Anna Rosinus

Strategic management Process (3)

source: Wheelen, Hunger (2012)
Programs
Act i vi t i es needed
t o accompl i sh a
pl an
Budgets
Costs of the
programs
Procedures
Sequence of steps
needed to do a job



Environmental
Scanning
Strategy Formulation Strategy
Implementation
Evaluation
and Control
2. Environmental
Scanning & Industry
Analysis
3. Internal Scanning &
Organisational
Analysis
4. Strategy Formulation
a. Situation Analysis & Business
Strategy
b. Corporate Strategy
c. Functional Strategy &
Strategic Choice
5. Strategy Implementation
a. Organising for
Action
b. Staffing & Directing
6. Evaluation &
Control
121
Anna Rosinus
Strategy Implementation
what are the different steps in strategic management?
strategy
formulation
strategy
implementation
evaluation and
control
environmental
scanning
1 2
3 4
staffing and
leading
122
Anna Rosinus
Strategy Implementation: Staffing & Directing

staffing
staffing follows strategy
selection and management development
problems in retrenchment
leading
managing corporate culture
action planning
management by objectives
total quality management

what to expect?
123
Anna Rosinus
Strategy Implementation and Staffing
recruiting & staff management in general
hiring new people with new skills
firing people with inappropriate skills
training and development
training existing employees to learn new skills
preparing existing employees for future positions
management selection
matching the manager to the strategy
finding executives with an appropriate mix of skills and experiences
tradition/culture

how to match people and strategy?
124
Anna Rosinus
repairing a car then
and now
Anna Rosinus
corporate communication then
and now
Anna Rosinus
Strategy Implementation and Recruitment
definition of tasks
job profiles
internal vs. external recruitment
=> training vs. on boarding
permanent vs. temps (freelancers etc.)
maintenance of networks

how to find the right people for the new strategy?
125
Anna Rosinus
Hiring Practice at Zappos
company is known for aiming at the ultimate customer experience
when Zappos hires new employees, it puts them through an intensive
four-week training program, immersing them in the company's
culture, strategy, and processes
then, about one week in, Zappos makes what it calls "The Offer,"
telling newbies, "If you quit today, we will pay you for the amount of
time you have worked, plus a $2,000 bonus."
PLEASE GUESS HOW MANY NEW EMPLOYEES TAKE THE OFFER?
only 2% to 3% of people take the offer
practical application
http://www.businessweek.com/stories/2008-09-16/why-zappos-offers-new-hires-2-000-to-quitbusinessweek-business-news-
stock-market-and-financial-advice
Anna Rosinus
0
20
40
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
job vacancies in Germany: time between
starting to search and final decision (data
source: IAB)
Anna Rosinus

Anna Rosinus

Anna Rosinus
Identifying Abilities and Potential
identification of (cap)abilities in order to manage resources and
detect promotion potential
responsible: HR development and management in general
tools:
appraisal systems employees portfolios of knowledge, skills and
capabilities
assessment centers internal recruiting
how to keep track of existing staff?
129
Anna Rosinus
DEVELOPING Abilities and Potential
teaching people additional knowledge and skills
improving performance in their current positions
TRAINING
switching between different positions
employees should gain a mix of different
experiences
JOB ROTATION
what about internal recruitment and development?
teaching people additional knowledge and skills
preparation for future (advanced) positions
DEVELOPMENT
job enrichment
job enlargement
further job design
measures
130
Anna Rosinus
Strategy and Executive Types
dynamic industry expert
analytical portfolio manager
cautious profit planner
turnaround specialist
professional liquidator
how to establish fit between strategy and top management?
131
Anna Rosinus
Matching Strategy and Executive Type
which leaders and directional strategies fit best?
growth
concentration

dynamic industry
expert
stability

cautious profit
planner
growth
diversification

analytical portfolio
manager
retrenchment
close company

professional
liquidator


retrenchment
save company

turnaround
specialist
strong weak
h
i
g
h

l
o
w

average
a
v
e
r
a
g
e

business strength/competitive position
i
n
d
u
s
t
r
y

a
t
t
r
a
c
t
i
v
e
n
e
s
s

growth
concentration

stability

growth
diversification

retrenchment
close company



retrenchment
save company

132
Anna Rosinus
Succession Planning
= replacing people in key positions, top managers or even the founder of
the company

internal* vs. external search
comparison of potential internal and external candidates
how to find internal candidates?
management appraisal programs
analysing people below the top management
provision of financial incentives


* career paths/promotion opportunities can serve as a way to attract future employees
how to replace a key position, top manager or even the founder?
133
Anna Rosinus
Dieter Zetsche
CEO and chairman of
Daimler AG since 2006
joined Daimler in 1976
Martin Winterkorn
CEO of Volkswagen and
Porsche AG since 2007 (09)
joined VW group in 1981
Norbert Reithofer
CEO and chairman of BMW AG since 2006
joined BMW AG in 1987
John Donahoe
president and CEO of eBay
Inc. since 2008
joined eBay in 2005
Jeff Bezos
founder, Chairman, President
and CEO of amazon.com
since 1994
Tim Cook
CEO of Apple Inc. since
2011
(+ in 2004 & 2009)
joined Apple in March
1998
Satya Nadella
CEO of Microsoft since 2014
joined Microsoft in 1992
Mark Zuckerberg
co-founder, chairman &
CEO of Facebook, Inc.
since 2004
Anna Rosinus

as part of their strategic program "Fit for Growth" Vodafone intends to cut
around 600 jobs in Germany, as it grapples with harsh competition and lower
revenues
"We have started voluntary job cuts. Nobody is forced to accept the offer,
in total cost reductions shall amount to Euro 100m
on the other hand Vodafone plans to invest Euro 400m in future growth, e.g.
for the acquisition of Kabel Deutschland, in network extension, in service
improvements or customer acquisition
other measures to reduce costs are offshoring, not paying regular wage
increases and the cancellation of the christmas party

WHAT DO YOU THINK?
http://www.welt.de/print/die_welt/wirtschaft/article122794663/Vodafone-Deutschland-verschaerft-Sparkurs.html http://www.rp-
online.de/wirtschaft/wir-versuchen-kuendigungen-bei-vodafone-zu-vermeiden-aid-1.3877007
http://in.reuters.com/article/2014/01/28/vodafone-germany-jobs-idINDEEA0R0FG20140128
Anna Rosinus
Problems in Retrenchment: Downsizing
= the planned eliminated of positions or jobs
negative touch
can damage the morality of the remaining employees
might harm the knowledge base of an organization
successful downsizing requires
focus on the elimination of unnecessary work instead of across-the-board
layoffs, e.g. by
outsourcing/contracting of work that others can do cheaper
consider and plan for long-run efficiencies
cautious and sensitive communication of actions and their reasons
investment in the remaining employees
balancing out job elimination by development of value added jobs

how to reduce the existing workforce?
134
Anna Rosinus
Strategy Implementation and Leadership
effective strategy implementation requires leadership
leadership includes
making people use their abilities and skills most effectively and efficiently
to achieve organisational objectives
exercising control
developing and communicating a vision and strategic direction
shaping the organisational culture
(e.g. Ray Kroc Mc Donalds, Steve Jobs Apple)
how does a companys leader contribute to strategy implementation?
135
Anna Rosinus
Strategy Implementation and Leadership
leadership types:


how does a companys leader contribute to strategy implementation?
administrator
(organisational systems and
principles)
autocrat
(top-down decision making, force of
personality, and centralisation of power)
strategic leader
(clear strategic direction and
considerable decentralisation of
decision-making)


Anna Rosinus
Leadership Styles
understanding and commitment
e.g. small-group briefings and delegation of
responsibilities
PERSUASION
widespread involvement of employees on
what and how to change
COLLABORATION
retaining overall control
delegation of elements of the change process
PARTICIPATION
leaders make most decisions
use authority to direct change
DIRECTION
how to lead change?
136
Anna Rosinus
Strategy Implementation and Corporate Culture
corporate culture = traditions, and accepted work practices and also
defines how managers and workers treat each
other and can expect to be treated
culture makes distinctive competences persist
corporate culture should support mission and
strategy culture follows strategy
culture affects a companys ability to shift its
strategic direction
strong cultures are resistant to change
strategically appropriate, adaptive or inert cultures
how does corporate culture influence strategy implementation?
137
Anna Rosinus
1) is the planned
strategy
compatible with
the current
culture?
YES
NO
tie
changes
into the
culture
2) can the culture
be modified to
make it more
compatible with
the new strategy?
YES
3) is management
willing and able to
make major and
organisational
changes and accept
probable delays?
No
manage around
the culture by
establshing a new
structural unit to
implement the
new strategy
4) is management
still committed to
implementing the
strategy?
YES
find a joint-
venture partner
or contract with
another
company to
carry out the
strategy
formulate
a different
strategy
s
o
u
r
c
e
:

W
h
e
e
l
e
n
,

H
u
n
g
e
r

NO
NO
decision tree: fit between culture and strategy
YES
apply minor
changes to
the culture
UPDATED
138
Anna Rosinus
Post Merger Integration
= (among others) managing diverse cultures following an acquisition

what about corporate culture in case of external growth?
INTEGRATION
equal merger into a new corporate culture, a
balanced give and take
ASSIMILATION domination of one culture over the other
SEPARATION both cultures are kept but in separate units
DECULTURATION the acquiring firm imposes its culture and practices
139
Anna Rosinus
Management by Objectives (MBO)
by Peter Drucker in 1954
process of participative goal setting
cascading logic for goal setting
development of action plans* ()
setting, establishment, and communication of individual objectives
periodical review of performance

how to follow up on implementation?
140
Anna Rosinus
*Action Plan

puts a program in place
defines
what actions are going to be taken?
by whom?
when or during what time frame?
with what expected results?
action plan elements
(1) specific actions
(2) start and end dates
(3) person(s) responsible
(4) person(s) responsible for monitoring timelines and effectiveness
(5) expected financial and physical consequences
(6) contingency plans

what has to be done, by whom, when and how much?
141
Anna Rosinus
t
h
e

a
c
t
i
o
n

p
l
a
n

t
h
e

p
r
o
g
r
a
m

s
o
u
r
c
e
:

s
l
i
g
h
t
l
y

a
d
a
p
t
e
d

f
r
o
m

W
h
e
e
l
e
n
,

H
u
n
g
e
r

PROGRAM OBJECTIVES: to run a new advertising and promotion campaign for
the Christmas season
EMPLOYEES ADDRESSED: Jan Lewis, Marketing Manager & Rick Carter Marketing
Assistant
1 2 3
action plan
elements
-
not included
in this
example
4 6
Anna Rosinus
Total Quality Management (TQM)
= philosophy committed to customer satisfaction and
continuous improvement
TQMs objectives
better, less variable quality in product
quicker response to customer needs & greater flexibility
concerning customer requirements
lower cost through quality improvement; elimination of work that is not
value adding
essential ingredients of TQM programs are
intense focus on customer satisfaction
consideration of internal as well as external customers
accurate measurement of critical variables
continuous improvement of products, services (and processes)
empowerment of employees (based on trust and teamwork)


how to implement hybrid strategies (cost leadership + differentiation)?
chapter 3
chapter 4a
143
Anna Rosinus
Management Consulting (1/2)
support for many different tasks of the strategy process:
strategy formulation
planners, coordinators, or facilitators of change processes
external as well as internal input (strategy workshops)
strategy implementation/execution (planning means of strategic change)
why using external consultants?
neutrality
signal importance
build trust
how to get support in strategy processes?
144
Anna Rosinus
Management Consulting (2/2)
types of companies:
large, diversified organisations
medium-sized management consultancies
boutique consultancies
are different in terms of areas of consulting expertise, e.g.
specific industries
functional areas
regions
how to get support in strategy processes?
145
Anna Rosinus
Test Yourself: Brainteaser
1. How many cats are there in Germany?
2. How much toothpaste is sold in England in a year?
3. How many marriages have been contracted in June 2006 in Germany?
4. How many trains are there on the London Underground?

pick two of the following questions and try to answer it please do NOT google!
Anna Rosinus
1) How many cats are there in Germany?
HOW TO?
on average you know 100 people and 5 of them have a cat, meaning 1 cat per
20 persons
there are 82 million people in Germany, i.e. around 4,1 million have a cat
maybe (and again on average) there is more than a cat per household and in
addition the average person is more likely to have a cat than your friends =>
lets round up to 5 million
besides cats living with people (in private households) there might be
homeless cats or some might be living in institutions such as zoos etc. =>
lets add 10-20%
=> there are between 5.5 and 6 million cats in Germany
the real answer? according to the Zentralverband zoologischer Fachbetriebe in
the 2000s there have been 6,7 million cats in Germany


answers
Anna Rosinus
2) How much toothpaste is sold in
England in a year?

HOW TO?
we as a 2 people household use nearly 1 tube of toothpaste per month
this makes 5 tubes per person per year, i.e. 1 liter
in England there are around 50 million people
=> 50 million liters
the real answer? 46.3 million liters
answers
Anna Rosinus
3) How many marriages have been
contracted in June 2006 in Germany?

HOW TO?
(A) institutions (Standesmter)
there are around 500 cities in Germany that have on average two offices
normally all 30 minutes a marriage takes place, the opening hours are 9 a.m.
to 12 p.m. on Saturdays
this makes 8 marriages per Saturday (in summer all time slots will be used), on
a typical weekday there are less
assumingly per week there are around 10 marriages
lets take 4 weeks (due to holidays this might be a good estimate) => 40 per
month
multiplied by 1000 offices => 40k, but as the June 2006 includes the
06/06/06 lets add another 10k => 50k
the real answer? 49 500
(B) people getting married (between 20 and 30, xy% of population etc.)
answers
Anna Rosinus
4) How many trains are there on the
London Underground?
HOW TO?
first the number of individual routes is needed, lets estimate 20 distinct
routes
on average a round trip might take 2hrs 30mins
the train frequency (i.e. how often does a train of a distinct line arrive at a
station) differs between 20 to 30 per hour at busy, central stations and 4-5 at
further out stations
on average all 6 minutes (equivalent to 10 trains per hour) during peak time
might be reasonable
if one train needs 2.5 hours for a round trip, during one hour there are 25
trains needed to realise the timetable
25 trains 20 routes = 500
the real answer? very close to 500, there are between 5 and 91 trains are
needed depending on the line, 11 lines, 1.2 billion passengers
In 1884 there were over 800 trains running around

answers
Anna Rosinus
Anna Rosinus
Strategic management Process (3)
source: Wheelen, Hunger (2012)



Environmental
Scanning
Strategy Formulation Strategy
Implementation
Evaluation
and Control
Performance
monitor
performance and
take corrective
action if
necessary
147
Anna Rosinus
which drink is bigger?
which drink is better?
Anna Rosinus
Anna Rosinus
Evaluation & Control
measuring performance
the balanced scorecard
problems in measuring performance
strategic information systems
strategic incentive management
strategic audits
what to expect?
148
Anna Rosinus
Performance during and after Implementation
b
e
f
o
r
e

s
t
r
a
t
e
g
y

i
m
p
l
e
m
e
n
t
a
t
i
o
n

types of
measures
definition of
KPIs
etc.
d
u
r
i
n
g

s
t
r
a
t
e
g
y

i
m
p
l
e
m
e
n
t
a
t
i
o
n

are programs on
time?
have milestones
been achieved?
are programs on
budget?
is there the
need for
corrective
measures?
etc.
a
f
t
e
r

s
t
r
a
t
e
g
y

i
m
p
l
e
m
e
n
t
a
t
i
o
n

have strategic
objectives been
achieved?
are all
stakeholders
interests met?
etc.
when to start evaluation?
149
Anna Rosinus
Measuring Performance
source: Wheelen, Hunger (2012)
how to check if desired goals will be achieved?
source: Wheelen, Hunger
150
Anna Rosinus
9-10 min
pro 3 km
=3-3,33
min/km
= 18-20
km/h
17 min
pro 3 km
=5,67
min/km
= 10-11
km/h
km PLAN
PLAN
(cumulated)
PLAN
(time)
0 0 0 9:30
3 18 18 9:48
6 17 35 10:05
9 16 51 10:21
12 18 1h09 10:39
15 20 1h29 10:59
18 20 1h49 11:19
21 15 2h04 11:34
ACTUAL
9:30
9:46
10:04
10:21
10:37
11:02
11:20
11:35
ACTUAL
9:30
9:46
10:04
10:21
10:37
11:02
11:20
11:35
Anna Rosinus
Types of Measures
PERFORMANCE MEASURES
measure the end result of an
activity
STEERING CONTROLS
measure variables that
influence future profitability
e.g. inventory turnover ratio
(retail) or customer
satisfaction
when to measure and what?
e.g. turnover or net income
151
Steering Controls in Practice: Vapiano
please think of possible steering controls a restaurant manager could
use in order to get an indication of its restaurants performance over a
year
group work
Anna Rosinus

practical application: steering controls in retailing now and then
Anna Rosinus

practical application: steering controls in retailing now and then
Anna Rosinus

practical application: steering controls in retailing now and then
Anna Rosinus
Types of Controls
input controls (resources)
knowledge
skills & abilities
values & motives
behaviour controls (how things are done)
policies & rules
SOPs & directives/orders
output controls ( end result)
objectives
targets
milestones
are there different ways to control performance?
152
Anna Rosinus
Types of Controls
is there a clear connection or relationship
between activities and results?
behaviour
controls
is output
measurable?
output controls input controls
which one to use?
YES NO
YES NO
Anna Rosinus
Traditional Performance Indicators
how to measure performance?
Traditional
Financial Performance Indicators
Return on
Investment
(ROI)
Earnings
per Share
(EPS)
Return on
Equity
(ROE)
=
net income before
taxes
total amount invested
in the company
(typically measured by
total assets)
=
net earnings
amount of
common stock
=
net income
total equity
Operating
(Profit)
Margin
=
operating income
(net income)
sales revenues
153
Anna Rosinus
Traditional Performance Indicators for Apple
practical application
Return on
Investment
(ROI)
Earnings
per Share
(EPS)
Return on
Equity
(ROE)
=
net income before
taxes
total amount invested
in the company
(typically measured by
total assets)
=
net earnings
amount of
common stock
=
net income
total equity
Operating
(Profit)
Margin
FY13 Apple Inc. (figures in million US $)
total net sales

$170,910
cost of sales

$106,606
gross margin

$64,304
operating expenses:
research and development
(r&d)

$4,475
selling, general and
administrative (sg&a)

$10,830
total operating expenses

$15,305
operating income

$48,999
other income/(expense), net

$1,156
income before provision for
income taxes

$50,155
provision for income taxes

$13,118
net income

$37,037
shareholders' equity

$123,549
number of shares (k)
925,331
total assets
$207,000
total shareholders equity
$123,549
=
$ 50,155m
$ 207,000m

=24.23%
=
$ 37,037m
925,331k

=$ 39.754
=
$ 37,037m
$123,549m

=29.98%
=
$48,999m
($ 37,037m)
$170,910m

=28.67%
(21.67%)
=
operating income
(net income)
sales revenues
Anna Rosinus
Performance Indicators
measurement results depend on the performance indicators used
source: onvista.de, retrieved 2013
Apple

Microsoft

EBIT-margin

28,47%

34,43%

RoE

29,97%

27,69%

EpS

29,24

1,94

price-to-
earnings ratio
(P/E ratio)

14,11

14,11

market
capitalisation
per turnover

2,95

4,00

turnover per
employee [USD]

1.489.792,50

578.520,29

comparison with
previous slide:
difference in Apples
EpS is based on
different time frames
as well as computation
methods
Anna Rosinus
http://www.forbes.com/global20
Anna Rosinus
Stakeholder Measures
customer satisfaction
sales
no. of new customers
CUSTOMERS
prices for raw material
delivery times
inventory/availability
SUPPLIERS
EPS
stock price
no. of buy recommendations
INVESTORS
no. of improvement proposals
satisfaction surveys
productivity
EMPLOYEES
number of complaints
and legal actions
ENVIRON-
MENTALISTS
how to measure the impacts of corporate activities on stakeholder interests?
ETC.
155
continuity
collaboration on new
ideas
acceptable price
expectations
Anna Rosinus
Balanced Scorecard
how to visualise measurement outcomes?
financial

(how do we appear
to shareholders?)
profitability:
ROI/EVA
revenue
growth/mix
cost reduction,
productivity
customer

(how do customers
view us?)
market share
customer
acquisition &
retention
customer
satisfaction
internal business
perspective
(what must we excel
at?)
innovativeness
operations
after sales service
innovation and
learning
(can we continue to
improve and create
value?)
employee
satisfaction &
retention
employee
productivity
156
Anna Rosinus
how to develop a BSC?
Anna Rosinus
Strategy Map
how to visualise the links between the different perspectives?
Anna Rosinus
Balanced Scorecard for Subway
group work
financial

(what are our
financial goals and
objectives?)
customer

(how do customers
view us?)
internal business
perspective
(what must we excel
at?)
innovation and
learning
(can we continue to
improve and create
value?)
Anna Rosinus
Example Balanced Scorecard/Strategy Map: VW do Brazil

practical application
how to visualise the
links between the
different perspectives?
Anna Rosinus
Strategy Map
how to visualise the links between the different perspectives?
Anna Rosinus
Strategy Map for Subway
take the Balanced Scorecard you have developed some minutes ago
and turn it into a Strategy Map
by drawing the links between the single perspectives
e.g. team building measures enhance collaboration amongst
employees which reduces sandwich preparation time what in turn
increases customer satisfaction and retention and thereby the
turnover (it might also reduce the cost level)
homework
Anna Rosinus
Information Systems
ERP (Enterprise Resource Planning), e.g. SAP
accounting and controlling department
surveys, e.g. for customer and/or employee satisfaction
CRM (Customer Relationship Management) system
Project Management Systems
etc.

where to get data from?
158
Anna Rosinus
Problems in Measuring Performance
short-term orientation
important behavior for goal achievement not measured
(goal displacement)
one unit optimizes performance at the expense of
another unit
lack of quantifiable objectives
inappropriate information systems or inability to use
them properly
what are potential pitfalls?
159
Anna Rosinus
POWER OF DATA
VISUALISATION
Anna Rosinus
Guidelines for Controlling Properly
guarantee minimum amount of information needed
focus on meaningful activities
evaluate and react timely
long-term as short-term focus
search for results outside a tolerance range
reward meeting or exceeding standards

how can evaluation and control be optimised?
160