Management Models...

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Product

Price

Promotion

Customer
Service
Place

People

Processes

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Key Words...
Break-even Financing Life Cycle Economies of
Scale Elasticity Sales Cycles Market Potential
Portfolio Matrix Product Model Four Ps
Push/Pull Strategy Marketing Mix PDCA Cycle
SWOT Value Chain Ansoff Matrix BCG Matrix
7-S Model Core Competencies GE Business
Screen Nine Cell Industry Risk/Reward Diagram
Porters Five Forces Industry Competition Generic
Strategies Geobusiness Model Porters Diamond
Matrix Design PIMS Leavitts Diamond Belbins
Team Roles Theory X/Y Maslows Hierarchy
Herzbergs Theory Cultural Web Pareto Curve
CIM Concept Value Drivers

Markets and Structure of Flow

Resources

Resource
markets

Money

Taxes,
goods

Manufacturer
markets

Services, money
Taxes, goods

Goods and services

Money

Services,
money

Government
markets

Services,
money

Money

Resources

Taxes
Services

Taxes,
goods

Middlemen
markets

Money
Goods and services

Consumer
markets

A Companys Macroenvironment

sl
gi
Le

MACROENVIRONMENT

lo
g

io
at
la
gu
re

no
Te
ch

d
an

Suppliers

IMMEDIATE INDUSTRY &

COMPETITVE ENVIRONMENT

tio

Substitute

ns

COMPANY

hi

cs

Buyers

m
og

sa
ue
al
lV

ra
p

a
ci
So

Rival Firms

ul

s
fe
l
ty

The Economy at large

Po
p

Li

at
io

nd

de

New Entrants

es

Break-even Point
Value $
Sales

Profit

Break-even Point
Variable
costs

Current sales level

Total
costs

Fixed
costs

0
0

Units sold

Break-even Chart

Dollars (in thousands)

1200

Total revenue

1000

Target profit
Total cost

800
600
400

Fixed cost
200

10

20

30

40

50

Sales Volume in Units (in thousands)

Break-even Volume
Total
Revenue

35
30

$ Millions

25

Total Costs

20
15

Fixed
Expenses*

10
5
0

Profit

50

Loss

100
Break-even Volume
(90,000)

* Fixed Expenses = Marketing Expenses and Other Direct

Expenses

150

200
Units Sold (000)

Break-even Regions
Cash flow
Returned capital
break-even

Cumulative revenue

Cash flow breakeven

$
EVA break-even
Opportunity cost based on
capital risk assumed

P&L break-even

Financing Life Cycle

Venture
Capitalist

FFF & Angels

Seed Capital
& Early Stage

Early
Growth

Enterprise
Cash Flow

Investment Banks &

Banks

Later
Growth

Mezzanine
3rd

Public
Market

2nd

Initial
Public
Offering

1st

Valley
of Death

Break-even
point

Emerging Growth

Time

Enterprise
Financing

Demand and Supply

S
D
F

Price

A
S

Quantity

Average cost

Economies of Scale

LACs*

Output
*Long-run average costs (LACs)
Increasing returns to scale, or economies of scale

Price

e=-

Price

Elasticity
e = 0 (total
inelastic
demand)

e<-1
e=(total elastic
demand)

e=-1
e>-1

Quantity

e=0

P1
(-)

Price

Quantity

P2
Price

P1
(+)

(-)

P2
(+)

Quantity

Demand is elastic and expenditure increases

when price falls from P1 to P2

Quantity

Demand is inelastic and expenditure increases

when price falls from P1 to P2

Price

Inelastic and Elastic Demand

P2

P 2

P1

P 1

Q 2Q 1

Q 2

Q 1

Quantity Demanded per Period

Quantity Demanded per Period

(a) Inelastic demand

(b) Elastic demand

Sales and Profit Life Cycles

Sales and Profits ($)

Sales

Profit

Introduction

Growth

Maturity
Time

Decline

Market Potential, Market Volume,

Market Share
Volume or value

Market potential
Market volume

Market share

Time

Sales over profits

The Product Life Cycle I

Sales

Profits
Introduction

Growth

Maturiy

Shake-out

Stages over Time

Decline

The Product Life Cycle II

Unit
Sales
Volume

Introduction

Growth
A
B
C

Maturity

Commodity or Decline

Time
Note: A = Moderate Growth, B = Commodity, C = Decline

The Life Cycle Portfolio Matrix

THE BUSINESS UNITS COMPETITIVE
POSITION
Strong
Average
Weak
Development
A
C
Growth

THE INDUSTRYS STAGE

IN THE EVOLUTIONARY
LIFE CYCLE

Competitive
shakeout
Maturity

B
D
F
E

Saturation
G
Decline

Patterns of Strategic Change

Continuity

Incremental

Flux

Global

The Whole Product Model

Potential Product
Augmented Product
Expected Product
Generic Product

The Product-Positioning Map

High quality

Low price

High price

C
D

Low quality

The Four Ps of McCarthy I

Product
Place

Price
Promotion

Environment

Environment

Environment

Environment

The Four Ps of McCarthy II

High quality
Marketing
Mix
Product variety
Quality
Design
Product
Features
Brand name
Packaging
Sizes
Services
Warranties
Returns

Price

Place
Target

Channels
Coverage
Assortments
Locations
Inventory
Transport

Market

List price
Discounts Low quality
Allowances
Payment period
Credit terms

Promotion

Sales promotion
Advertising
Salesforce
Public relations
Direct marketing

Push versus Pull Strategy

Marketing
activities
Push
Strategy

Manufacturer

Demand
Intermediaries

End
users

Demand

Marketing activities
Demand

Demand
Pull Strategy

Manufacturer

Intermediaries

End
users

The Expanded Marketing Mix

Product

Price

Promotion

Customer
Service
Place

People

Processes

The 6 Step Marketing Plan

1

Situation (SWOT)

Action plan

firm
market
industry
competition
environment

Objectives
sales
market share
market expansion
leadership
satisfaction

Strategy
segment target
price / quality
product positioning
differentiation
diversification

budget allocation
product
promotion
price
distribution

Marketing
Plan

Forecasts

quantify:
costs
sales
profits
market share
Control

organization structure
measurement tools
check frequency
=> Corrective actions

The PDCA Cycle

Performance

Plan

Act

Do
Check

Path of continous improvement

Time

Enterprise Management Process

Decision
Process
Enterprise
Structure

Mission &
Strategy

Customer
Satisfaction

Value
Improvement

Enterprise
Learning
Benchmarking

SWOT Analysis Diagram

Numerous
environmental
opportunities

Cell 3:
Supports a turnaroundoriented strategy

Cell 1:
Supports an
aggressive strategy
Substantial
internal
strengths

Critical
internal
weaknesses
Cell 4:
Supports a
defensive strategy

Cell 2:
Supports an
diversification strategy

Major
environmental
threats

SWOT Analysis I

Strengths

Opportunities

Weaknesses

Threats

SWOT Analysis II
STRENGTHS
STRENGTHS//WEAKNESSES
WEAKNESSES

OPPORTUNITIES
OPPORTUNITIES/ /THREATS
THREATS

Firm,
Firm,Organization
Organization

Environment,
Environment,Market,
Market,Industry
Industry

Market share
Key account share
Growth rate
Supply diversity
Influence
On market
Purchasing / selling
deadline
New products cycles
Negotiation power
- firm suppliers
- customers
Firm competitivity
- Product, service
- Profitability, H.R.,
Segments invested in
Firms integration level
High-tech vulnerability

MARKET

Market size
Key account size
Annual growth rate
Market diversity
Price sensitivity
Seasonality
Cycles
Negotiation power
- suppliers
- consumers

COMPETITION
Competitor types
Concentration level
Intrants / extrants
Market share evolution
Vertical / horizontal integration
Technology substitution

SWOT Analysis III

STRENGTHS
STRENGTHS/ /WEAKNESSES
WEAKNESSES

OPPORTUNITIES
OPPORTUNITIES/ /THREATS
THREATS

Firm,
Firm,Organization
Organization

Environment,
Environment,Market,
Market,Industry
Industry

Firm margins
Economies of scale
Barriers
Production capacity level

Adaptability to change
Expertise / Know-How
Patent ownership
Production technology

Reactivity / Flexibility level

Adaptability
Agressiveness
Working relationships

FINANCE / BUSINESS

Global benefits
Economies of scale
Barriers
Production capacity level

TECHNOLOGY

Maturity / volatility
Complexity
Differentiation
Patents and copyrights
Production technology

SOCIO - POLITICAL

Attitudes / Social trends

Laws and regulations
Pressure groups
Trade union activities

The Generic Value Chain I

Support

Firm infrastructure
gin
Mar

activities
Human resource management
Technology development
Procurement
Operations

Outbound
logistics

Marketing
and sales

Service

Mar
gin

Inbound
logistics

Primary activities

The Generic Value Chain II

FIRM INFRASTRUCTURE
HUMAN RESOURCES MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT

INBOUND
LOGISTICS OPERATIONS

Marketing
Management

Advertising

OUTBOUND
LOGISTICS

Sales Force
Administration

MARGIN

MARKETING
& SALES

Sales Force
Operations

Technical
Literature

SERVICE

Promotion

The Generic Value Chain III

Firm infrastructure
rgin
Ma

Human resources management

Technology development
Procurement

Outbound
logistics

Primary Activities

Marketing
and sales

Service

in

Operations

Ma
rg

Inbound
logistics

The Ansoff Matrix I

Current Products

New Products

Current
Markets

Market
penetration

Product
development

New
Markets

Market
development

Diversification

The Ansoff Matrix II

PRODUCTS AND/OR SERVICES

Existing

Existing

New

Market
penetration

New
product
development

Market
development

Diversification

MARKETS

New

The Customer Growth Matrix

PRODUCTS AND/OR SERVICES

Existing

Existing

New

Customer
loyalty

Customer
extension

Customer
acquisition

Customer
diversification

CUSTOMERS

New

Product-Market Diversification

Product Diversification

Broad

Moderate

Narrow
Narrow

Moderate
Market Diversification

Broad

BCGs Growth-Share Matrix I

RELATIVE MARKET SHARE

High

High

Star

Low

Cash
Cow

Low

Question
Mark

MARKET
GROWTH
RATE

Dog

BCGs Growth-Share Matrix II

RELATIVE MARKET SHARE
High
Star

Low
Question Mark

High

E
B

MARKET
GROWTH
RATE

Divest

F
Low

G
Cash Cows

Targeted
future position
in the corporate
portfolio

Dog
Present position
in the corporate
portfolio

Divest

BCGs Growth-Share Matrix III

RELATIVE MARKET SHARE
10x

Low
MARKET
GROWTH
RATE

High

1.0x

Low

Star businesses

Question marks

Cash generating
businesses

Dog businesses

10%

High

0.1x

BCGs Growth-Share Matrix IV

Stars

Question Marks

22%

18%

16%

14%

12%
10%

Dogs

Cash Cows

8%
6%

4%

2%

Relative Market Share

0.1 x

1x

8
10 x

Market Growth Rate

20%

The New BCG Matrix

Many

Fragmented

Specialization

Stalemate

Volume

Small

Large

NUMBER OF
APPROACHES TO
ACHIEVE
ADVANTAGE
Few

SIZE OF ADVANTAGES

Underlying Relationship Between ROI

and Market Share in the New BCG Matrix
SIZE OF THE ADVANTAGE
Small

Large

Stalemate

Volume
ROI

ROI

Few
Market share

Market share

NUMBER OF WAYS
TO ACHIEVE
COMPETITVE
ADVANTAGE

Specialization

Fragmented
ROI

ROI

Many
Market share

Market share

McKinseys Seven Ss Framework

Structure

Systems

Strategy

Superordinate
Goals

Skills

Style

Staff

Disruption and the New 7-Ss

VISION PLANNING
Vision for Disruption
Identifying and creating
opportunities for
temporary advantage
through understanding
Stakeholder Satisfaction
Strategic Soothsaying
directed at identifying new ways to serve
existing customers better or new
customers that no one else
serves now.

Capability for Disruption

Sustaining for momentum by
developing flexible capacities for
Speed
Surprise
that can be applied across
many actions to build a series
of temporary advantages

RESOURCE PLANNING

Market
Disruption

Tactics for Disruption

Seizing the initiative to gain
advantage by
Shifting the Rules
Signaling
Simultaneous and
Sequential Strategic
Thrusts
with actions that shape, mold, or
influence the direction or nature of
the competitors responses.

PUNCH-COUNTERPUNCH PLANNING

Core Competencies I

Banner
Brand

Business
Units

Core
Products
(Platforms)

Core
Competencies

Core Competencies II

Processes

Core
Competencies
Technologies

Capabilities

Core Competencies III

Low

Company View

High

High

Competency 1
Competency 5

Market View

Competency 4

Competency 6

Low

Competency 2
Competency 3

The General Electric Business Screen

COMPETITIVE POSITION
Strong

Low

INDUSTRY
ATTRACITVENESS

Medium

High

Average

Weak

Attractiveness/Competitive Position
Strategies
COMPETITIVE POSITION
Strong

High

INDUSTRY
ATTRACTIVENESS

Evaluate
potential for
Grow
leadership via
Seek dominance
Segmentation
Maximize
Identify
investment
weaknesses
Build strengths

Identify
growth
segments
Medium Invest strongly
Maintain
position
elsewhere

Low

Average

Maintain
overall
position
Seek cash flow
Invest at
maintenance
levels

Weak
Specialize
Seek niches
Consider
acquisitions

Identify growth
segments
Specialize
Invest
selectively

Specialize
Seek niches
Consider exit

Prune lines
Minimize
investment
Position to
divest

Trust leaders
statesmanship
Sic on
competitors
cash generators
Time exit and
divest

Company Position/Industry
Attractiveness Screen

High

HOLD

BUILD

BUILD

HARVEST

HOLD

BUILD

Medium

HARVEST

HARVEST

HOLD

Business unit strengths

Medium

High

Low

Low

Industry attractiveness

A Representative Nine-Cell Industry

Attractiveness-Competitive Strength
Matrix
COMPETITIVE STRENGTHS/BUSINESS POSITION
Strong

High

LONG-TERM
INDUSTRY
ATTRACTIVENESS

Average

Business F

Weak

Business A

Medium
Business C

Business B

High priority for investment

Low
Business E

Business D

Medium priority for investment

Low priority for investment

GE / McKinsey Multifactor Portfolio Matrix

BUSINESS STRENGTH

INDUSTRY ATTRACTIVENESS

Invest

Invest

Manage
Selectively
for Earnings

Invest

Manage
Selectively
for Earnings

Harvest or
Divest

Manage
Selectively
for Earnings

Harvest or
Divest

Harvest or
Divest

Portfolio Positions and

Defensive Strategic Market Plans
Very Attractive

Market Attractiveness

Protect

Protect or
Harvest

Harvest or
Divest

Protect or
Focus

Harvest or
Divest

Protect

Protect or
Focus

Protect or
Harvest

Very Unattractive
Very Weak

Competitive Advantage

Very Strong

Market Attractiveness Portfolio

Classification and Strategies
BUSINESS STRENGHT
Weak

Medium

Strong

5.00

Invest / grow

Joints

MARKET
ATTRACTIVENESS

High
Aerospace
Fittings

Hydraulic
Pumps

3.67

Selectivity / earnings
Harvest / divest

Clutches
Fuel
Pumps

Medium
Flexible
Diaphragms

2.33

Relief
Valves

Low

1.00
5.00

3.67

2.33

(a) Classification

1.00

The Risk-Reward Diagrams

RISK

High

Low

High
REWARD (NPV)

Low

Contrasting Characteristics of Upstream

and Downstream Companies
Supply stages in a manufaturing industry (supply chain)
Raw
materials

Primary
manufacturer

Fabricator

Product
producer

Consumer
marketer

Retail
Consumer

Supply flow
UPSTREAM
ORGANIZATIONS

Centre of gravity
of a manufacturing
industry

DOWNSTREAM
ORGANIZATIONS

Contrasting characteristics of upstream and downstream companies

Upstream

Downstream

Commodity
Standardize
Maximize end users
Low-cost producers
Sales push
Line-driven organization
Process innovation
Capital budget
Capital-intensive
Technological know-how
Supply and trading/manufacturing and engineering

Proprietary
Customize
Target end users
High margins
Marketing pull
Line/staff
Product innovation
R & D/advertising budget
People-intensive
Marketing skills
Product development/marketing

Porters Five Forces I

Potential
PotentialEntrants
Entrants

Threat new entrants

Bargaining
power of
suppliers

Industry
Industry
competitors
competitors

Bargaining
power of
buyers

Suppliers
Suppliers
Rivalry
Rivalryamong
among
existing firms
existing firms

Threat of substitute products

Substitutes
Substitutes

Buyers
Buyers

Porters Five Forces II

Firms in other
industries
offering
Substitute
Products

Suppliers of
raw materials,
parts,
components or
other resource
inputs

RIVALRY
AMONG
COMPETING
SELLERS

Potential
New Entrants

Buyers

Forces Driving Industry Competition

Potential Entrants

Threat of
new entrants

Suppliers

Bargaining power
of suppliers

Industry
competitors

Rivalry among
existing firms
Threat of
substitute products
or services
Substitutes

Bargaining power
of buyers

Buyers

Barriers and Profitability

EXIT BARRIERS
Low

High

Low

PROFITS=LOW
RETURNS=STABLE

PROFITS=LOW
RETURNS=RISKY

High

PROFITS=HIGH
RETURNS=STABLE

PROFITS=HIGH
RETURNS=RISKY

ENTRY
BARRIERS

Four Routes to Strategic Advantage

Business/Product Offered

Compete
(wisely)

Old/Existing

New/Creative

KFS
KFS

Aggressive
Aggressive
initiatives
initiatives

Route 1

Route 3
Intensify
Intensifyfuntional
funtional
differentiation
differentiation

Avoid
head-on
competition

Relative
Relativesuperiority
superiority

Ask
Askwhy-whys
why-whys

Strategic
Strategicdegrees
degreesofof
Freedom
Freedom

Route 2

Route 4
Exploit
Exploitcompetitors
competitors
weakness
weakness

Maximize
Maximizeuser
user
benefit
benefit

The Generic Strategies I

Differentiation

Cost Leadership

Focus

The Generic Strategies II

COMPETITIVE ADVANTAGE
Lower Cost

Differentiation

Broad
Target

Cost Leadership

Differentiation

Narrow
Target

Cost Focus

Differentiation Focus

COMPETITIVE
SCOPE

Five Modified Competitive Strategies

TYPE OF COMPETITVE
ADVANTAGE BEING PURSUED

A Broad
Cross-Section
of Buyers

Lower Cost

Differentiation

Overall
Low-Cost
Leadership
Strategy

Broad
Differentiation
Strategy

Best-Cost
Provider
Strategy

MARKET
TARGET

A Narrow
Buyer-Segment
(or Market Niche)

Focused
Low-Cost
Strategy

Focused
Differentiation
Strategy

Sweeneys Generic Strategies

Marketer

Innovator

Emphasizes
Quality
Dependability
Range

Emphasizes
Quality
Product/service
Performance
Speed
New product/service
Development

Caretaker

Innovator

Emphasizes
Price/ cost
Dependability
Quality

Emphasizes
Quality
Product/service
Performance
Flexibility
Speed

Traditional

Enhanced

Strategic change involves enhancing

the operations infrastructure

Basic

Customer service criteria

Enhanced

Strategic change involves enhancing

The operations structure

Geobusiness Model

CONTROL VARIABLES

MOTIVATION VARIABLES

CONDITIONING
VARIABLES

Porters Diamond

FIRM
FIRMSTRATEGY,
STRATEGY,
STRUCTURE
STRUCTUREAND
AND
RIVALRY
RIVALRY

FACTOR
FACTOR
CONDITIONS
CONDITIONS

DEMAND
DEMAND
CONDITIONS
CONDITIONS

RELATED
RELATEDAND
AND
SUPPORTING
SUPPORTING
INDUSTRIES
INDUSTRIES

Resource Allocation at Corporate Level

PERCEIVED NEED FOR CHANGE

Low

Low

Formula

High

Imposed
priorities

EXTENT OF
CENTRAL
DIRECTION
High

Free
bargaining

Open
competition

PIMS Competitive Strategy Paradigm

Market structure

Strategy and tactics

Market
differentiation

Pricing

Market growth rate

Entry conditions
Unionization

R & D spending
New product
introduction

Capital intensity

Change in relative
quality and variety
of products/services

Purchase amount

Marketing expenses

Competitive position
Relative perceived
quality
Relative market
share
Relative capital
intensity
Relative cost

Distribution
channels
Relative vertical
integration
Workforce
productivity

Performance
Profitability (ROS,
ROI, etc.)
Growth
Cash flow
Value enhancement
Stock (share) price

International Strategy Options

High

PRODUCT
DIVERSITY

Joint
venture

Foreign
branch

Foreign
subsidiary

Licensing/

Joint
venture

Foreign
branch

Licensing/

Joint
venture

Export
Low

Low

High
MARKET COMPLEXITY

The Wheel of Competitive Strategy

Product Line

Finance
and Control

R&D

Target Market

Marketing
GOALS
Definition of
how the
business is
going to
compete

Objectives for
profitability,
growth, market
share, social
responsiveness
etc.

Sales

Distribution

Purchasing
Labor

Manufacturing

Generic Competitive Strategies

Return on
Investment

Market Share

The Strategic Triangle I

Multiple market segments
Target segments

Corporation

Product/service
differentiation

e
lu
Va

Va
lu
e

Customers

Cost

Competitors

The Strategic Triangle II

Customers
Needs seeking benefits
at acceptable prices

Va
lu
e

e
lu
Va

Assets and
utilization
Company

Cost
differentials

Assets and
utilization
Competitor

Trilogy Strategy - Culture - Structure

nm
ri o
v
En

t
en

En
vi
ro
nm

Strategy

Structure

En
vi
ro
nm

en
t

en
t

Culture

En

nm
ro
i
v

t
en

Optimum Degree of Formal Organization

Organizational
effectiveness

Degree of formal organization

The Flow of Formal Authority

Functional, Divisional, Multidivisional

Structures
CEO

CEO
Controlling

Logistics

Manufacturing

Sales

Finance
Cement

CEO

R&D

Concrete

Chemicals

Europe

North America

CEO

Europe

North America

Asia

Motor

Motor

Motor

Marine

Marine

Marine

Fire

Fire

Cement

Concrete

Chemicals

Asia

A Matrix Design
FUNCTIONAL DEPARTMENTALIZATION
Marketing
Department
Manager

Research and
Development
Department
Manager

Purchasing
Department

Production
Department

Manager

Manager

PROJECT DEPARTMENTALIZATION
Alpha
Project

Project
Leader

Beta
Project

Project
Leader

Gamma
Project

Project
Leader

Models of Virtuality

The Virtual Face

Star-alliance Model

Co-alliance Model

Value-alliance Model

Leavitts Diamond: The Interaction of

Social Forces in an Organization

Task

Structure

People

Technology

Action-centred Leadership

TASK
NEEDS

INDIVIDUAL
NEEDS

GROUP
NEEDS

Belbins Team Roles

TEAM

Shaper
Company Worker

Finisher

t
Plan

Chairman
ato
Monitor-Evalu

Resource-Investigator

r
orker
W
m
Tea

Group Development

Group effectiveness

Stage V
Adjourning
Stage IV
Performing
Stage III
Norming
Stage II
Storming

Stage I
Forming

Time

Theory X and Theory Y

Theory X

Vicious circle of theory X

following

confirms

no responsability,
no Initiative

strong rules
and control

leads to

leads to

passive work
attitude

Theory Y
following

strenghten

no responsability,
no Initiative

strong rules
and control

leads to

Strenghten effect of Theory Y

allow

passive work
attitude

Maslows Hierarchy of Human Needs I

Self-Actualization
Needs
(self-development and
realization)

Esteem Needs
(self-esteem, recognition, status)

Social Needs
(sense of belonging, love)

Safety Needs
(security, protection)

Physiological Needs
(hunger, thirst)

Maslows Hierarchy of Human Needs II

GENERAL EXAMPLES
Achievement

ORGANIZATIONAL EXAMPLES
SelfActualization
Needs

Challenging Job

Status

Esteem Needs

Job Title

Friendship

Belongingness Needs

Friends in
Work Group

Stability

Security Needs

Pension Plan

Shelter

Physiological Needs

Base Salary

Herzbergs Motivator-Hygiene Theory

HYGIENE FACTORS

SALARY
SALARY
ADMINISTRATION
ADMINISTRATION
SUPEVISION
SUPEVISION
COMPANY
COMPANYPOLICY
POLICY
STATUS
STATUS
WORKING
WORKING
CONDITIONS
CONDITIONS

MOTIVATORS

ACHIEVEMENT
ACHIEVEMENT
RECOGNITION
RECOGNITION
RESPONSIBILITY
RESPONSIBILITY
ADVANCEMENT
ADVANCEMENT
NATURE
NATUREOF
OFWORK
WORK

Parallels Among Need Theories of

Motivation
Herzbergs
Two-Factor Theory

Motivation
Factors

Hygiene
Factors

Maslows
Hierarchy of Needs

Achievement
Work Itself
Responsibility
Advancement and Growth

Self-Actualization
Needs

Recognition

Self-Esteem
Esteem Needs
Respect of Others

Supervision
Interpersonal Relations

Belongingness Needs

Security
Company Policies

Interpersonal Security
Security Needs
Physical Security

Pay
Working Conditions

Physiological
Needs

Alderfers
ERG Theory

Growth
Needs

Relatedness
Needs

Existence
Needs

Other
Key Needs
Need for
Achievement
Need for
Power

Need for
Affiliation

9
8

Team management (9,9)

Production is incidental
to lack of conflict and
good fellowship

Production is from
integration of task
and human requirements

Country Club Management (1,9)

Dampened Pendulum (5,5)

(Middle of the road.)
Push for production but
dont go all out. Give some
but not all all: be fair but firm

5
4
3
2
1

Concern for people

Managerial Grid

Impoverished Management (1,1)

Task Management (9,1)

Effective production is
unobtainable becaus people are
lazy, apathetic and indifferent.
Sound and mature relationships
are difficult to achieve because,
(human nature being what it is)
conflict is inevitable

Men are a commodity

just as machines.
A managers responsibility
is to plan, direct and
control the work of those
subordinate to him

Concern for production

Situational Leadership

DE
LE
GA
TI

NG

S3

S2

Provide
specific
Turn over
instructions
responsibility for and closely
decisions and
supervise
S4 implementation performance
TASK BEHAVIOUR
(Guidance)

G
IN
LL

HIGH
R4
Able and Willing
or Confident

G
IN
T
IPA
IC
T
R
PA

Explain
decisions
and provide
opportunity
for
clarification

TE

(LOW)

Share ideas
and facilitate
in decisionmaking

G
IN
LL
SE

(Supportive Behaviour)
RELATIONSHIP BEHAVIOUR

LEADER BEHAVIOUR

S1

FOLLOWER READINESS
MODERATE
R3
R2
Able but Unwilling
Unable but Willing
or Insecure
or Confident

FOLLOWER DIRECTED

(HIGH)

LOW
R1
Unable and Unwilling
or Insecure

LEADER DIRECTED

Cultural Web

Stories
Rituals and
routines

Symbols

THE
PARADIGM
Control
systems

Power
structures
Organizational
structures

Dynamics of Paradigm Change

The
Theparadigm
paradigm

Development
Developmentofof
strategy
strategy

Implementation
Implementation

Corporate
Corporate
Performance
Performance

if unsatisfactory
Step 1
Step 1
Tighter
Tighter
controls
controls

Step 2
Step 2
Reconstruct
Reconstructoror
develop
developnew
new
strategy
strategy

Step 3
Step 3
Abandon
Abandonparadigm
paradigm
and
adopt
new
and adopt newone
one

Four Organizational Cultures

Power Culture

Task Culture

Role Culture

Person Culture

Integrated Model of Strategic

Management
Vision,
Vision,values,
values,
and
andexpectations
expectations

Mission
Mission

Goals,
Goals,
objectives
objectives
Situation
Situationanalysis
analysis

Strategy
Strategy
formulation
formulation

Policies
Policiesand
and
procedures
procedures

Alternatives
Alternatives
Evaluation
Evaluation
and
andchoice
choice

Enviromental
Enviromental
opportunities/
opportunities/
threats
threats
Organizational
Organizational
resources
resourcesand
and
competences
competences

Strategy
Strategy
implementation
implementation
and
andplanning
planning

Strategic control
Why?

What?

How?

Guidelines

M-O-S-T

Mission
Mission
WHAT
WHAT an
anorganization
organizationisisseeking
seekingtotodo
do
Objectives
Objectives
Strategy
Strategy
HOW
HOW
Tactics
Tactics

an
anorganization
organizationwill
willachieve
achieveitit

Network Analysis, PERT, CPA

5

4
8

0
1
0

12
6

12
1

5
4
3

3
F

9
5

5
9

KEY:
Activity
Critical path
Event
Earliest event time
Event number
Latest event time

The Five Phases of Growth

collaboration

Large

coordination
"?"
delegation
red tape

SIZE OF
ORGANIZATION

direction
creativity

Small

control

autonomy

revolution: stages of
crisis

leadership
Young

evolution: stages of
growth

AGE OF ORGANIZATION

Mature

The Chasm

The
Mainstream
Market

The Early
Market
The
Chasm
Te
c
En hno
thu log
s ia y
sts

Vis
io

na

Pr
ri e

ag

ma
ti

Co
s ts

ns e

rv a

t iv

es

Sk
ep
tic
s

Inventory Profile
Steady and
predictable
demand (D)

Order
quantity
Q

Slope = demand rate

Inventory
level

Average inventory = Q / 2

Time

Q/D
Instantaneous deliveries at rate of D / Q per period

Economic Order Quantity

Costs

Total costs

Holding costs

Economic order
quantity (EOQ)

Order quantity

Order costs

Cumulative % of total value

Pareto Curve for ABC-Products

Class A
items

Class B
items
% of total number of items

Class C
items

CIM-Concept
CIM
PPS

CAD/CAM
CAD

Production Programm Planning

Quantity Planning

CAP

Time and Capacity Planning

Place Order

CAM

Control Order

The Business Process Re-engineering

Approach
Micro operations

Activity 3

Micro operations

Customer needs

Customer needs fulfilled

Activity 2

Customer needs fulfilled

Activity 1

Function 4

Business processes

Function 3

Business processes

Function 2

Customer needs

Function 1

Activity 4

Total Quality Management

Whole operation involved

Quality srategy
Teamwork
Staff empowerment
Involves customers and suppliers

Quality systems
Quality costing
Problem solving
Quality planning

Inspection

Quality control
Statistical methods
Process performance
Quality standards
Error detection
Rectification

Quality assurance
Total quality management

Supply Chain Management

Second-tier
suppliers

First-tier
suppliers

First-tier
customers

Second-tier
customers

The
Operation

Supply side

Demand side

Purchasing and supply

management

Physical distribution
management
Logistics

Materials management
Supply chain management

Internal Rate of Return (IRR)

Main methods of capital expenditure appraisal

Return on Investment ROI

Pay Back

Net Present Value (NPV)

Discounted Cash Flow (DCF)

Internal Rate of Return (IRR)

Net Present Value (NPV)

Main methods of capital expenditure appraisal

Return on Investment (ROI)

Pay Back

Discounted Cash Flow (DCF)

Internal Rate of Return (IRR)

Net Present Value (NPV)

Variance Analysis
Profit Variance

Total Cost Variance

Materials
Price
Variance

Materials
Price
Variance

Labour
Variance

Materials
Usage
Variance

Variable
Overhead
Variance

Total Sales Variance

Fixed
Overhead
Variance

Wage
Rate
Variance

Sales
Volume
Variance

Sales
Price
Variance

Labour
Efficiency
Variance

The Link Between the Balance Sheets

and the Income Statement
Balance Sheet
December 31, 2001

Assets
$170

Income Statement
Year 2002

Liabilities
$100

Balance Sheet
December 31, 2002

Assets
$190

Owners equity
$70
Revenues
$480

Expenses
$469.8

Liabilities
$113
Owners equity
$77

Net Profit
$10.2
Retained earnings
$7
Dividends
$3.2

Working Capital

Simple cycle of operations

Cash

Raw materials
inventory

Receivables

Finished goods
inventory

Financial Strategy Framework

Due dilligence process

Investor Investment strategy

Alternative Investments

Time to close deal

Financial Strategy

Risk/Reward Space

Opportunity
Debt

Entrepreneurial concerns
Time to out of cash
Future alternatives

Sources and Deal

Structure

Equity
Other

Burn Rate
Operating
Requirements

Financial
Requirements

Business Strategy

Working Capital
Market Strategy
Asset Requirement

Technological Strategy

Investor Perceived Risk-Return Space

Angels
High

FFF
VCs
Entrepreneur

PERCEIVED
RETURN

Moderate

Low

Realistic
Investors

Banks

Low

Moderate
PERCEIVED RISK

High

Du Pont Scheme
Return on equity
Earnings after tax
ROE = Owners equity

Return on invested capital

ROIC =

Earnings before interest and tax

Invested capital

Financial leverage multiplier

Operating profit margin

Capital turnover

Financial structure ratio

Earnings before interest and tax

Sales

Sales
Invested capital

Invested capital
Owners equity

Invested capital

Owners equity

Sales
Operating costs

Cash
Working Capital
requirement
Fixed assets

Financial cost ratio

Tax effects

Tax effect ratio

Earnings before tax

Earnings after tax
Earnings before interest and tax Earnings before tax

Cost of debt

Tax rate

The Drivers of Value Creation

EBIT
Operating margin = Sales
Sales
Capital turnover = Invested capital

EBIT
Invested capital
(pretax ROIC)
Expected after tax
ROIC

Tax effect = (1 Taxe rate)

Aftertax cost of debt
Estimated cost of equity

Percent of
debt financing

Percent of
equity financing

Return spread
(ROIC WACC)
Weighted average
cost of capital
WACC

Competitive advantages and

core competencies

If the present value of the future stream of

expected return spreads is positive, MVA is
positive and the higher the growth, the more
value created.
If the present value of the future stream of
expected return spreads is negative, MVA is
negative and the higher the growth, the more
value destroyed.

Economic, political, and

social environments
Market structure

Market Value Added (MVA)

Sustainability
of growth

Business Design Process

Economics
Economics
Changing
Changing
Customer
Customer
Priorities
Priorities
Technology
Technology

What
Whatare
are
the
thekey
key
assumptions
assumptions
About
About
customers
customers
and
and
economics?
economics?

Whats
Whats
important
importanttoto
customers?
customers?

How can
How can
profit
profitbebe
made?
made?

What
What
dimensions
dimensions
matter
matterthe
the
most?
most?

What are my
What are my
choices
choices
now?
now?InInthe
the
future?
future?

Which
Which
ones
ones
are
arebest?
best?

Are
Arethe
thebest
best
choices
choices
internally
internally
consistens
consistens
integratable?
integratable?

Whats my
Whats my
best
best
business
business
design?
design?

How long
How long
will
willthis
this
design
designbebe
valid?
valid?

How
Howcan
canI I
prepare
prepare
for
for
ongoing
ongoing
redesign?
redesign?

The Company Center of Gravity

The Entrepreneurial Phase

The Growth Phase

The Success Phase

The Center
of Gravity

The Center
of Gravity
The
center
of
gravity

The
Company

The
Customers

The
Company

The
Customers

The
Company

The
Customers

The Traditional Value Chain

The Traditional Value Chain
Start with Assets, Core Competencies

Assets/
Core
Competencies

Inputs, Raw
Material

Product/
Service
Offering

Channels

The
Customer

The Modern Value Chain

Start with the Customer

The
Customer

Channels

Offering

Inputs, Raw
Material

Assets/
Core
Competencies

The Modern Value Chain

Truly Understanding the Customer

Purchase Criteria
Customer Anger
Preferences
Power
Decision-Making Process
Purchase Occasion
Buyer Behavior
Functional Needs
Systems Economics

Customer
Priorities

Channels

Offering

Inputs, Raw
Material

Assets/
Core
Competencies

Profit

Customer Solutions Profit

Product Pyramid Profit

Price

Volume

Multicomponent Profit

Base Business

Other Components

Switchboard Profit

Buyers

Sellers

$/Unit

Time Profit

Cost
Price
Time

$/Project

Blockbuster Profit

Revenue

Cost
Project Type

Profit Multiplier Model

Other Forms

Key Asset

Entrepreneurial Profit

Base
Business
Spin-Outs

Return on Sales

Specialization Profit

Generalist

Specialist

Profit Margin

Installed Base Profit

Hardware/Base
Product

Consumables/
Follow-on Product

Profit Margin

De Facto Standard Profit

Market Share

Price/Unit

Brand Profit

Market
Price

Brand
Price

Specialty Product Profit

100 %

Revenue

Five Years
Ago

Today

Profitability by Region

Local Leadership Profit

Local Market Share

$/Unit

Transaction Scale Profit

Revenue

Cost

Size of Transaction

Value Chain Position Profit

Cycle Profit

$/Unit

Price

Cost

Utilization

After-Sale Profit

Base
Product

Follow-on
Products/Services

New Product Profit

Time

Return on Sales

Relative Market Share Profit

Relative Market Share

Cost/Unit

Experience Curve Profit

Cumulative Experience

$/Unit

Low-Cost Business Design Profit

Conventional
Business
Design

Low Cost
Business
Design

GE's Business Design:

Sell the Solution, Not Just the Box

Sell the Box, or ...

Product

... Sell the Whole Solution

Product

The Profit Zone

Options

Accessories

Financing

Services

The SMH Product Pyramid

The Profit Zone

Blancpain
Omega, Longines,
Rado

Tissot, Certina, Mido, Pierre Balmain,

Hamilton, Calvin Klein

Swatch, Flik Flak

Endura
Lanco

Coca-Cola's Business Design:

Manage the Value Chain
1980

Distribution
Consumer

Grocery

Logistics

Bottling

Syrup
Coca-Cola
Brand

Fountain
Vending

1996

Distribution
Consumer

Grocery

Logistics

Fountain
Vending
The Profit Zone

Coca-Colas participation, influence

no participation

Bottling

Syrup
Coca-Cola
Mega Brand
Coca-Cola, diet CocaCola, Caff. Free, diet
Caff. Free, Cherry,
Diet Cherry

The Charles Schwab "Switchboard"

Investors

Mutual Fund
Companies

Investors

Mutual Fund
Companies

The Profit Zone

Schwab
One Source

Intel's Business Design: Two Steps

Ahead

The Profit
Zone

$/Unit

Intel

AMD

Cost
Price
Q2

Q4

Q6

Q8

Quarters Post-Launch

Q10

Disneys Business Design Reinvention

The Profit Zone
The Value Capture

Cruises

Publishing

Hotels

Television

Retail

Merchandise

Theme Parks

Music

Animated and Live-Action Films

The Foundation

Videocassette

The Thermo-Electron
"Spin-Out Business Design
The
Profit Zone
Thermo
Instrument
Systems

Thermo-Electron

Thermedics

Thermo
Spectra
Thermo
Optek

Thermo
Voltek
Thermo
Sentron

Thermolase
Thermo
Trex

Trex
Medical

Microsoft's Business Design:

Create-the-Standard

OEMs

The Profit Zone

Microsoft
Applications

Applications
Developers

Windows

Customers

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