STRATEGIC MANAGEMENT (KMBN-301)

UNIT-IV
Strategic Analysis:
The process of conducting research on the business environment within which an organization
operates and on the organization itself, in order to formulate strategy.

Why to use it?

To take advantage of the path of least resistance to achieve your goal.

When to use it?

When you are planning to make a change in your organization, and you need to determine the
best path to take.

Strategic Choice:

The decision to select from, among the grand strategies considered, the strategy which will best
meet the enterprise’s objective. The decision involves focusing on a few alternatives
considering the selection factors, evaluating the alternatives against these criteria and making
the actual choice.

Process of Strategic Choice:

Analyzing the strategic alternatives

Evaluating the strategic alternatives

Choosing among strategic alternatives

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Analyzing the Strategic Alternatives:
An analysis has to rely on certain factors. These factors are termed as selection factors.

• The Objective Factors: Based on analytical techniques and hard facts or data.
• The Subjective Factors: Based on one’s personal judgment, collective or descriptive
factors.

Evaluating the Strategic Alternatives:

• Evaluation of strategic alternatives basically involves bringing together the analysis done
on the basis of the objective and subjective factors.
• To observe what is important, both the factors have to be considered together.

Choosing Among Strategic Alternatives:

This is the final step of making the strategic choice. One or more strategies have to be chosen
for implementation. Also a blue print has to be made that will describe the strategy and the
condition under which they operate.

Tools and Techniques of Strategic Analysis:

BCG Matrix (Boston Consulting Group):

• Its portfolio model was developed by Bruce Henderson in 1970’s.

• Based on observation combination of market growth and market share.
• BCG Matrix is to evaluate the strategic position of the business portfolio and its
potential.

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BCG matrix is divided into 4 cells: stars, question marks, dogs and cash cows.

Relative market share. One of the dimensions used to evaluate business portfolio is relative
market share. Higher corporate’s market share results in higher cash returns. This is because a
firm that produces more, benefits from higher economies of scale and experience curve, which
results in higher profits. Nonetheless, it is worth to note that some firms may experience the
same benefits with lower production outputs and lower market share.

Market growth rate. High market growth rate means higher earnings and sometimes profits
but it also consumes lots of cash, which is used as investment to stimulate further growth.
Therefore, business units that operate in rapid growth industries are cash users and are worth
investing in only when they are expected to grow or maintain market share in the future.

There are four quadrants into which firms brands are classified:

1. Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing
market. In general, they are not worth investing in because they generate low or negative cash
returns. But this is not always the truth. Some dogs may be profitable for long period of time,
they may provide synergies for other brands or SBUs or simple act as a defense to counter
competitors moves. Therefore, it is always important to perform deeper analysis of each brand
or SBU to make sure they are not worth investing in or have to be divested.

Strategic choices: Retrenchment, divestiture, liquidation

2. Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as
much cash as possible. The cash gained from “cows” should be invested into stars to support
their further growth. According to growth-share matrix, corporates should not invest into cash
cows to induce growth but only to support them so they can maintain their current market
share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that

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are capable of innovating new products or processes, which may become new stars. If there
would be no support for cash cows, they would not be capable of such innovations.

Strategic choices: Product development, diversification, divestiture, retrenchment

3. Stars. Stars operate in high growth industries and maintain high market share. Stars are both
cash generators and cash users. They are the primary units in which the company should invest
its money, because stars are expected to become cash cows and generate positive cash flows.
Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where
new innovative products can soon be outcompeted by new technological advancements, so a
star instead of becoming a cash cow, becomes a dog.

Strategic choices: Vertical integration, horizontal integration, market penetration, market

development, product development

4. Question Marks. Question marks are the brands that require much closer consideration. They
hold low market share in fast growing markets consuming large amount of cash and incurring
losses. It has potential to gain market share and become a star, which would later become cash
cow. Question marks do not always succeed and even after large amount of investments they
struggle to gain market share and eventually become dogs. Therefore, they require very close
consideration to decide if they are worth investing in or not.

Strategic choices: Market penetration, market development, product development, divestiture

Benefits of the matrix

• Easy to perform
• Helps to understand the strategic positions of business portfolio
• It’s a good starting point for further more thorough analysis.

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Following are the main limitations of the analysis

• Business can only be classified to four quadrants. It can be confusing to classify an SBU that falls
right in the middle.
• It does not define what ‘market’ is. Businesses can be classified as cash cows, while they are
actually dogs, or vice versa.
• Does not include other external factors that may change the situation completely.
• Market share and industry growth are not the only factors of profitability. Besides, high market
share does not necessarily mean high profits.
• It denies that synergies between different units exist. Dogs can be as important as cash cows to
businesses if it helps to achieve competitive advantage for the rest of the company.

Using the tool

Although BCG analysis has lost its importance due to many limitations, it can still be a useful
tool if performed by following these steps:

Step 1. Choose the unit. BCG matrix can be used to analyze SBUs, separate brands, products or
a firm as a unit itself. Which unit will be chosen will have an impact on the whole analysis.
Therefore, it is essential to define the unit for which you’ll do the analysis.

Step 2. Define the market. Defining the market is one of the most important things to do in this
analysis. This is because incorrectly defined market may lead to poor classification. For
example, if we would do the analysis for the Daimler’s Mercedes-Benz car brand in the
passenger vehicle market it would end up as a dog (it holds less than 20% relative market
share), but it would be a cash cow in the luxury car market. It is important to clearly define the
market to better understand firm’s portfolio position.

Step 3. Calculate relative market share. Relative market share can be calculated in terms of
revenues or market share. It is calculated by dividing your own brand’s market share (revenues)
by the market share (or revenues) of your largest competitor in that industry. For example, if

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your competitor’s market share in refrigerator’s industry was 25% and your firm’s brand market
share was 10% in the same year, your relative market share would be only 0.4.

Step 4. Find out market growth rate. The industry growth rate can be found in industry reports,
which are usually available online for free. It can also be calculated by looking at average
revenue growth of the leading industry firms. Market growth rate is measured in percentage
terms. The midpoint of the y-axis is usually set at 10% growth rate, but this can vary. Some
industries grow for years but at average rate of 1 or 2% per year. Therefore, when doing the
analysis you should find out what growth rate is seen as significant (midpoint) to separate cash
cows from stars and question marks from dogs.

Step 5. Draw the circles on a matrix. After calculating all the measures, you should be able to
plot your brands on the matrix. You should do this by drawing a circle for each brand. The size
of the circle should correspond to the proportion of business revenue generated by that brand.

Ansoff Grid:
Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on
whether it markets new or existing products in new or existing markets.

The output from the Ansoff product/market matrix is a series of suggested growth strategies
which set the direction for the business strategy. These are described below:

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Market Penetration

Market penetration is the name given to a growth strategy where the business focuses on
selling existing products into existing markets.

Market penetration seeks to achieve four main objectives:

• Maintain or increase the market share of current products – this can be achieved by a
combination of competitive pricing strategies, advertising, sales promotion and perhaps more
resources dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; this would require a much more
aggressive promotional campaign, supported by a pricing strategy designed to make the market
unattractive for competitors
• Increase usage by existing customers – for example by introducing loyalty schemes

A market penetration marketing strategy is very much about “business as usual”. The business
is focusing on markets and products it knows well. It is likely to have good information on
competitors and on customer needs. It is unlikely, therefore, that this strategy will require
much investment in new market research.

Market Development

Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets.

There are many possible ways of approaching this strategy, including:

• New geographical markets; for example exporting the product to a new country
• New product dimensions or packaging: for example
• New distribution channels (e.g. moving from selling via retail to selling using e-commerce and
mail order)

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• Different pricing policies to attract different customers or create new market segments

Market development is a more risky strategy than market penetration because of the targeting
of new markets.

Product Development

Product development is the name given to a growth strategy where a business aims to
introduce new products into existing markets. This strategy may require the development of
new competencies and requires the business to develop modified products which can appeal to
existing markets.

A strategy of product development is particularly suitable for a business where the product
needs to be differentiated in order to remain competitive. A successful product development
strategy places the marketing emphasis on:

• Research & development and innovation

• Detailed insights into customer needs (and how they change)
• Being first to market

Diversification

Diversification is the name given to the growth strategy where a business markets new
products in new markets.

This is an inherently more risk strategy because the business is moving into markets in which it
has little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about
what it expects to gain from the strategy and an honest assessment of the risks. However, for
the right balance between risk and reward, a marketing strategy of diversification can be highly
rewarding.

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GE Nine Cell Planning Grid:

The GE McKinsey matrix is a product portfolio analysis matrix. When you have a complex
product portfolio, then it is difficult for you to take decisions. This is because each product will
have its own demands and requirements. But you yourself have limited resources in the
company. Thus, what you as a business manager have to look at is to ensure that the firm
grows at the optimum rate. For this, you will have to support some products by investing
money in them, hold some products by letting them be as they are, and prune other products
which are not working as well as you thought. This decision making, on products, is done by the
GE Mckinsey matrix.

The GE Mckinsey matrix has two main variables which are plotted on the X and Y axis of the
matrix. These variables are the “Market attractiveness” and the “Business unit strength”. Once
each product is given a value for its market attractiveness as well as the business unit’s
strength, than it is plotted in its right place in the graph. The GE Mckinsey matrix is also known
as the nine box matrix, because in the graph, there are nine boxes where the product can be
plotted. Once the product is in its place, you can decide the strategy for the product. There are
3 main strategies in the GE McKinsey matrix which are grow, hold and harvest.

Grow – If the business unit is strong against a strong attractiveness, you grow the business. This
means, that you are ready to invest a higher percentage of your resources in these businesses.
These business units have high market attractiveness and high business unit strength. They are

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most likely to be successful if backed up with more resources. The quadrants marked in green
are the places where you can grow your business.

Hold – If the business unit strength or attractiveness is average, than you hold the business as it
is. It might be that the market is dropping in value, or that there is much high competition
which the business unit will be hard put to catch up. In both the cases, the business unit might
not give optimum returns even if resources are invested. Thus, in this case, you wait and hold
the business unit to see if the market environment changes or if the business unit gains
importance in the market as compared to other players.

Harvest – If the business unit or market has become unattractive, than you either sell or
liquidate the business or you can hold it for any residual value that it has. This strategy is used
in the GE McKinsey matrix when the business unit strength is weak and the market has lost its
attractiveness. The best measure in this case is to harvest the weak businesses and reinvest the
money earned into business units which are in growth.

Challenges for the GE McKinsey Matrix

Like any other strategy, the GE McKinsey matrix has its own challenges. Some of them are
mentioned below.

(1) Determining market attractiveness is a tough task especially looking at the fast paced
market environment. During the dotcom bust, the online market was least attractive. But look
where the online market is now.

(2) Similarly, determining the strength of the business unit and weighing it against the
attractiveness is difficult. Thus, if the variables are not matched properly, you might grow a
business which is supposed to be held back and waste unnecessary resources on this business.
This might happen if the top management does not know the core competency of the business
units.

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(3) Companies will be limited by resources even if the business unit falls in the growth criteria.
Thus, out of 50 products, if 25 fall in growth criteria, what does the management do when it has
limited resources? Taking decisions again becomes difficult.

McKinney’s 7s Framework

McKinsey 7s model is a tool that analyzes firm’s organizational design by looking at 7 key internal elements:
strategy, structure, systems, shared values, style, staff and skills, in order to identify if they are effectively aligned
and allow organization to achieve its objectives.

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert Waterman and Julien
Philips with a help from Richard Pascale and Anthony G. Athos. Since the introduction, the model has been widely
used by academics and practitioners and remains one of the most popular strategic planning tools. It sought to
present an emphasis on human resources (Soft S), rather than the traditional mass production tangibles of capital,
infrastructure and equipment, as a key to higher organizational performance.

The goal of the model was to show how 7 elements of the company: Structure, Strategy, Skills, Staff, Style,
Systems, and Shared values, can be aligned together to achieve effectiveness in a company. The key point of the
model is that all the seven areas are interconnected and a change in one area requires change in the rest of a firm
for it to function effectively.

Below you can find the McKinsey model, which represents the connections between seven areas and divides them
into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes interconnectedness of the elements.

The model can be applied to many situations and is a valuable tool when organizational design
is at question. The most common uses of the framework are:

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• To facilitate organizational change.
• To help implement new strategy.
• To identify how each area may change in a future.
• To facilitate the merger of organizations.

7s factors

In McKinsey model, the seven areas of organization are divided into the ‘soft’ and ‘hard’ areas.
Strategy, structure and systems are hard elements that are much easier to identify and manage
when compared to soft elements. On the other hand, soft areas, although harder to manage,
are the foundation of the organization and are more likely to create the sustained competitive
advantage.

HARD S SOFT S

Strategy Style

Structure Staff

Systems Skills

1. Strategy is a plan developed by a firm to achieve sustained competitive advantage and

successfully compete in the market. What does a well-aligned strategy mean in 7s McKinsey
model? In general, a sound strategy is the one that’s clearly articulated, is long-term, helps to
achieve competitive advantage and is reinforced by strong vision, mission and values. But it’s
hard to tell if such strategy is well-aligned with other elements when analyzed alone. So the key
in 7s model is not to look at your company to find the great strategy, structure, systems and
etc. but to look if its aligned with other elements. For example, short-term strategy is usually a

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poor choice for a company but if its aligned with other 6 elements, then it may provide strong
results.
2. Structure represents the way business divisions and units are organized and includes the
information of who is accountable to whom. In other words, structure is the organizational
chart of the firm. It is also one of the most visible and easy to change elements of the
framework.
3. Systems are the processes and procedures of the company, which reveal business’ daily
activities and how decisions are made. Systems are the area of the firm that determines how
business is done and it should be the main focus for managers during organizational change.
4. Skills are the abilities that firm’s employees perform very well. They also include capabilities
and competences. During organizational change, the question often arises of what skills the
company will really need to reinforce its new strategy or new structure.
5. Staff element is concerned with what type and how many employees an organization will need
and how they will be recruited, trained, motivated and rewarded.
6. Style represents the way the company is managed by top-level managers, how they interact,
what actions do they take and their symbolic value. In other words, it is the management style
of company’s leaders.
7. Shared Values are at the core of McKinsey 7s model. They are the norms and standards that
guide employee behavior and company actions and thus, are the foundation of every
organization.

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Strategy Implementation
Strategy implementation is the sum total of the activities and choices required for the
execution of a strategic plan. It is the process by which strategies and policies are put into
action through the development of programs, budgets and procedures.

Although implementation is usually considered after strategy has been formulated.

Implementation is a key part of strategic management. Strategy formulation and strategy
implementation should thus be considered as two sides of the same coin.

Strategy implementation is the technique through which the firm develops, utilizes and
integrates its structure, culture, resources, people and control system to follow the strategies
to have the edge over other competitors in the market.

Poor implementation has been blamed for a number of strategic failures.

We can say that strategy implementation refers to the execution of the plans and strategies. So
as to accomplish the long- term goals of the organization.

Developing Programs, Budgets and Procedures

Programs- A program is a statement of the activities or steps needed to accomplish a single

use plan. The purpose of program is to make a strategy action oriented.

Budgets- A budget is a statement of corporation’s program in monitory terms. After

development of programs, the budget process begins. Planning a budget is the last real check a
corporation has on the feasibility of its selected strategy.

So we can say that budget is the cost of the programs.

Procedures- Procedures are system of sequential steps or techniques that describe in detail
how a particular task or job is to be done.

Corporate Development:
Corporate Development (Corp Dev) is the group at a corporation responsible for strategic
decisions to grow and restructure its business, establish strategic partnerships, and/or achieve
organizational excellence. The purpose of corporate development is to create opportunities for

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the company through actions such as mergers and acquisitions (M&A), divestitures, and deals
that leverage the value of the company’s business platform.

Stages of Corporate Development:

When discussing the stages of corporate development, the stages themselves do not refer to
those followed during a single M&A deal or when striking up a new partnership. Instead, these
stages define business growth as a whole, from the inception of a company through to its
maturation and, in some cases, redevelopment. Only during certain stages in business growth
do formal corporate development teams exist and use their preferred strategies to grow the
business.

1. Development: Every company starts with an idea. Whether that's an idea for a
product or to provide a service, the first stage of corporate development is
ideation, and then research. Knowing the viability of the company is imperative if
that company is meant to survive this and the next stage. Key factors to
improving the chances of survival include the opportunity within the target
market, buyer personas, the competitive landscape, and how the idea sets the
potential company apart.
2. Startup: Once the development stage is concluded and all stakeholders agree
the viability of the company is sound, it's time to actually create the company.
This may include finding angel investors or seed funding, or the company may be
able to go the bootstrapped (self-funded) route. This stage is simply about
surviving, however, and the unfortunate truth is that 90% of businesses will fail
here. However, this is the crucial stage where many business investors can find
amazing opportunities, including the holy grail of all investing: proprietary deals.
3. Expansion: Startups that successfully exit the"survival" stage and look to build a
more stable growth pattern then turn to expanding their business. This is the
sweet spot for corporate development teams, as thoughts of using M&As to
grow even faster become more prevalent. This may happen by offering multiple
products or reducing the competition by acquiring a rival business. Companies,
however, must keep their focus on what will be good for the long-term success
of the business. A bad merger or acquisition can sound the death knell for a
business if not undertaken carefully.
4. Maturity: When companies have steady growth, a strong brand, and are a force
in their market, they're considered to have reached the maturity stage. Some
companies will look for some kind of exit strategy, such as an initial public
offering (IPO). Others will look to develop a new product or service, starting the
stages of corporate development all over again.

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Organizational Life- Cycle

MATURITY

GROWTH DECLINE

EARLY

ORGANIZATION GROWTH AGING

-AL

DEVELOPMENT BIRTH

DEATH

ORGANIZATIONAL STABILITY

The organizational life- cycle model is a process model which identifies how organizations grow,
mature and decline over time. There are four phases in an organization’s existence: birth,
growth, maturity and decline. Each phase is characterized by specific factors which influence
organizational performance at the time, helping develop appropriate strategies for dealing with
each situation effectively.

1. Birth/ Startup Phase- In this phase organization means determining what type of
activity it will engage in and how it will grow.
In startup stage begins when an organization is founded. During this stage, organizations
accumulate capital, hire workers and begin developing their products and services.
2. Growth/ Expansion Phase- Growth generally represents the period when an
organization becomes more stable and increases its size and number of employees.

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As business opportunities exceed the infrastructure and resources of a new
organization, the organization enters into the growth stage.

3. Maturity Phase- Maturity includes a stable workforce with good working

relationship among employees.
In maturity phase, organization reaches a size that fits its environment and no further
growth is necessary.
4. Decline Phase- Decline is characterized by an aging workforce, fewer customers
and shrinking profits or losses.

The concept of organizational life- cycle model was developed based on three main
assumptions.
(A) All systems exist within a larger environment.
(B) All systems have a boundary that separates them from their environment.
(C) All systems must take in materials from their environment to maintain
themselves.

So we can say that organizational life- cycle is the life cycle of an organization from its
creation to its termination.

Organizational Structure
Organizational structure is an arrangement pattern of jobs within the firm, which reflects the
work arrangement.

An organizational structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organizational goals.

An organizational structure details how certain activities are delegated toward achieving an
organization’s goal. It outlines an employee’s role and various responsibilities within a
company.

Organizational structure affects organizational action and provides the foundation on which
standard operating procedures and routine rest.

An organizational structure is a system that outlines how certain activities are directed in order
to achieve the goals of an organization. These activities can include rules, roles and

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responsibilities. The organizational structure also determines how information flows between
levels within the company. For example, in a centralized structure, decision flow from the top
down, while in a decentralized structure, decision making power is distributed among various
levels of the organization.

An organization structure is the way in which the tasks and subtasks required to implement a
strategy are arranged.

Benefits of Organizational Structure

1- Faster decision- making
2- Multiple business locations
3- Improved operating efficiency
4- Greater employee performance
5- Eliminate duplication of work
6- Reduced employee conflict
7- Better communication

Elements of Organizational Structure

1- Work specialization
2- Departmentalization
3- Chain of command
4- Span of control
5- Centralization and decentralization
6- Degree of formalization

Design of organization structure is considered to be matter of choice among a large number

of alternatives. There are various forms of organization structure.

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1- Matrix Organization Structure-

Matrix structure is the relation of two dimensional structures which emanates directly
from two dimensions of authority. Matrix organization is also known as Grid. It has been
developed to establish flexible structure to achieve a series of project objectives. A
matrix organization also referred to as “the multiple command system”

A permanent organization designed to achieve specific results by using teams of

specialists from different functional areas in the organization is a matrix organization.

General Manager

Production Marketing Finance Personnel

Production Marketing Finance Personnel

Project A

Project B Production Marketing Finance Personnel

Production Marketing Finance Personnel

Project C

Project D Production Marketing Finance Personnel

Merits of matrix Organizational-

(i) Matrix structure focuses resources on a single project
(ii) Flexible structure
(iii) It improves motivation
(iv) Emphasizes professional competence

Demerits of Matrix Organizational-

(i) There is always power struggle in matrix structure
(ii) Costly
(iii) Delay in decision making

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2- Network Organizational Structure:

The NETWORK ORGANIZATIONAL STRUCTURE (also called virtual network structure) is a

temporary or permanent arrangement of otherwise independent organizations or associates,
forming an alliance to produce a product or service by sharing costs and core competencies.

The network-based organizational structure Opens in new window is built around alliances
between organizations within the network. Each associate or organization of the network
focuses on its core competency and performs some portion of the activities necessary to deliver
the products and services of the network as a whole.

Organizational network-based structure simply means that the

firm outsources or subcontracts many or most of its major processes to separate companies
and coordinates their activities from a small headquarters organization.

Outsourcing or subcontracting has become an important strategy for many firms as recognized
during the late eighties and nineties, partly due to an increased pressure towards downsizing
and a growing recognition of possible advantages of cooperative inter-firm relations.

Citing Miles & Snow (1986), “organizational network structure is the basic principle to achieve
flexibility, adaptability to the market and quick response in a highly complex environment”.

Why the Structure Is Important

The knowledge and physical resources associated to the development and production of most
of today’s products often exceed what a single firm is able to accomplish.

To solve the problem of the lack of resources that could bring to the firm a competitive
advantage, the firm simply searches for operation with other companies, under several
formats, ranging from the well-known solutions of subcontracting other companies or creating
strategic partnerships or joint-venture associations.

Partnerships, alliances, and other complex collaborative forms are now a leading approach to
accomplishing strategic goals, especially because many managers and other strategy experts
suggest that a company should focus on its distinctive competencies and outsource the other
things.

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The Core Competence Theory (Prahalad & Hamel, 1990) outlines that success and failure of an
organization are necessarily based on its unique or specific potentials, assets, or resources. Core
competencies are a competitive advantage and should provide access to a wide range of
markets, should substantially contribute to the benefit of the product and should be visible for
the client and also hard to copy and out of competitors reach.

Fashion wear companies like Nike, for example, frequently produce none of their own clothing,
focusing instead on building brand value through comprehensive marketing efforts and
exercising tight control over their suppliers. Essentially, in a network-based structure, partners
contribute with its best practices and core competencies to achieve the highest
competitiveness of the structure as a whole.

How the Structure Works

At the core of network organizational structure is an organization viewed as a central hub

surrounded by a network of outside specialists. The figure below illustrates the network
organizational structure in quite a simplistic form.

Rather than being housed under one roof, services such as accounting, design, manufacturing,
and distribution are outsourced to separate organizations that are connected electronically to

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the central office. The central organization simply coordinates the activities of others so that
the product reaches the ultimate consumer in an effective and efficient way.

Networked computer systems, collaborative software, and the Internet enable organizations to
exchange data and information so rapidly and smoothly that a loosely connected network of
suppliers, manufacturers, assemblers, and distributors can look and act like one seamless
company.

One of the numerous advantages of network approach to organizational design is that a

company can concentrate on what it does best and contract out other activities to companies
with distinctive competence in those specific areas, which enables a company to do more with
less.

Companies in countries such as India and Malaysia, as well as European sites such as Scotland
and Eastern Europe manage call centre and technical support for multinational corporations
including financial companies, computer vendors and mobile phone companies.

3- Modular/ Cellular Organizational Structure

A non- biological entity with a cellular organizational structure is setup in such a way
that it mimics how natural systems within biology work with individual cells working
same what independently to establish goals and tasks administer those things, and
trouble shoot difficulties. Cellular organization is the defining property in living
organisms.
These cells exist in a broader network in which they frequently communicate with
each other, exchanging information, in a more or less even organizational playing
field.

Organization structured around the units/ cells that complete the entire assembly
process are called cellular organizations.
The concept of cellular organization in management is same to the concept of living
things. Like-
• Cell- Basic unit of structure and function in living things.
• Tissue- A group of cells that work together to do a specific job.

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• Organ- When two or more tissues working together for a specialized
function.
• Organ System- Group of organs that work together to do a specific job.
• Organism- A living things (composition of various organs system).

PRODUCT WEBSITE DESIGN ADVERTISING

DISTRIBUTION

TRAINING RESEARCH AND PAYROLL

DEVELOPMENT
INFORMATION CUSTOMER
TECHNOLOGY SERVICE
HUMAN ACCOUNTING
RESOURCE

SALES PRODUCT MANUFACTURING PACKAGIN-

DESIGN G

So in cellular organizational structure/ a modular organization is an organization structure via

outsourcing where the organization final product or service based on the combination of
several companies, self contained skills and business capabilities.

A modular organization comprises independent bodies that can re- arrange and work with
different other departments as needed.

In the modular structure, an organization focuses on developing specialized and relatively

autonomous strategic business units.

Reengineering:
The definition of business process reengineering (BPR) is a systematic, disciplined approach to
reducing organizational costs and redundant business processes involving the analysis of
existing human and automated workflows.

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Steps of Business Process Reengineering:

1. Figure out what you want:

What is it that you expect to see after the execution of a specific business workflow? Once you
understand how you want your business outcomes to work, you can start figuring out why it
isn’t happening. For example, if you’re looking to get deliveries to customers within a specific
timeframe, look at ways to speed up getting items out of the warehouses and into a delivery
truck.

2. Define the current state:

Go through the steps involved in completing a work process. Look at places where logjams
might occur that bring down efficiency and add to costs.

3. Identify gaps:
Set up key performance indicators (KPIs) that give you an idea of how close or far away you are
from achieving your business goals. Look at cycle time, the production process, or how long it
takes to get trucks loaded at the warehouse.

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4. Select a test case:
Look for an essential process that impacts your organization’s effectiveness. Then, come up
with a future state that helps you achieve your company’s strategic objectives.

5. Develop and test your hypothesis:

Come up with new workflow and procedures, then communicate to the relevant stakeholders.
Create test scenarios for any new or enhanced functions within your revamped process.

6. Implement the new process:

Make sure you have the dependencies and resources in place to successfully roll out your
changes.

7. Evaluate performance:
Track the performance of the new process and use your KPIs to assess the impacts in
comparison to the original business workflow.

Your goal should be about coming up with clear strategic improvements to your work processes
versus trying to go about business as usual in a shiny new package. It’s about coming up with
new ideas, like changing how you engage with customers at every point in the sales process.

Leadership and Corporate Culture

Corporate culture is the set of important assumptions. Every company has its own culture
followed by all the members of the company. Basic elements of corporate culture are basic
assumptions and beliefs, values and norms.

Executives have the power to shape corporate culture and motivate ethical conduct. Most
leaders consider themselves ethical. Ethical behavior is very necessary in public life as well as
private life.

In fact, studies suggest that leaders do not believe specialized skills or knowledge in ethics are
necessary to produce effective results in the work place.

The analysis also will examine various leadership styles, the impact they have on corporate
culture, how they affect ethical decision- making.

Because an organization’s culture can exert a powerful influence on the behavior of all
employees, it can strongly affect a company ability to shift its strategic direction.

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Importance of Ethical Leadership
Ethical leadership is very important because success and failure of an organization will depend
upon the ethical leadership. When leaders cultivate an environment of fraud and deceit, they
are fertilizing the ground for failure and destruction.

(a) Guide a corporation to profits for the sake of the stakeholders.

(b) Achieve organizational goals in an ethical manner.
(c) Motivate their employees.

Implementation also involves leading people to use their abilities and skills most effectively and
efficiently to achieve organizational objectives.

Values
Values are the set of principles; they enhance the quality of individual and collective life. These
values are determining the overall personality of an individual.

Values have major influence on a person’s behavior and serve as broad guidelines in all
situations. Some common business values are fairness, innovation and community involvement.

Values are an essential part of developing your strategy. Your core values are part of your
strategic foundation.

Values are deeply held convictions, priorities and underlying assumptions that influence the
attitude and behavior of your organization.

• Values are social and ethical norms common to all cultures, societies and religions.
• Values are the guiding force to take specific decisions in specific societal issues.
• Values are comprehensive standards that direct conduct in a variety of ways.

Ethics
Ethics deals with law of morality and rules of conduct. It determines the rightness or wrongness
of actions.

Ethics in business management (including strategic management) deals with moral issues
(beliefs, norms, values etc.) arising from activities performed by manager and employees of the
corporation.

Ethical Issues in Business

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(A) Ethical Factors in Area of Business Communication
(1) Proper marketing techniques, telling truth about products and services.
(2) Informing customers, employees and partners about company’s mission statement and
goals.
(3) Respecting religious and social values of employees, customers and partners.
(4) Hiding information about mergers, acquisitions, investments etc.

(B) Ethical Factors Concerning Production Process

(1) Eliminating unsafe working conditions.
(2) Avoiding processes and technologies that jeopardize the safety of the employees
and public.
(3) Waste product utilization and recycling.
(4) Profiting from products bad for health (drugs, cigarettes, alcohol) and people
(gambling).

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