing and
learning —> continuous improvement
- without continuous improvement business will not be able to keep up with competitors
and demand
- business should provide learning opportunities but employees should take
responsibility for their self development
Teamwork
- teamwork generates new ideas
- synergy
- teamwork can make or break the business - person who can assist is on leave
- one person’s strength can compensate another’s weakness
- division of labour - everyone can do what they want