Current Trends in Strategic Management

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					Current Trends in Strategic Management

                   OUTLIN
                     E
  • The New Economy

  • New Directions in Strategic Thinking

  • Redesigning the Organization

  • New Modes of Leadership
              The Turbulent 21st Century
Collapse of New                               Corporate Scandals
   Economy                                     • Enron, WorldCom, Parmalat
 •Dot.com bubble bursts                     • Jack Welch’s retirement package
     •TMT recession

           International                                       War
       competition intensifies                       • Invasion of Afghanistan
       • China as Workshop of the World                         & Iraq
             • Outsourcing to LDCs                      •Civil wars in Congo,
                                                      Liberia, Sudan, Somalia
The Curse of                     Decline of
  Terrorism                     Multilateralism
                                •Collapse of Doha round
 • Sept. 11, 2001         • Trade wars between US, EU, China       Age of
•Suicide bombings in               •Weakening of UN
  Israel, Iraq, Saudi                                             Disbelief
    Arabia, Turkey,
     Afghanistan                                       Fear of Disease
                           Unstable                    •SARS, Mad Cow, Bird
                          Currencies                           Flu
                  US$ declines by >50% against
                         Euro 2002-04
US Labor Productivity: Annual Changes in Non-Farm
Output per Hour Worked, 1990-2006

  4.5

   4       Annual produc t iv it y growt h
           (% )
  3.5

   3

  2.5

   2

  1.5

   1

  0.5

   0
        1990 1991 1992 1993 1999 2000 2001 2002 2003 2004 2005 2006
      Return on Equity of US Manufacturing
      Corporations, 1990-2003

18

16

14
12

10
                                                                              ROE (%)
 8

 6
 4

 2
 0
     1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

                                                       Source: US Bureau of the Census
       The value of mergers and
       acquisitions worldwide
4.5
 4
3.5
 3
2.5
 2                                                     $ trillion

1.5
 1
0.5
 0
      1990 1992 1994   1996 1998 2000       2002


                         Source: Thomson Financial Securities Data
              Directions in Strategic Management
                 Practice—Trends of the 1990s
Key Trends of the 1990s:
•Quest for shareholder value
•Adjusting to increased                 Major Themes of Business
 turbulence & more intense              Strategy:
competition                             •Cost cutting—squeezing
                                         overhead, business process re-
Influential Strategy Concepts:           engineering, increasing labor
•Modern financial analysis               productivity
 —shareholder value, economic profit,   •Outsourcing/refocusing/
 option theory                           divestment
•Core competences and intangible        •Performance management and
 assets                                  incentive alignment
•Dynamically competitive markets
 —“hypercompetition”
•Competitive advantage through
 alliances, networks, and standards
    Forces Shaping Company Strategies 2001-04

                                        The Business
  Future Sources of Profit               Environment
Limits of downsizing/cost cutting
                                           •Uncertainty
  Where are future sources of
                                      •Stalling of economic
             profit?
                                           liberalization
                                      •Intense competition

  Concepts & Theories
  •Resources & capabilities as                Technology
   basis for competitive advantage     Continued advances in ICT
  •Knowledge-based theory
   of the firm
  •Option theory                  Demands of society
  •Complexity theory       •Social & environmental responsibility
                                      •Ethics & fairness
                                     •Quest for meaning
            Emerging Developments

                       STRATEGY
       •Multiple competitive advantages/multiple capabilities
       •Innovation / New Product Development / New
        Business Development
       •Alliances & networks
                                            ORGANIZATION
                                             STRUCTURE
MANAGEMENT SYSTEMS                        • Reconciling flexibility
• Knowledge management                     & integration
  (incl. best-practice transfer)          • Modular structures
• Redesigning incentive systems           • Multidimensional structures
• Rethinking performance management       • Informal organization &
• Capturing human creativity                 self-organization
   The Need to Redesign Organizations

      THE PAST                 THE FUTURE


 Emphasis on control      Emphasis on co-ordination

Single performance
                          Multiple performance goals
goal

Decisions located         Decisions located where
centrally                 relevant knowledge exists

Simple structures,        Multidimensional
unified line of command   structures
                          Diffused authority, but
                          clear responsibilities

Organization by design    Self organization
              Emerging Organizational Forms
Organizing for capability    Shifting emphasis of organization
development                  design from control to coordination

From unitary to parallel     Separate coordination structures for
structures                   different processes. E.g. 3M’s product
                             development structure; separate structures
                             for TQM and change management

Process-based                Organizing around business processes
organizations                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          E.g. electronics in Silicon Valley, clothing
organization                 and packaging equipment in Italy
           New Models of Leadership:
    What Competencies do Top Managers Need?
                             THE REQUIRED
 THE LEADERSHIP            COMPETENCIES OF
  NEEDS                    BUSINESS LEADERS
  OF ORGANIZATIONS
                           • business literacy
The ability to:            • creativity
    •   build confidence   • cross-cultural
    •   build enthusiasm     effectiveness
    •   cooperate          • empathy
    •   deliver results    • flexibility
    •   form networks      • proactivity
    •   influence others   • problem-solving
    •   use information    • relation-building
                           • teamwork
                           • vision