1.
Environmental Uncertainty
b.
Uncertainty arises from two related factors
i.
complexity - the number of issues to which a manager must attend
as well as their interconnectedness
ii.
dynamism - the degree of discontinuous change that occurs
within the industry
c.
As uncertainty increases, techniques must be developed
to collect, sort, and interpret information about the environment
2.
Environmental Scanning
a.
Searching for and sorting through information about the
environment
b.
Competitive intelligence - information that helps managers determine how to
compete better
c.
Competitive potential of environments differs
i.
attractive
environments - give
firm a competitive advantage
ii.
unattractive
environments - put firm
at a competitive disadvantage
3.
Scenario Development
a.
Scenario - a narrative that describes a particular set of
future conditions
i.
best-case
scenario - events
occur that are favorable to the firm
ii.
worst-case
scenario - events
occur that are all unfavorable
b.
Help managers develop contingency plans
4.
Forecasting
a.
Method for predicting how variables will change in the
future
b.
Accuracy varies from application to application
c.
Forecasts are most useful when they accurately predict
a changed future environment
5.
Benchmarking
a.
Process of comparing the organization’s practices and
technologies with those of other companies
i.
determine
the best-in-class performance by a company in a given area
ii.
benchmarking
team collects information on its own company’s operations and those of
benchmark companies to identify gaps
iii.
gaps
investigated to learn the underlying causes of performance differences
Responding to the Environment
1.
Adapting to the Environment
a.
Company adjusts its structures and work processes
b.
In uncertain environment caused by complexity,
companies tend to decentralize decision making
i.
empowerment - process of sharing power with employees
o
enhances
their confidence in their ability to perform their jobs
o
engenders
beliefs that they are influential contributors to the firm
c.
In uncertain environments caused by dynamism,
companies tend to establish more flexible structures
i.
bureaucracy - suited for stable environments (low dynamism)
ii.
organic - provides flexibility required for changing
environments (high dynamism)
Four Approaches for Managing Uncertainty
d.
Adapting
at the boundaries
i.
buffering - creating supplies of excess resources in case of
unpredictable needs, buffers created on both the input and output side of
the business
ii.
smoothing - leveling normal fluctuations at the boundaries of
the organization
e.
Adapting
at the core
i.
flexible
processes - permit
adaptation of the technical core
ii.
mass
customization
-use of a network of independent operating units that each performs a specific
process,
different modules join
forces to deliver the product or service as specified by the customer
2.
Influencing Your Environment
a.
Proactive responses aimed at changing the environment
i.
Independent
action - strategies
that an organization acting on its own uses to change some aspect of its
current environment
ii.
Cooperative
action - strategies
used by two or more organizations working together to influence the external
environment, at
an organizational level, establish strategic alliances, partnerships, joint
ventures, and mergers with competitors
3.
Changing the Environment You Are in
a.
Strategic maneuvering - conscious effort to change the boundaries of the
competitive environment
i.
prospectors - companies that continuously change the boundaries
of their task environments by:
o
diversifying
and merging
o
seeking
new products and markets
o
acquiring
new enterprises
ii.
defenders - companies that stay within a stable, more- limited
product domain as a strategic maneuver
Choosing a Response Approach
1.
Change appropriate elements of the environment
a.
Focus on elements that:
i.
cause
the company problems
ii.
provide
the company with opportunities
iii.
allow
the company to change successfully
2.
Choose responses that focus on specific elements of
the environment
a.
Focus on competitive aggression and pacification
3.
Choose responses that offer the most benefit at the
lowest cost
a.
Focus on both short- and long-term financial
considerations
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