Exercise no. 3

1
Exercise no. 3
Read D.Needle p. 1 18 Read the Car Industry
Case in D. Needle and describe the Car Industry
with respect to Mutual interaction between
economy, culture,, ownership, size, technology,
strategy, decision-making (what kind of cars
should be produced), operations, marketing,
innovations.
2
Seat Arosa 1,7 SDE23 km/litre
3
EUROPEAN CAR INDUSTRY KEY ISSUES 1
1.4.1

• ENVIRONMENTAL LEVEL
• Over-capacity
• Competition
• Globalisation
• Outsourcing
• Barriers to entry
• Emerging markets
• Currency exchange
• State intervention
• Job losses
• Investment in product and process technologies
• Convergence v cultural differences

4
EUROPEAN CAR INDUSTRY KEY ISSUES 2

• ORGANIZATIONAL LEVEL
• Car industry as big business
• Manufacturer - Supplier links
• Global organization structures
• Impact of mergers on ownership patterns and
  structure
• Culture changes at the level of the firm
• STRATEGIC LEVEL
• Product Strategies
• Search for new markets
• Cost reduction strategies
• Mergers and acquisitions
• Restructuring the supply chain

5
EUROPEAN CAR INDUSTRY KEY ISSUES 3

• ACTIVITIES LEVEL
• Product, process and supply-chain innovations
• Search for operating efficiencies -
  consolidation, lean production, outsourcing
• Broadening production range and markets
• Brand differentiation
• Changing nature of industrial relations
• Cost management
• Expansion into financial services

6
THE NATURE OF GOALS
3.1.1

• Give direction to the activities of members of an
  organization
• Attempt to reduce conflict and ambiguity
• Often comprise an overall statement of intent and
  detailed objectives
• Goals can be viewed as a hierarchy
• Vision
• Mission
• Goals
• Objectives

7
VISION
3.1.1

• A vision is a future picture of the company.
  Desired future state The aspiration of the
  organisation.
• A personal example
• To run the Berlin Marathon

8
MISSION
3.1.1

• A mission is the reason to be, the kind of needs
  the company is trying to meet. How the company is
  going to contribute to society. It is the
  overriding purpose in line with the values or
  expectations of stakeholders.
• A personal example
• To be healthy and fit

9
MISSION STATEMENT for FedEx(Mixed goals
statement from annual report)

• FedEx is committed to our People-Service-Profit
  philosophy. We will produce outstanding financial
  returns by providing totally reliable,
  competitively superior, global air-ground
  transportation of high-priority goods and
  documents that require rapid, time-certain
  delivery.
• Equally important, positive control of each
  package will be maintained utilizing real time
  electronic tracking and tracing systems. A
  complete record of each shipment and delivery
  will be presented with our request for payment.
  We will be helpful, courteous, and professional
  to each other and the public. We will strive to
  have a completely satisfied customer at the end
  of each transaction.

10
Goal (not operational statement)
3.1.1

• General statement of aim or purpose.
• A personal example
• Lose weight and strengthen muscles

11
Objective (operational)
3.1.1

• Quantification (if possible) or more precise
  statement of goal.
• A personal example
• Lose 5 kilos by 1 September and run the marathon
  in 2002

12
Core competences
3.1.1
Resources, processes or skills which provide
COMPETITIVE ADVANTAGE A personal
example Proximity to a fitness centre, supportive
family and friends and past experience of
successful diet.
13
Strategies
3.1.1
Long-term direction (how) A personal
example Associate with a collaborative network
(e.g. join running club), exercise regularly,
compete in marathons locally, stick to
appropriate diet.
14
Goal-setting in carpentry
15
Decision making in a small firm
16
GOAL-HIERACHY
Deliver cabinets made of wood for
communication-industry
Mission
Financial Profit 5 million
Innovation
Sales 120000 cabinets
Production
Main goals
Sub-goals
17
HOW GOALS ARE DEVELOPED
3.1.2

• Political process
• Product of interest groups
• Role of the dominant coalition and senior
  management
• Effective pursuit of goals linked to power
• Goal conflict common
• Goal conflict tackled by
• Rules and regulations
• Bargaining
• Acceptance of top management
• Control mechanisms

18
COMPLEXITY OF GOALS
3.1.3

• Involve the resolution of complex external forces
  and internal politics
• Goal formulation operates in dynamics and
  changing internal and external environments
• Links with performance difficult to show
• Most organizations have multiple goals - A
  product of different interest groups and
  stakeholders
• Variations in the nature of goal occur both
  between and within organizations

19
Rational decision model
Problem or opportunity Search for
alternatives Find consequences Goals
Choose Implement Evaluate
You need goals to decide what is the best
20
Arguments against the rational decision model
Decisions can not be entirely rational because,
the following conditions are not met.

• The decision makers preferences are known, rank
  and consistency is unambiguous
• All alternatives are known
• All consequences are known

Decision makers have to act before they have got
total information and they recognize only a
limited number of criteria and alternatives.
Often they chose alternatives, that reflect their
self-interest.
21
Other decision models

• Anarchistic model
• The science of Muddling through by Charles
  Lindblom (1959)
• Small steps at a time
• The garbage can model by James March and Olsen
  (1976)
• 4 streams of a) decision possibilities b)
  problems c) solutions and d) participants.
• The political model
• Consensus, distribution of power, legal
  restraints, commitment
• by Cyert and March (1963)
• The institutional model
• Legitimacy for the time being e.g. JIT, TQM, BPR
• by March Olsen (1989)

22
ADVANTAGES OF ETHICAL BUSINESS
3.2.1

• Branding goods as ethical can lead to increased
  awareness and sales
• Costs of irresponsible behaviour can be great,
  e.g. Coca Cola, Shell (Brent Spar), Cheminova,
  chemical pollution, children labour, Exxon
  Valdes, Chernobyl, Use of gene-manipulated
  products or illegal chemicals to preserve food,
  dirty products etc.
• Increasing government pressures and regulations
• Increasing numbers of firms have ethical codes of
  conduct to which suppliers and associates must
  conform

23
PROBLEMS AND ISSUES IN ETHICAL BUSINESS
3.2.2

• Traditional belief in an inherent conflict
  between ethical business and profitable business
• Branding goods as ethical is sometimes a
  marketing ploy with no real substance
• Can result in high costs passed on as high prices
• Different standards operate in different parts of
  the world
• Different stakeholders have different requirements

24
To prepare

• Needle
• p. 129 143, 195- 243
• EX-6
• Answer following questions concerning rational
  behaviour
• 1. What 3 conditions should be met to make
  optimal decisions?
• 2.   Describe the steps in a rational
  decision-process.
• 3. What do you perceive by limited rationality?
• 4.     Mention some problems with respect to the
  model for rational decision-making.