Unrelated diversification- Less need for interdependence, reward & control systems focus more on financial indicators.
Related Diversification: Intense need for tight interdependencies among functional areas &business units, sharing resources is critical, synergies are more important than cost leadership, heavy use of behavioral performance indicators. Capital Shareholders are most important, organizational stakeholders (employees) are the least important.
In most environments, organizations should strive to provide a system of rewards & incentives, coupled with a culture strong enough that boundaries do become internalized.
Unrelated diversification calls for less interdependence.
Methods used in a compliance-based approach: education reduced discretion, auditing & controls & penalties.
Elements of developing a learning organization:
Inspire & motivate people with a mission/purpose
Empower employees at all levels3)Accumulate & share internal knowledge
Gather & integrate external info
Challenge the status quo
Escalation of commitment
Tendency for managers to stick w/ an investment when investment criteria aren't met.
Economic Risk threats protection of intellectual property
Outsourcing - when you utilize another firms value adding activities
Offshoring - moving operations to another country (you are still conducting operations)
Factors effecting a Nations Competitiveness
Factor -Skilled Labor, Infrastructure
Demand - Home market demand for a good
Related & Supporting Industries - Presence/Absence of supplier &related industries
Firm Strategy, structure &rivalry - how firms are structured, created, organized &managed,& domestic rivalry.
Motivations for International Expansion
Increase market share / extend product lifecycle
Economies of scale --> spread their costs over a larger sales base
Location advantage --> better access to suppliers, buyers, raw materials
large, older, more respected companies can't change direction quickly very influential in marketplace conditions
smaller firms like restaurants and small service firms can change directions very quickly have little market power majority don't aspire to grow huge
seek rapid growth and profitability seek growth rather than control (double in size in 4 years)
Opportunities come from many sources
Current or past work experiences
Hobbies that grow into businesses or lead to inventions
Suggestions by friends or family
Needs of existing customers
Suggestions by suppliers
Technological developments that lead to new advances
Feasibility Analysis Attractive, Achievable, Durable, Value creating.
Pioneering new entry
Creating new ways to solve old problems
Meeting customer’s needs in a unique new way
Imitative new entry
Strong marketing orientation
Introduce same basic product or service in another segment of the market
Adaptive new entry
Offer product or service that is “somewhat new and different”
Aware of marketplace conditions and conceive entry strategies to capitalized on current trends strategic actions major commitments of resources --> entering new markets, new products, mergers/alliances tactical actions refinements of current actions (little resources) --> increased marketing, price cutting, new distribution channels
Effective reward systems:
Objectives are clear, well understood, & broadly accepted
Rewards are clearly linked to performance & desired behaviors
Performance measures are clear &highly visible
Feedback is prompt, clear, &unambiguous
The compensation system is perceived as fair & equitable
The structure is flexible; it can adapt to changing circumstances.
Principals --> shareholders (board of directors)