Fundamentals of Business Administration:

2 – Management
Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
Learning objectives

• You are able to explain and contrast the diverse

meanings of the term "management"

• You are able to describe the concept and goal of a

company's mission statement

• You are able to differentiate, illustrate, and critically

reflect different management techniques
The term "management" is diverse

• The term "management" is usually translated as

"leadership" and used interchangeably
• Two different meanings of management:
-Functional: Description of processes that are necessary in work-
sharing organizations (planning, leadership, organization, control)
-Institutional: Description of people with management
responsibilities, their activities, and roles

• When considering the leadership phenomenon, various

aspects are examined from which recommendations for
leadership practice can be derived:
-Corporate and management principles ("Mission Statement")
-Management techniques
-Management models

Thommen/Achleitner (2017), p. 490

A company's mission statement is a fundamental and
open guidance framework for its leadership

The mission statement sets out the general principles of the company's goals and
behaviors, which should guide all entrepreneurial activities.

CASE EXAMPLE: DAIMLER

„Mobility will change fundamentally in the future. Our vehicles will be increasingly connected,
electric and autonomous. At the same time sharing of cars will become more important.

To shape this change from a leading position, we will strengthen our global core business further as a basis
for the successful implementation of new business models centered around the CASE topics. At Daimler,
CASE stands for the four major trends connectivity (Connected), autonomous driving (Autonomous), flexible
use (Shared & Services) and electric drive systems (Electric). Each of these topics has the potential to turn
our industry upside down. However, the real revolution lies in combining them. That is what we are working
on.

Our claim is set: As the inventor of the automobile, we strive to be a leader in its re-invention as well. That
is why we are also refining our corporate culture to become even faster, more flexible and more innovative.

Our actions are therefore based on three strategic pillars. We want:

1. To grow profitably worldwide in our core business.
2. To lead with our vehicles and business models centered around the CASE topics.
3. To reflect the variety, agility and requirements of our business environment with our corporate culture.”

Thommen/Achleitner (2017), p. 539; https://www.daimler.com/company/strategy/, retrieved 15 January 2018

Management techniques substantiate corporate and
management principles
EXAMPLES
Selected
"Management-by" techniques

Management-by- Management-by- Management-by-

Objectives Exception Delegation
• Guidance by target- • Guidance by deviation • Leadership by delegation
setting control of tasks, competencies
• Agreement on objectives • Intervention only in and responsibilities
exceptional cases • So-called "Harzburg
Model"

Management-by techniques look at very specific aspects of

leadership (e.g., goal, delegation, etc.) and their impact on
the business

Thommen/Achleitner (2017), pp. 490-492

Detail view Management-by-delegation:
Delegation of more than just tasks!
• Employees work and decide independently within a defined range of tasks –
unit of task, competence and responsibility
Concept • Shifting decisions to the organizational levels where they can be solved most
professionally
• Manager has only supervision and control responsibility

• Existence of job descriptions

• Identification of delegable and non-delegable tasks
Prerequisites
• Transparent target system, sufficient information for employees, working
reporting and control system

ADVANTAGES DISADVANTAGES
• Supervisory burden is lowered • Risk that supervisors only delegate
• Motivating boring activities
Critical • Neglection of horizontal
assessment • Decisions are made at the most
suitable organizational layer relationships
• Many individual decisions with
lacking coherence/consistency

Thommen/Achleitner (2017), p. 492

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.2.1 Overview
2.2.2 Planning
2.2.3 Decision-making
2.2.4 Task delegation
2.2.5 Controlling
2.3 Corporate culture
2.4 Strategic management
Learning objectives

• You are able to name the four classic functions in

management

• You are able to explain that management happens

across many areas on multiple levels
Typically, there are four classic functions in management

• Management is often referred to as

corporate governance and includes
-Planning,
Planning
-Decision-making,
-Task delegation, and
-Controlling
of various functional areas in the Decision-
company Controlling Management
making
• Management takes place at various
levels in the company
• Accordingly, management can be sub-
Task delegation
divided into strategic and operative
management

Thommen/Achleitner (2017), pp. 490-497

Management activities are performed on the strategic as
well as on the operational level
STRATEGIC MANAGEMENT OPERATIVE MANAGEMENT

Involvement of all levels; focus

Hierarchical level Focus on top management
on middle management levels

Uncertainty Relatively large Relatively low

Mostly unstructured and Relatively well structured

Kind of problems
relatively complex and often repetitive
Short- to
Time horizon Long-term perspective
medium-term perspective

Information needs Primarily external (environment) Primarily in-house (subareas)

Range of alternatives
Alternatives Continuum restricted
generally large

Concentration on individual Includes all functional areas and

Scope
important problems integrates all sub-plans

Degree of Relatively low; Quite high;

detail global statements concrete statements

Thommen/Achleitner (2017), p. 502; Schierenbeck/Wöhle (2012), p. 150

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.2.1 Overview
2.2.2 Planning
2.2.3 Decision-making
2.2.4 Task delegation
2.2.5 Controlling
2.3 Corporate culture
2.4 Strategic management
Learning objectives

• You are able to describe the purpose of planning

• You are able to illustrate various principles of planning

Planning fulfills an important coordination and
integration function

• Planning, as a systematic decision- Planning

making process, influences the future

behavior of the company essentially Controlling Management
Decision-
making

• When making decisions, planning

provides the basis for delegating Task delegation

tasks
• Planning is a necessary precondition
for control, since goal achievement can
only be verified by comparing planned
and actual results

Thommen/Achleitner (2017), pp. 500-503

Principles of planning

Planning

Objectivity
Decision-
Controlling Management
making
Relevance Completeness

Task delegation

Accuracy Feasibility

Flexibility Consistency

Efficiency Target-oriented

Clarity

Thommen/Achleitner (2017), pp. 500-501

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.2.1 Overview
2.2.2 Planning
2.2.3 Decision-making
2.2.4 Task delegation
2.2.5 Controlling
2.3 Corporate culture
2.4 Strategic management
Learning objectives

• You are able to describe which aspects influence the

decision-making process

• You are able to name typical decision types that are

taken in organizations each and every day
After development of plans, a decision is made on their
validity and implementation

ASPECT DESCRIPTION Planning

Decision maker Who is involved in the decision-

making process and who owns the
Decision-
final decision-making authority? Controlling Management
making

Decision-making What does the decision-making Task delegation

process process look like and which phases

should be distinguished?

Decision-making What tools are available to make

instruments decisions (e.g., investment
computing, linear programming,
ABC analysis, decision rules, etc.)?

Thommen/Achleitner (2017), p. 503

In business practice, a large number of decisions are
made on a daily basis

Innovative decisions and routine decisions

Decisions under certain or uncertain conditions

Collective decisions and individual decisions

Types of decisions
in operational
practice
Conscious and unconscious decisions

Decisions in different functional areas

Strategic and operational decisions

Thommen/Achleitner (2017), pp. 503-504

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.2.1 Overview
2.2.2 Planning
2.2.3 Decision-making
2.2.4 Task delegation
2.2.5 Controlling
2.3 Corporate culture
2.4 Strategic management
Learning objectives

• You are able to describe task delegation as means of

leading and organizing, including the participants
involved, the process, as well as instruments employed

• You are able to explain four principles of task delegation

and give examples

• You are able to illustrate different sources from which

the authority of supervisors/management can stem from
Through task delegation a chosen action alternative
will be implemented

ASPECT DESCRIPTION Planning

Participants in A distinction is made between task dispatcher

task delegation and assignee/recipient, as well as indirect
participants who influence the informal Controlling Management
Decision-
making
organization

Process of How is a task passed on (e.g., technical Task delegation

task delegation transmission, inter-human relations,

authority of the task distributor, motivation of
the task receiver)?

Instruments of Tools for transferring tasks, such as

task delegation organizational instruments
(e.g., organizational chart, job description,
function diagram, network plan, process
chart) or plans and working papers of
individual functional areas

Thommen/Achleitner (2017), p. 505-506

Principles of task delegation

Planning

Clarity
Decision-
Controlling Management
making

Completeness Justifiability

Task delegation

Appropriateness

Thommen/Achleitner (2017), pp. 505-506

Authority can stem from a variety of sources

Legal basis

Institutional (formal)
Corporate organization
authority

Social norms

Expertise
Sources of
Professional authority
authority
Leadership skills

Employee treatment

Personal authority Integrity

Assertiveness

Thommen/Achleitner (2017), p. 507

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.2.1 Overview
2.2.2 Planning
2.2.3 Decision-making
2.2.4 Task delegation
2.2.5 Controlling
2.3 Corporate culture
2.4 Strategic management
Learning objectives

• You are able to describe the purpose of the control

function, as well as the different aspects under which it
can performed

• You are able to list different control areas and explain

the requirements that effective control mechanisms need
to fulfill
Controlling compares the actual results achieved with
the desired results

• The goal of controlling is to compare to-be concept

Planning
and actual as-is situation and derive the degree of
target achievement
• In addition to the target/actual comparison, there is Controlling Management
Decision-
making
also the actual/actual comparison to control the
success of a company. It can be performed under
different aspects: Task delegation

-Industry-focused: Comparing results to those of other

companies in the same industry (competitors) or an
industry average
-Employee-related: Comparing the results of
employees with the same or similar tasks
-Past-oriented: Comparing current values to actual
values of the same company from the past
• Different characteristics
-Self-control
-Control of others

Thommen/Achleitner (2017), pp. 508-509

Control is divided into different control areas and must
meet certain requirements
SELECTED
CONTROL AREAS REQUIREMENTS
• Assumptions control • Relevance
• Target control • Accuracy
• Method control • Unambiguity
• Budget control • Efficiency
• Process control
• Results control
• Behavior control
• Management control

Thommen/Achleitner (2017), pp. 508-509

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.3.1 Overview
2.3.2 Systematization
2.3.3 Impact of corporate culture
2.3.4 Influencing corporate culture
2.3.5 Management styles
2.4 Strategic management
Learning objectives

• You are able to explain what corporate culture refers to

• You are able to describe the three levels of corporate

culture by listing their typical components and giving
examples
Corporate culture is an important aspect of
business practice
• Corporate culture refers to
-all collectively shared explicit as well as implicit behavioral norms
(i.e., self-evident assumptions),
-patterns of behavior,
-behavioral statements, and
-behavior results,
-that are learned by members of a company and
-forwarded by means of symbols.
• Corporate culture is learned and is the result of
historic learning processes
• Since corporate culture is learned and people-made, it can
also be changed
• In companies, there is often a variety of subcultures
Thommen/Achleitner (2017), p. 512
First level of corporate culture:
Symbol systems

1st level: Symbol systems EXAMPLES

• Language, rituals, clothing, manners, • Use of the language in forms, e-mails, etc.
logos, artifacts
• Corporate identity of the company
• Visible, often in need of interpretation
• "Dress code"
• Dealing with customers in stores
• Equipment of offices and building architecture
• Organization charts
• Myths about leaders
• Events
• Initiation rites
• Title and company-provided car

Schein (1988)
Second level of corporate culture:
Norms and values

1st level: Symbol systems EXAMPLES

• Language, rituals, clothing, manners, • Standards in international business
logos, artifacts
• Corporate Governance Codex
• Visible, often in need of interpretation
• Statute of the company
• Compliance programs
2nd level: Norms and values • History of the company
• Maxims, ideologies, behavioral • Leadership guidelines, assessment guidelines,
guidelines, commandments, prohibitions personnel selection criteria
• Partly visible, partly unconscious, in
need of interpretation
• Formal and informal rules of contact
• Vision and strategy
• Implicit values (e.g., loyalty)
• Communication style

Schein (1988)
Third level of corporate culture:
Basic assumptions

1st level: Symbol systems EXAMPLES

• Language, rituals, clothing, manners, • Attitude to the truth
logos, artifacts
• Attitude to law and morality
• Visible, often in need of interpretation
• Basic concept of human interaction
• Basic concept of dealing with stakeholders
2nd level: Norms and values • Individualism of the Americans
• Maxims, ideologies, behavioral • Collectivistic understanding in Japan
guidelines, commandments, prohibitions
• Knowledge stocks in the company
• Partly visible, partly unconscious, in
need of interpretation

3rd level: Basic assumptions

• Environmental relevance of the
company, world view, nature of human
relations, dealing with time
• Unconscious intuitions, perceptions,
thoughts, feelings

Schein (1988)
Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.3.1 Overview
2.3.2 Systematization
2.3.3 Impact of corporate culture
2.3.4 Influencing corporate culture
2.3.5 Management styles
2.4 Strategic management
Learning objectives

• You are able to give a systematic overview of different

corporate cultures, discuss their different degrees of risk
and feedback speed, and give examples for industries
where they are common
Systematization of culture types based on degree of
risk and feedback speed according to Deal/Kennedy

high
engineering company investment banking

Tough guy,
Bet-your-company culture
macho culture

Degree of
risk
start-up company
Bureaucracy

Work hard, play hard

Process culture
culture

low

slow Feedback speed fast

Thommen/Achleitner (2017), pp. 512-513

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.3.1 Overview
2.3.2 Systematization
2.3.3 Impact of corporate culture
2.3.4 Influencing corporate culture
2.3.5 Management styles
2.4 Strategic management
Learning objectives

• You are able to discuss the influence of corporate culture

on company performance by contrasting its positive and
negative effects
Hypothesis: "Corporate culture has a positive effect on
company performance"

• Strong corporate cultures significantly influence

organizational action
• Strong corporate cultures lead to a high commitment of
employees and thus to better performance
• Positive corporate culture "fits" and supports the strategy
and structure of the company (idea of "fit")
Specific effects of corporate culture

POSITIVE NEGATIVE
• Action orientation • Tendency to seclusion
• Smooth communication • Blockage of new ideas
• Quick decision-making • Implementation barriers
• Immediate implementation • Lack of flexibility
• Low control effort
• Motivation and team spirit
• Stability

Thommen/Achleitner (2017), pp. 513-514

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.3.1 Overview
2.3.2 Systematization
2.3.3 Impact of corporate culture
2.3.4 Influencing corporate culture
2.3.5 Management styles
2.4 Strategic management
Learning objectives

• You are able to describe means to influence corporate

culture
Multitude of specific possibilities for influencing
corporate culture
CONTEXTUAL CULTURAL DOCUMENTS
CONDITIONS DETERMINANTS AND SYMBOLS
• Leadership systems • Value-oriented • Design and development
(consensus-oriented, self- personnel of mission statements
obligatory) management (selection, and principles
• Incentive systems introduction, • Ethical guidelines
(material and immaterial) development) ("Code of Conduct")
• Structural measures • Organizational • Publications and
(structural and procedural development "historical research"
organization, information (organizational structure,
individual behavior, • Community-sponsoring
and communication projects (sporting
processes) learning)
events, product
• Symbolic management presentations, etc.)
(development of symbolic
meaning potentials, • Corporate identity
previous life of new measures
values)

Steinle (2005), pp. 102-105; Thommen/Achleitner (2017), pp. 514-515

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.3.1 Overview
2.3.2 Systematization
2.3.3 Impact of corporate culture
2.3.4 Influencing corporate culture
2.3.5 Management styles
2.4 Strategic management
Learning objectives

• You are able to explain the factors that influence the

specific leadership style that is used in a company

• You are able to contrast and characterize different

leadership styles by the level of involvement of the
subordinate employees

• You are able to describe the situational leadership style

and discuss its advantages and disadvantages
Leadership style is the result of the design of planning,
decision-making, task delegation, and controlling

Planning

• Leadership styles are recursively Decision-

linked to the existing corporate
Controlling Management
making

culture
Task delegation

• Leadership styles can be discerned,

e.g., with respect to the involvement
of subordinate employees in the
decision-making process
• There is thus a continuum of
different styles of leadership

Thommen/Achleitner (2017), p. 516

Differentiation of leadership styles based on the level
of involvement of the subordinate employees
Authoritarian leadership style Cooperative leadership style

Decision space
of the supervisor
Decision space
of the group

despotic patriarchal participatory democratic

Decides Decides, but Informs and Displays a problem

and orders strives for presents problem, and acts as a
Super- acceptance and decides after coordinator or
visor conviction consultation with limits the decision
subordinates

--- Can, for example, Can express Decide

ask questions opinion, suggest
Sub- own problem
ordinate solution

Thommen/Achleitner (2017), p.517, based on Zepf (1972), p. 28

A situational leadership is more applicable in practice

High

Supportive
Behavior /
Relationship
Behavior

Low
Low Task Behavior / High
Directive Behavior
Skill High Medium to high Medium to Low Low
Employee
maturity
Motivation High Shaky High Low

High maturity Medium maturity Low maturity

Straub (2012), pp. 495-497, based on Hersey/Blanchard (1986)
Advantages and disadvantages of the situational
leadership style

ADVANTAGES DISADVANTAGES

• Gives guidance for executives • Model could not be confirmed

• High acceptance empirically so far

• Includes the situation and the • High standards of managerial

employees flexibility of supervisors

• Provides room for development for • A mature employee does not have
employees to have organizational goals, but
can also pursue his own goals (for
• Maturity-dependent guidance tends example, career goals)
to be correct in practice
• Inclusion of only one situation may
not be enough

Straub (2012), p. 497

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to describe strategic management, its

purpose and goals

• You are able to explain strategic management as a

comprehensive, multi-staged process
Strategic management is a comprehensive strategy-
finding process that includes multiple elements

Strategic management ...

... encourages in-house and outside strategic
thinking
... involves responsible executives and
employees in strategy development
... does not just mean looking for strategies, but
actually implementing them in operative
management
stretegic management

... focuses on questions of effectiveness as

well as efficiency in companies
Operational management

Kreikebaum et al. (2011), pp. 28-32

Understanding strategic management as process

Values and basic attitudes

of the management

Strategic
Strategy
Segmen- analysis Strategy
Vision implemen-
tation (external, formulation
tation
internal)

Strategic control

Environmental conditions

Kreikebaum et al. (2011), p. 55

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objective

• You are able to describe how a company's vision

influences the future direction of a company and
illustrate how the "mission statement" serves this goal
Understanding strategic management as process:
Vision

Values and basic attitudes

of the management

Strategic
Strategy
Segmen- analysis Strategy
Vision implemen-
tation (external, formulation
tation
internal)

Strategic control

Environmental conditions

Kreikebaum et al. (2011), p. 55

Visions characterize the future direction of corporate
policy as a corporate purpose

• ... are the basis and starting point for the

company's goal setting and strategy
• ... should serve as an orientation for all
stakeholders, motivate them, and give
meaning to entrepreneurial activity

Kreikebaum et al. (2011), pp. 58-73

Examples of "Vision Statements" or
"Mission Statements" of IT companies
"Delight our customers, employees, and "Our vision is to be earth's most customer-
shareholders by relentlessly delivering the centric company; to build a place where
platform and technology advancements people can come to find and discover
that become essential to the way we work anything they might want to buy online."
and live."

"We follow a simple business philosophy:

"Organize the world's information and make to devote our talent and technology to
it universally accessible and useful." creating superior products and services
that contribute to a better global society."

"Empower every person and organization on

the planet to achieve more. That's what "[Our] mission is to give people the power
inspires us, drives our work and pushes us to share and make the world more open
to challenge the status quo every day." and connected."

"Apple designs Macs, the best personal computers in the world, […]. Apple
leads the digital music revolution with its iPods and iTunes online store. Apple
has reinvented the mobile phone with its revolutionary iPhone and App Store,
and is defining the future of mobile media and computing devices with iPad."

www.strategicmanagementinsight.com/mission-statements.html and company websites, retrieved 16 January 2018

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to explain why segmentation is a necessary

step in strategic management

• You are able to break down the economic landscape into

segments along certain criteria and define these criteria
taking into account certain requirements
Understanding strategic management as process:
Segmentation

Values and basic attitudes

of the management

Strategic
Strategy
Segmen- analysis Strategy
Vision implemen-
tation (external, formulation
tation
internal)

Strategic control

Environmental conditions

Kreikebaum et al. (2011), p. 55

Definition of Strategic Business Segments (SBSs) is an
essential step of segmentation

SEARCH SPACE FOR SBSs REQUIREMENTS

Target groups
• Breaking up the overall market
Institutional

into internally homogeneous

customers

Others
segments
Investment fund
• However, segments should be
Corporation Customer
clearly different from each
customers
Corporate

contact situation
SME (technology)
other (external heterogeneity),
Small trade Internet, regarding
Automated television
Wealthy private
customer
Service calls -their customer-related
Foreign center
requirements
customers

"Average Own location

Private

customer" Field store

Price-sensitive
sales -other performance-relevant
customers
Store
characteristics such as the
Financing intensity and structure of the
Payment processing competition
Wealth protection
Insurance • Within the SBSs, further
Real estate differentiation is then made by
... means of the more detailed
Needs market segmentation

Meffert et al. (2012), pp. 266-269

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to explain what the purpose of strategic

analysis is and why it is necessary for a company

• You are able to name different groups of methods and

individual methods for analysis and strategy development
Understanding strategic management as process:
Strategic analysis

Values and basic attitudes

of the management

Strategic
Strategy
Segmen- analysis Strategy
Vision implemen-
tation (external, formulation
tation
internal)

Strategic control

Environmental conditions

Kreikebaum et al. (2011), p. 55

Objective of the strategic analysis: Gathering
information for formulating the corporate strategy

COMPANY ENVIRONMENT
• What are the strengths • What are opportunities
and weaknesses of the and risks arising from
company? anticipated environmental
developments?
• Where are strategic
success positions
available?

Internal Analysis External Analysis

(“Company analysis“)

Thommen/Achleitner (2017), pp. 525-532

Methods for analysis and strategy development

Methods

Tools of internal Tools of external Strategy

Combined tools
analysis analysis frameworks

SW analysis OT analysis SWOT Porter

Experience Competitor McKinsey

Ansoff
Curve analysis portfolio
Product Strategy
Benchmarking BCG portfolio
lifecycle diamond
Porter's Five
Forces

Market
analysis

Important: Integrative analysis of external and internal data

Thommen/Achleitner (2017), pp. 533-539

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to explain what the SWOT analysis is and

describe its key components

• You are able to perform a SWOT analysis in order to

better understand and analyze a certain business
situation
SWOT analysis (1/3): A widely used concept for
strategic analysis in practice

SWOT analysis SWOT matrix

Strengths Weaknesses
Internal Current
External Strengths Weaknesses

+ - Oppor-
tunities

Opportunities Threats

Threats

Future

Derivation of consequential strategy

Bruhn (2010), pp. 43-45
SWOT analysis (2/3): A template with key questions

STRENGTHS WEAKNESSES
• What are you good at? • What are you not good at?
• What new skills does the company have? • Which skills do you lack?
• What can you do that others cannot? • What can others do better than you?
• How could you repeat one of your achievements? • What failures did you have?
• What makes you unique? • What are the reasons?
• Why do customers come to you? • Which customers were not satisfied? What are the
reasons?

OPPORTUNITIES THREATS
• Was/is there any change in the market to your • Was/is there any change in the market to your
advantage? detriment?
• What new products could you offer? • What do your competitors do?
• Which new target groups could you target? • Are customer needs changing to your disadvantage?
• How could you make yourself unique? • Is the political / economic environment changing to
• How could the company look like in 4-6 years? your disadvantage?
• Are there circumstances that threaten you or the
company?
SWOT analysis (3/3): Example of a SWOT matrix
for a car manufacturer

Strengths Weaknesses

International Lack of experience

business in the small car
presence segment
Opportuni-
ties Particular growth
Worldwide growing in the area
automotive markets of small vehicles

Leading position No series-ready

in occupant alternative drive
protection concepts
Threats
Worldwide
Worldwide tightening tightening of
of safety standards emission regulations

Bruhn (2010), p. 44
Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to explain the concept of the Experience

Curve and what it means for companies or markets

• You are able to describe the relationship between the

Experience Curve and pricing strategies in different
phases of a product introduction

• You are able to give a real example of an industry or

company where the effects of the Experience Curve can
be observed
The Experience Curve (1/5): Costs per production unit
produced decrease with increasing experience
The Experience Curve effect implies that the real (uninflated) unit cost of a product
decreases on average by a relatively constant amount of 10 to 30 percent as soon as the
product experience expressed in cumulative production volumes doubles.
(see Henderson 1974, p. 19)
Cost (in EUR per unit)

10 Cost reductions are

not automatic for the
individual company!
8
at 10% decrease
6

4 at 20% decrease

2
at 30% decrease
0
12 4 8 16 32
Cumulated experience (units)
Meffert et al. (2012), p. 281; Thommen/Achleitner (2017), pp. 535-536
Experience Curve (2/5): Main causes and necessary
operationalization of variables

•Theory of the learning curve

Main •Technical progress
causes •Rationalizations
•Size of scale

•Product
•Costs
Variables
•Experience
•Deflation
Experience Curve (3/5): Significant room for favorable
price politics in view of the Experience Curve

EUR/piece
New
Production competitors
costs
Retail price

Retail price

Production
costs

Cumulative production volume

Thommen/Achleitner (2017), p. 537

Experience Curve (4/5): Examples of real Experience
Curves from practice
Development of unit prices for shipped photovoltaics
Module cost $/Watt (inflation-adjusted)

Cumulative module shipments (MWp)

https://en.wikipedia.org/wiki/Swanson%27s_law; last accessed 07.02.2018
Experience Curve (5/5): Examples of real Experience
Curves from practice
Development of hard drive cost per gigabyte

1,000,000.00
Module cost $/GByte (inflation-adjusted)

100,000.00

10,000.00

1,000.00

100.00

10.00

1.00

0.10

0.01
1980 82 84 86 88 90 92 94 96 98 2000 02 04 06 08 10 12 14 16 2018
Year

http://www.mkomo.com/cost-per-gigabyte-update; last accessed 07.02.2018

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to explain Porter's Five Forces, its

components and how they are interrelated with each
other

• You are able to apply the framework to an industry or

company and use it to analyze the market situation

• You are able to describe determinants that influence the

intensity of the existing market forces and give
examples from companies or markets where they can be
observed
Porter's Five Forces (1/3): Five drivers of competition
according to Porter

Potential new
entrants
Threat of
market entry

Bargaining Competitors in
power of
suppliers
the industry

Suppliers Buyers
Bargaining
Rivalry among
power of
existing companies
buyers

Threat of
substitutes

Substitutes

Porter (1999), p. 26; Thommen/Achleitner (2017), p. 533

Porter's Five Forces (2/3): Example determinants to
examine the intensity of the five driving forces

DANGER OF
NEGOTIATION POWER THREAT OF
MARKET ENTRY
(SO-CALLED ENTRY BARRIERS) OF CUSTOMERS SUBSTITUTES

High risks if market entry Customer negotiation Strong threat if:

barriers are low, e.g., if: power high if: • Relative price /
• Only low capital • Few customers, but performance ratio of
investment necessary many providers (so- substitutes is good
• Minimum sales volume called limited monopoly • Change costs low
to make a profit is low of demand)
• Probability of potential
• No expected retaliation • Products can be customers to substitute
by competitors substituted relatively high
easily by similar
• Easy access to products
production factors and
distribution channels

Thommen/Achleitner (2017), pp. 533-534

Porter's Five Forces (3/3): Example determinants to
examine the intensity of the five driving forces

NEGOTIATION POWER
OF SUPPLIERS RIVALRY AMONG COMPETITORS

Negotiation power of suppliers high if: Rivalry stronger if:

• Few suppliers, but many customers (so- • Industry growth stagnates
called limited supply monopoly / • Forcing high fixed costs and exit barriers
oligopoly) to capacity utilization (price wars or
• Suppliers do not consider focal company phases of overcapacity)
or industry as important • Polypolistic market structures, i.e.,
• There are no replacement products for many competitors
the delivered products
• Delivered product is important input for
customer's business (focal company
dependent on supplies)

Thommen/Achleitner (2017), pp. 533-534

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to explain Porter's competitive strategies by

describing the components by which they can be
classified, and give examples for the three strategies

• You are able to illustrate how the choice of such

strategies influences a company's behavior
Understanding strategic management as process:
Strategy formulation

Values and basic attitudes

of the management

Strategic
Strategy
Segmen- analysis Strategy
Vision implemen-
tation (external, formulation
tation
internal)

Strategic control

Environmental conditions

Kreikebaum et al. (2011), p. 55

Porter's competitive strategies: Porter differentiates
between three "generic" competitive strategies

Source of strategic advantage

efficient
Uniqueness perceived
Low cost position
by the customer

Overall cost
Industrywide Differentiation
leadership

Strategic "Stuck in
target the middle"

Particular
Focus
segment only

Porter (1999), p. 67; Thommen/Achleitner (2017), pp. 544-545

Contents

2 Management
2.1 Introduction
2.2 Management functions
2.3 Corporate culture
2.4 Strategic management
2.4.1 Strategic management as a process
2.4.2 Vision
2.4.3 Segmentation
2.4.4 Strategic analysis
2.4.5 Focus: SWOT analysis
2.4.6 Focus: The Experience Curve
2.4.7 Focus: Porter's Five Forces
2.4.8 Strategy formulation
2.4.9 Strategy implementation
Learning objectives

• You are able to describe the differences between

strategy formulation and implementation

• You are able to illustrate three critical success factors for

effective strategy implementation
Understanding strategic management as process:
Strategy formulation

Values and basic attitudes

of the management

Strategic
Strategy
Segmen- analysis Strategy
Vision implemen-
tation (external, formulation
tation
internal)

Strategic control

Environmental conditions

Kreikebaum et al. (2011), p. 55

Strategy formulation is in several ways different to
strategy implementation

Intuitive and Science with

Focus on Process-
analytical tools and
efficacy oriented
skills techniques
Strategy
formulation
Coordination Primarily by
Intellectual Difficult to
among a top
process do well
few people managers

Motivation
An art to
Focus on and People-
energize
efficiency leaderships oriented
people
skills
Strategy
implement-
tation Coordination
Even more
Primarily by
Operational among mid and
difficult to
process many lower-level
do well
people managers
The world's best strategy implementers excel in three
critical success factors
OWNERSHIP AND PRIORITIZATION
COMMITMENT AND PLANNING ACCOUNTABILITY

• Devotion of appropri- • Clear communication • Elimination of

ate time and energy at all levels about which performance variability
by reserving sufficient outcomes and actions are through close monitoring
space in their diaries to desirable and most and quick responses
drive efforts in a hands- important for customers, • Use of appropriate key
on manner shareholders, and other performance indicators
• Role-modelling of right stakeholders which are tracked at the
behaviors and new • Use of appropriate right frequency and
processes to support tools such as value- granularity
change driver trees to ensure • Regular performance
employees prioritize well discussions with teams
• Defined review • Regular performance
intervals to track and assessments of
re-align individual efforts individual employees
versus the priorities of against their goals and
the overall organization targets

https://www.mckinsey.com/business-functions/operations/our-insights/why-implementation-matters; last accessed 07.02.2018

Execution is everything...

"An imperfect strategy fully implemented is

better than a perfect strategy partially
implemented"
Repetition questions: Management

1. Please describe and evaluate 9. What are advantages and

Management-by-Delegation! disadvantages of a strong corporate
2. Please describe the four classic culture?
functions in management! 10. Please contrast the authoritarian from
3. Please describe the relationship the cooperative leadership style!
between planning and the other three 11. Please outline the strategic
functions! management process!
4. What types of decisions do you know? 12. What is the concept of the Experience
5. From what sources can authority stem Curve?
in business practice? 13. Please outline Porter's Five Forces!
6. What control areas can be discerned? 14. Please outline the three archetypical
7. What is corporate culture? competitive strategies according to
Porter!
8. Which are the three layers of corporate
culture? Please name them and give
examples for each layer!
Repetition questions: Management

• Using the example of order quantity or • It is very important for a company to recognize
procurement, explain the four functions which factors influence the competitive
planning, decision-making, task delegation, situation in a market.
and controlling! -Which competitive forces does Porter distinguish?
• What is the concept behind a temporal -Please describe other influencing factors that can
influence the competitiveness and profitability of an
differentiation of planning? industry!
• Often, changes in strategy also require a -What is the difference between the these "other"
changed corporate culture influencing factors and the five competitive forces
-What difficulties does a company management face according to Porter?
when it wants to change its corporate culture? -Is it imperative that a company follows a
-What are measures to facilitate a change in growth strategy in general market growth?
corporate culture?
• Both in literature and in practice you often
meet the statement: "The cooperative
leadership style is the best leadership style"
-What is meant by a cooperative style of leadership?
-Please comment on the statement above!