What is an “Efficient Organization?”
Executes the organization’s plan with minimum use of resources Plans, produces and delivers products and services on time with planned levels of quality (near zero defects) Operates at the correct level to gain economies of scale Combines resources - labor, capital in the right proportions Able to respond rapidly to changes in direction, plans
& environment
Organizational Effectiveness
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What is an “Effective Organization?”
Clear goals
Able to anticipate new market directions
Able to respond before its competition
Capable of sustaining a competitive advantage when it has one
Identifies and nurtures its basic competencies
Continuously adaptive
Long-term viability and/or profitability
Efficiency Goals of BPR Projects
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Process efficiency
Resource efficiency
Efficient use of the competencies of superior (greater scope of vision) and subordinate (detailed knowledge) organizational units
Market efficiency
Efficient use of the resources available for the execution of processes
Delegation efficiency
Optimization of process criteria such as processing time or faithfulness to deadlines
The proper positioning of the enterprise in its relation to market partners
(reliable prediction of delivery times, transparent communication with suppliers and customers, optimized procurement and distribution processes etc.)
Motivation efficiency
Motivation of staff to work according to the business goals of the enterprise Efficiency Goals
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Market Based Strategy
Strategy: Value Chain (Porter)
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Value chain for a single business
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Firm Infrastructure
Support
Functions
Human Resource Management
Technology Development
Procurement
Primary Inbound
Logistics
Activities
Operations
Outbound
Logistics
Marketing &
Sales
Service
Value chain for an industry
Suppliers
Manufacturers
Distributors
Customers
Example: An automobile manufacturer
Material
Parts
Components
Sub-Systems
Assembly
Distribution
Value-Add Comparative Analysis
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* Created value = Product price - Raw material cost and all business process costs
Five Forces That Shape Strategy
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PORTER’S COMPETITIVE FORCES MODEL
Five Competitive Forces
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Traditional competitors
All firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs
New market entrants
Some industries have high barriers to entry, e.g. computer chip business
New companies have new equipment, younger workers, but little brand recognition
Five Competitive Forces
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Substitute products and services
Customers
Substitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDs
Can customers easily switch to competitor’s products? Can they force businesses to compete on price alone in transparent marketplace?
Suppliers
Market power of suppliers when firm cannot raise prices as fast as suppliers
Strategy: Market-Based View (Porter)
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Michael Porter, “Competitive Strategy”, Free Press, 1981
Competitors
Barriers:
Cost/Know-how/Brand
New Entrants
Price/Performance/Niche
Switching costs
Supplier
Bargaining
Power
Firm
Competition or dependency
Customer
Bargaining
Power
Litigate
Innovate
Government
Substitute
Products/Services
Alliances can be used to defend/attack any of the forces
