Day 1 3 Strategy Implementation of Relationships

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Learning Objectives Learning Objectives

• Appreciate the advantages and potential disadvantages
• Appreciate the advantages and potential disadvantages

of various types of interorganizational relationships

Analyze stakeholders to determine their strategic
Analyze stakeholders to determine their strategic
Select strategies for dealing with stakeholders based
Select strategies for dealing with stakeholders based

importance

on their strategic importance

Understand how to make partnerships effective
Create plans for functional-level resources to
Understand how to make partnerships effective
Create plans for functional-level resources to
• Determine how to effectively manage relationships with
• Determine how to effectively manage relationships with

implement business strategies

external stakeholders

of various types of interorganizational relationships

importance

on their strategic importance

implement business strategies

external stakeholders

Strategy Implementation Strategy Implementation

Managing

Stakeholder relationships and

Organizational resources

• To move the organization towards the
• To move the organization towards the

successful execution of its strategies

Consistent with strategic direction
Consistent with strategic direction
Managing

ICT CANATUR Environmental protection groups Regional tourism chambers

ICT CANATUR Environmental protection groups Regional tourism chambers Restaurants Catering Food vendors Restaurants Catering Food vendors Hotels Resorts Campgrounds Hotels Resorts Campgrounds Inns Bed & Breakfast Cabins Inns Bed & Breakfast Cabins Financial Communications Immigration and customs Financial Communications Immigration and customs National Parks Museums Entertainment Sport and recreation equipment rental Casinos Handicraft/souvenirs National Parks Museums Entertainment Sport and recreation equipment rental Casinos Handicraft/souvenirs Natural and cultural Adventure Conventions Business Health services Language training Incentive travel Natural and cultural Adventure Conventions Business Health services Language training Incentive travel Airlines Car rentals Taxis Buses Cruise ships Ferries Airlines Car rentals Taxis Buses Cruise ships Ferries Airports Highways Ports Railways Airports Highways Ports Railways Management Vocational Management Vocational Tour operators Tour operators Hotels Hotels Security Health Security Health Support Support Organizations Organizations Support Support Organizations Organizations F& B F& B F& B F& B Lodging Lodging Lodging Lodging Support Services Support Services Support Services Support Services Motivations Motivations Motivations Motivations Attractions Attractions Attractions Attractions Transport Transport Transport Transport Transportation Transportation Infrastructure Infrastructure Transportation Transportation Infrastructure Infrastructure Other Services Other Services Other Services Other Services Training Training Training Training

Promotion

Promotion Promotion

Promotion

Resource Acquisition
Resource Acquisition

Gain access to a particular resource, such as capital, employees with specialized skills, intimate knowledge of a market, or a modern production facility

Speed to Markets
Speed to Markets

High fixed costs sometimes require firms to find partners to expand production volume.

Advantages of Interorganizational

Relationships

Advantages of Interorganizational

Relationships

Firms with complementary skills partner to increase speed to market with hope of capturing first-mover advantages

Enter Foreign Market
Enter Foreign Market

Often the only practical way to gain access to a foreign market

Economies of Scale
Economies of Scale

High fixed costs sometimes require firms to find partners to expand production volume

Advantages of Interorganizational

Relationships

Advantages of Interorganizational

Relationships

Risk and Cost Sharing
Risk and Cost Sharing

Allows two or more firms to share the risk and cost of a particular business endeavor

Product / service development
Product / service development

Provides firms the opportunity to pool their skills to

develop new products and/or services

Learning
Learning

Provide participants with the opportunity to “learn” from their partners (e.g. lean manufacturing, product

development, human resource management in an

unfamiliar country)

Allows two or more firms to share the risk and cost of a particular business endeavor

Provides firms the opportunity to pool their skills to

develop new products and/or services

Provide participants with the opportunity to “learn” from their partners (e.g. lean manufacturing, product development, human resource management in an unfamiliar country)

Advantages of Interorganizational

Relationships

Advantages of Interorganizational

Relationships

Strategic Flexibility
Strategic Flexibility

A valuable alternative to acquisitions, because they do not have to be as permanent. They also require less of

an internal resource commitment, which frees up

resources for other uses.

Collective Political Clout
Collective Political Clout

Neutralizing or Blocking Competitors
Neutralizing or Blocking Competitors

A valuable alternative to acquisitions, because they do not have to be as permanent. They also require less of

an internal resource commitment, which frees up

resources for other uses.

Can increase collective clout and influence governments into adopting policies favorable to their industries or circumstances

Firms can gain the competencies and market power needed to neutralize or block the moves of a competitor

Firms can gain the competencies and market power needed to neutralize or block the moves of a competitor

and Decision to Partner

Formal Power

Importance Importance

High High

Economic

Partnering and

Power

Partnering and

Power

Inclusion in the

Firm’s Activities Firm’s Activities Monitoring and

Political Power

Strategic Strategic Importance Importance of External of External Stakeholder Stakeholder Economic

Influence on

Environmental

Uncertainty

Monitoring and

Facing the

Traditional

Firm Firm Possession of

Possession of

Importance Importance

Low Low

Knowledge or

Resources not Found in Firm

Resources not

Traditional Management Traditional Management

Partnering / Inclusion Partnering / Inclusion

Customers
Customers
Customers

Customers

Customer service departments

Involvement on design teams or product testing

Customer service departments

Involvement on design teams or product testing

Marketing and marketing research

Joint planning sessions

Marketing and marketing research

Joint planning sessions

Joint training/service programs

On-site visits

Financial investments

Long-term contracts

Interlocking directorate

Suppliers
Suppliers
Suppliers
Suppliers

Purchasing departments

Involvement on design teams for new products

Encourage competition among suppliers

Integration of ordering system with manufacturing

Sponsor new suppliers

800 numbers

with External Stakeholders

Shared information systems

Threat of

Interlocking directorate

Long-term contracts

Partnering / Inclusion Partnering / Inclusion

Competitors
Competitors
Competitors
Competitors

Consortia or Alliances

Trade associations for information sharing and collective lobbying

Informal price leadership

Collusion (may be illegal)

Jointly or government sponsored research

Joint foreign development projects

Problem solving task forces on sensitive issues

Appoint retired government officials to board

Traditional Management Traditional Management

Joint ventures

Direct competition based on differentiation

Intelligence systems

Corporate spying and espionage (ethical problems)

Government
Government
Government
Government

Legal, tax or government relations offices

Lobbying and political action committees

Campaign contributions

Appoint retired government officials to board

Problem solving task forces on sensitive issues

with External Stakeholders

Joint foreign development projects

Joint ventures

Consortia or Alliances

Trade associations for information sharing and collective lobbying

Informal price leadership

Collusion (may be illegal)

Jointly or government sponsored research

Personal gifts to politicians (ethical problems)

Traditional Management Traditional Management

Partnering / Inclusion Partnering / Inclusion

Local Communities

Local Communities
Local Communities
Local Communities

Task forces to work on special community needs

Community relations offices

Task forces to work on special community needs

Community relations offices

Cooperative training and educational programs

Public relations advertising

Development committees/ boards

Involvement in community service

Joint employment programs

Donations to local causes

Activist Groups
Activist Groups
Activist Groups
Activist Groups

Consultation with representatives on sensitive issues

Organizational decisions to satisfy demands

Public/political relations efforts

Joint research and development programs

Financial donations

with External Stakeholders

Appointments to the board

Traditional Management Traditional Management

Partnering / Inclusion Partnering / Inclusion

The Media
The Media
The Media
The Media

Exclusive interviews or early release of information

Public/political relations efforts

Exclusive interviews or early release of information

Public/political relations efforts

Inclusion in social events and other special treatment

Media experts/press releases

Unions
Unions
Unions
Unions

Contract clauses that link pay to performance

Union avoidance through excellent treatment of employees

Joint committees on safety and other issues

Hiring professional negotiators

Joint industry/labor panels

Inclusion on management committees

Mutually satisfactory labor contracts

with External Stakeholders

Appointments to the board

Chapter XI protection to re- negotiate contract

Chapter XI protection to re-

Traditional Management Traditional Management

with External Stakeholders

Partnering / Inclusion Partnering / Inclusion

Financial Intermediaries
Financial Intermediaries
Financial Intermediaries
Financial Intermediaries

Financial reports

Inclusion in management decisions requiring financing

Financial reports

Inclusion in management decisions requiring financing

Close correspondence

Finance and accounting departments

Contracts and linkages with other clients of financier

High-level financial officer

Audits

Shared ownership of projects

Appointments to the board

Source: Adapted from J.S. Harrison and C.H. St.John, “Managing and Partnering with External Stakeholders,” Academy of Management Executive (May 1996), p. 53. Used with permission Source: Adapted from J.S. Harrison and C.H. St.John, “Managing and Partnering with External Stakeholders,” Academy of Management Executive (May 1996), p. 53. Used with permission

Actions that Increase the Likelihood of Successful Partnerships

Actions that Increase the Likelihood

of Successful Partnerships

Carefully study and select a partner
Define roles of partners
Develop a strategic plan
Keep top managers involved
Meet often, informally, at all managerial levels
Appoint someone to monitor partnership
Maintain enough independence to develop

your own expertise

Anticipate and plan for cultural differences
Anticipate and plan for cultural differences
Carefully study and select a partner
Define roles of partners
Develop a strategic plan
Keep top managers involved
• Meet often, informally, at all managerial levels
Appoint someone to monitor partnership
Maintain enough independence to develop
Functional-level strategy is the collective pattern

Functional-level strategy is the collective pattern

Paying attention to the details

Many companies are successful because of excellence at the functional level

The following characteristics are essential:
The following characteristics are essential:

Decisions made within each function are consistent

Decisions made in all functional areas are consistent with and support the strategies of the business

of day-to-day decisions made and actions taken by managers and employees who are responsible for value-creating activities within a functional area

Functional-Level Resource Management

Decisions made within one function are consistent with decisions made within other functions

Decisions made in all functional areas are consistent with and support the strategies of the business

Marketing Strategy
Marketing Strategy

Target Customers—few vs. many, what groups, what regions

Product Positioning—premium commodity, multi-use, specialty use

Conducting a Functional Strategy Audit

Product Line Mix—a mix of complementary products

Product Line Breadth—a full-line offering of products

Pricing Strategies—discount, moderate, premium prices

Promotion Practices—direct sales, advertising, direct mail, Internet

Distribution Channels—few or many, sole contract responsibilities

Customer Service Policies—flexibility, responsiveness, quality

Product/Service Image –premium quality, good price, reliable

Market Research—accuracy, frequency and methods for obtaining marketing information

Market Research—accuracy, frequency and methods for obtaining marketing information

Operations Strategy
Operations Strategy

Capacity Planning—lead demand to ensure availability or lag demand to achieve capacity utilization

Facility Location—near suppliers, customers, labor, natural resources or transportation

Facility Layout—continuous or intermittent flow

Technology and Equipment Choices—degree of automation, use of computers and information technology

competitive bid

Workforce Policies—training levels, cross-training, rewards, use of teams

Conducting a Functional Strategy Audit

Sourcing Arrangements—cooperative arrangements with a few vs.

competitive bid

Sourcing Arrangements—cooperative arrangements with a few vs.

Planning and Scheduling—make to stock, make to order, flexibility to customer requests

Quality Assurance—acceptance sampling, process control, standards

Workforce Policies—training levels, cross-training, rewards, use of teams

Areas of Interdependency and Potential Conflict Between Marketing and Operations Areas of Interdependency and Potential Conflict Between Marketing and Operations • Facility Size and Process Choice vs. Market Forecasts

Market Forecasts

Facility Location vs. Market Planning • Production Schedules vs. Forecasts,
Facility Location vs. Market Planning • Production Schedules vs. Forecasts,

Orders and Promotions

Orders and Promotions

Operating Policies
Operating Policies • Facility Size and Process Choice vs.
Information Systems Strategy

Information Systems Strategy

Hardware—local area network (LAN), mainframe, minicomputer, internal systems, links to Internet

Conducting a Functional Strategy Audit

Hardware—local area network (LAN), mainframe, minicomputer, internal systems, links to Internet

Software—data processing, decision support, Web management, computer automated design (CAD), computer integrated manufacturing (CIM), just-in-time inventory

Personnel—in-house experts, subcontracting or alliances

Disaster Recovery—off-site processing, backup procedures, virus protection and treatment

Personnel—in-house experts, subcontracting or alliances

Information Security—hardware, software, physical location and layout

Disaster Recovery—off-site processing, backup procedures, virus protection and treatment

Business Intelligence—management support, marketing, accounting, operations, R&D, human resources, finance

Internet—uses of Internet in communications, marketing, resource acquisition, research or management

Internet—uses of Internet in communications, marketing, resource acquisition, research or management

Conducting a Functional Strategy Audit

R&D/Technology Strategy
R&D/Technology Strategy

Research Focus—product, process, applications

Research Orientation—leader, early follower, late follower

Corporate Entrepreneurship—“seed money” grants, time off

to develop a venture, management support, rewards for

entrepreneurs, ideas come from everyone

Research Orientation—leader, early follower, late follower

Corporate Entrepreneurship—“seed money” grants, time off

to develop a venture, management support, rewards for

entrepreneurs, ideas come from everyone

Project Priorities—budget, quality, creativity, time

Knowledge Creation—training, alliances and ventures, acquisitions, cross-functional teams

Human Resources Strategy
Human Resources Strategy

Recruitment—entry level vs. experienced employees, colleges, technical schools, job services

Personnel Actions—disciplinary plans, outplacement, early retirements

Benefits—medical, dental and life insurance, paid leave, vacations, child care, health club

Management Compensation—stock awards, stock options, bonuses linked to performance, perquisites, low interest loans

Other Compensation—stock ownership programs, bonuses

Salary and Wages—hourly, piece rate, commission, fixed, relationship to performance, competitiveness

Performance Appraisal—appraisal methods and frequency, link to rewards

Nature of Work—part-time, full-time, or a combination, on site or off site, domestic or foreign

Selection—selection criteria and methods

Training—types of training, availability of training to employees, tuition reimbursement

Recruitment—entry level vs. experienced employees, colleges, technical schools, job services

Personnel Actions—disciplinary plans, outplacement, early retirements

Benefits—medical, dental and life insurance, paid leave, vacations, child care, health club

Management Compensation—stock awards, stock options, bonuses linked to performance, perquisites, low interest loans

Other Compensation—stock ownership programs, bonuses

Salary and Wages—hourly, piece rate, commission, fixed, relationship to performance, competitiveness

Performance Appraisal—appraisal methods and frequency, link to rewards

Nature of Work—part-time, full-time, or a combination, on site or off site, domestic or foreign

Selection—selection criteria and methods

Training—types of training, availability of training to employees, tuition reimbursement

Conducting a Functional Strategy Audit

Financial Strategy
Financial Strategy

Sources of Capital—debt, equity, or internal financing

Financial Reporting—frequency, type, government, shareholders, other stakeholders

Capital Budgeting—system for distributing capital, minimum ROI for investments, payback

Overhead Costs—allocation of overhead costs based on direct labor, machine use, sales volume, activity

Financial Control—system to ensure accuracy of internal and external financial information, audits

Financial Targets—establishment of financial targets for functional

areas and business units, method of reporting on progress

Financial Targets—establishment of financial targets for functional

areas and business units, method of reporting on progress

Returns to Shareholders—dividends policy, re-purchase of stock, treasury stock, stock splits

Problems with Capital

Budgeting Systems

Problems with Capital

Budgeting Systems

Inaccurate Cost Data • Base Comparisons • Hurdle Rate • Qualitative Factors
Inaccurate Cost Data • Base Comparisons • Hurdle Rate • Qualitative Factors

Strategy implementation involves managing
Strategy implementation involves managing

relationships with internal and external stakeholders as well as managing other organizational resources. These processes overlap.

One of the most important reasons for
One of the most important reasons for

interorganizational relationships is to acquire need resources, especially knowledge

• Stakeholders that are high priority for partnerships
• Stakeholders that are high priority for partnerships

possess a large amount of formal, political or economic power, have a large impact on the uncertainty facing the firm or possess needed resources

relationships with internal and external stakeholders as well as managing other organizational resources. These processes overlap.

interorganizational relationships is to acquire need resources, especially knowledge

possess a large amount of formal, political or economic power, have a large impact on the uncertainty facing the firm or possess needed resources

Major Concepts in Chapter 7

A set of traditional monitoring and management
A set of traditional monitoring and management

techniques apply to stakeholders that are not high priority for partnerships

• The travel industry is composed of a complex and
• The travel industry is composed of a complex and

diverse variety of organizations. These firms work together in a tourism cluster to provide the overall tourism experience

Strategies are implemented through day-to-day
Strategies are implemented through day-to-day

decisions. The challenge is to create a pattern of

integrated, coordinated functional-level decisions

that meets the needs of stakeholders and fulfills

the planned strategies of the organization

techniques apply to stakeholders that are not high priority for partnerships

diverse variety of organizations. These firms work together in a tourism cluster to provide the overall tourism experience

decisions. The challenge is to create a pattern of

integrated, coordinated functional-level decisions

that meets the needs of stakeholders and fulfills

the planned strategies of the organization

Major Concepts in Chapter 7 Major Concepts in Chapter 7