SBA - Module 7 (BB)
SBA - Module 7 (BB)
SBA - Module 7 (BB)
LEARNING OBJECTIVES:
CHAPTER TOPICS:
CHAPTER OUTLINE:
I. Opening Vignette—Hewlett-Packard
Hewlett-Packard Company (HP) is one of the leading providers of personal computing devices;
imaging and printing-related products; enterprise information technology (IT); and technology
services, consulting, and outsourcing. The company has made several large acquisitions in
recent years, including computer industry rivals Compaq and Electronic Data Systems. HP is
now the market share leader in desktop personal computers, portable personal computers,
inkjet printers, and laser printers. While acquisitions have contributed to substantial growth in
company revenues, HP’s increasing profit margins are more a function of cost-cutting and
internal efficiency measures.
One of HP’s most successful efficiency programs is what the company calls its “information
technology transformation.” The company completely rebuilt its IT infrastructure and processes
to reduce costs, provide more reliable information, improve business continuity, create a more
simplified system, and support company growth.
Mark Hurd, the CEO, is leading HP’s quest for internal efficiency. He is a numbers-oriented
manager who uses a personal spreadsheet program to track and analyze his own daily
schedule. He not only preaches internal efficiency to internal managers and employees but is
known to share HP’s philosophy with other stakeholders as well. Looking forward, Hurd
believes that HP’s significant competitive advantages include “a strong balance sheet,
diversified revenues with one-third of our revenue and well over half of our profits from
recurring sources such as services and supplies, a lean, variable cost structure and commitment
to continue to eliminate all costs that do not core to the company’s success, and proven
financial and operational discipline.”
A. The collective pattern of day-to-day decisions made and actions were taken by employees
responsible for value activities creates functional strategies that implement the growth and
competitive strategies of the business.
1. Decisions made within each function will be consistent with each other.
2. Decisions made within one function will be consistent with those made in other
functions.
3. Decisions made within functions will be consistent with the strategies of the business.
C. Marketing strategy is the plan for investing marketing efforts and resources to achieve
business goals.
3. The competitive strategy of the firm also influences marketing decisions. Low-cost
competitive strategies require low-cost channels of distribution and low-risk product and
market development activities. Differentiation strategies require that marketing identify the
attributes of products and services that customers will value, price, and distribute the product
or service in ways that capitalize on the differentiation, and advertise and promote the image of
difference.
D. Operations strategy is the plan for aligning the product and/or service operations of the
firm with the intended business strategies. The task of operations managers is to design and
manage an operations organization that can create the products and services the firm must
have to compete in the marketplace.
1. Supply chain management, one of the most important areas in operations management,
involves, at a minimum, the integration of the interests of the focal company, the company’s
customers, and the company’s suppliers.
2. Growth strategies may require capacity expansion, hiring of new employees, and new
sourcing arrangements.
3. Retrenchment strategies often target the activities of operations first: line employees are
laid-off, equipment is idled, plants (offices and stores) are closed.
E. A firm’s R&D strategy should define the priorities for new product and service
development, long-range innovation efforts, the role of intellectual protection, and any alliances
or partnerships needed to advance innovation goals.
1. Although the HR staff serves as a resource, most of the actual HR decisions are made by
line managers. All managers, whether they are involved in marketing, operations, R&D, or
information systems, play key roles in deciding employee performance levels, training needs,
selection criteria, and salary levels.
2. As companies become more global, the challenges of managing human resources are
becoming more complex.
G. The primary purpose of a financial strategy is to provide the organization with the capital
structure and funds that are appropriate for implementing growth and competitive strategies.
1. The finance group decides the appropriate levels of debt, equity, and internal financing
needed to support strategies by weighing the costs of each alternative, the plans for the funds,
and the financial interests of various internal and external stakeholder groups.
2. Finance also determines dividend policies and, through the preparation of financial
reports, influences how financial performance will be interpreted and presented to
stockholders.
3. All expenditures in capital and expense budgets should be linked back to the strategies of
the firm.
H. The purpose of the information systems strategy is to provide the organization with the
technology and systems that, at a minimum, are necessary for operating, planning, and
controlling the business.
2. Some organizations have built their entire competitive strategy on the effective use of
information systems.
3. Many organizations are creating enterprise resource planning (ERP) systems to manage
the flow of information throughout the entire organization.
a. An ERP system supports a wide variety of functions, such as operations and supply
chain management, finance and accounting, human resources, distribution, and customer
relationship management, from a shared data source.
b. Each functional area may have its own software and applications that contribute to
drawing what is needed from a common database. The information contained in the database
should be current, reliable, and easily accessible.
c. ERP systems are useful in achieving the goal of integration across functional
strategies. The effectiveness of strategy implementation efforts is increased in firms in which
employees work as a coordinated system with all of their separate but interdependent efforts
directed toward the goals of the firm.
A. The formal organizational structure specifies the number and types of departments or
groups and provides the formal reporting relationships and lines of communication among
internal stakeholders. The underlying assumption is that a strategy-structure fit will lead to
superior organizational performance.
B. A functional structure is organized around the inputs or activities that are required to
produce products and services, such as marketing, operations, finance, and R&D.
1. This sort of structure causes people to become focused on a particular function in the
firm. They become experts, which can enhance the quality and efficiency of what they do.
2. In the functional structure, the general manager will tend to make all of the key strategic
decisions for the firm. It is centralized.
3. A disadvantage is that the same functions are performed by more than one person or
group in a divisional structure. For instance, there is potential for overlap of functions in areas
such as marketing, R&D, and purchasing.
4. In the divisional structure, strategic decisions are shared between the general manager
and the product managers.
D. A hybrid structure that combines some elements of both functional and product/market
forms is called a matrix structure.
1. Project matrix structures are most common in organizations that experience their
workload in the form of projects (construction firms, consulting firms, architectural firms, movie
and television production, and engineering firms).
2. Matrix structures can be disconcerting for employees because of the “too many
bosses” problem. The overall complexity of the structure can create ambiguity and conflict
between functional and product managers and between individuals.
E. The network structure is very decentralized and organized around customer groups or
geographical regions. Network structure represents a web of independent units, with little or
no formal hierarchy to organize and control their relationship.
1. A network structure may not be appropriate when high levels of coordination and
resource sharing are required since it represents an extreme form of decentralization, with
executive-level management serving primarily an advisory function and lower-level managers
controlling most decisions.
2. The weaknesses of the network structure include the potential for lost control of the
autonomous units and high costs from the extensive duplication of resources.
2. In these types of firms, production can involve many firms simultaneously through a
variety of cooperative relationships and joint ventures. They are joined through common goals
and allow components to be recombined into a variety of configurations.
H. Foreign subsidiaries lay one of three roles: local implementation by focusing on one
country, specialized contribution by playing a unique role as a member of an interdependent
network of subsidiaries, or global mandate by managing an entire global business.
A. An organization’s culture is its system of shared values that guides employee decision-
making.
1. Organizational culture often reflects the values and leadership styles of executives and
managers who guide the firm.
5. The role of executive leadership is to define and live by the sought-after values, and
harness or redirect the organization’s energy toward the important strategic priorities of the
company.
B. Innovation and entrepreneurship are essential for a firm to differentiate its goods or
services from competitors and create additional or new value for customers, both of which are
critical to achieving competitive advantage.
3. It is also helpful if the firm has slack financial resources, which are those that are not
completely committed to paying existing obligations. High liquidity reflected in higher-than-
necessary cash balances and low debt levels allows a firm the flexibility it may need to pursue
promising new ventures.
5. Also, systems are in place to facilitate the creation of new products, processes, or
services that create value. These systems include a simple approval process for obtaining firm
resources to pursue innovative ideas.
C. Innovative firms learn from their own internal research and development processes,
but they also learn from external stakeholders such as customers, suppliers, and venture
partners. They can learn through communications and transactions with them and pursue new
collaborations with them. Collaborative innovation can be defined as “the pursuit of
innovations across firm boundaries through the sharing of ideas, knowledge, expertise and
opportunities.”