Principle Of Management - Chapter 9: Value Chain Management

Principle Of Management

Chapter 9: Value Chain Management:

As a manager, you must ask yourself how you can add value to the firm. Those who do not add value serve little purpose in their organizations. At the functional level, managers are not planning overall corporate strategies, or even business-level strategies. However, their role in adding value to the operations of the firm is significant.

A functional-level strategy is a plan of action to improve the ability of an organization's departments to create value. According to the text, there are two ways to add value to an organization's products:

1. Departmental managers can lower the costs of creating value so that an organization can attract customers by keeping its prices lower than its competitors.

2. Departmental managers can add value to a product by finding ways to differentiate it from the products of competitors.

In trying to add value or lower the costs of creating value, all functional managers should attend to four goals:

1. To attain superior efficiency.

2. To attain superior quality.

3. To attain superior innovation.

4. To attain superior responsiveness to customers.

By doing these four things, a firm seeks to establish a competitive advantage over its rivals. Think of a successful company with which you are familiar. In what ways do they do one or more of the above four things better than any other company in their industry?

One thing to remember about competitive advantage. A company can NEVER rest on its laurels. The best manufacturer of 8-track tape players went out of business long ago. New competitors enter the market and take away your market share. New technologies come along and make your products or processes obsolete. You can never look at the past and assume the future will go in the same direction. Even so, a firm that seeks to provide high quality, innovative products or services that exceed customer expectations and does so more efficiently than their competition will gain a competitive advantage, at least for awhile. If it can innovatively adapt to future changes, it will extend that competitive advantage into the future for some period of time.

Managing the Organizational Environment

An important element for organizations to focus on is "change." Environmental change is the degree to which forces in the task and general environments change and evolve over time. A major sticking point for organizations is their philosophy toward change. Think about this question: "Do people like change?" Some of you will respond like this: "Change is good!" or "I like to change; it keeps things from being boring." However, most people tend to see change as a bad thing. Inherently, people fear change.

While people may not like change, how should companies react to change? Think about these statements. "Organizations that change survive." "Organizations that don't change don't survive."

 

Three points about boundary spanning are important to note:There are several ways that organizations can respond to a complex and changing environment. One method is through the structure and control systems of the organization (these will be discussed later). Another method is through information. Information reduces uncertainty and helps us better understand the change process. In this sense, knowledge is power. It is the power to reduce uncertainty and better manage our environment (instead of our environment managing us.) Information about the task and general environments is gained by practicing "boundary spanning," which is defined as "interacting with individuals and groups outside the organization to obtain valuable information from the task and general environments."

1. Boundary-spanning activities seek ways not only to respond to forces in the external environment, but also to directly influence and manage the perceptions of stakeholders.

2. Through boundary-spanning, managers in two organizations communicate and share information that helps both of them understand the changing forces and conditions in the industry environment.

3. If managers in all of an organization's departments perform boundary-spanning roles, the quality of managers' decision making and planning would increase.

The roles of the boundary-spanner were identified by Mintzberg more than twenty years ago (some of these were mentioned in Chapter 1 under Managerial Roles).

1. Representing and Protecting the Organization

2. Scanning and Monitoring the Environment

3. Gatekeeping and Information Processing

4. Establishing Interorganizational Relationships

With the advances in technology, specifically information technology such as the Internet, how have these boundary-spanning roles changed in the last several years?

1. Responsiveness to customers: Does this company meet or exceed customer expectations? If so, how? What do customers expect or want that this company provides?This week, after reading through the chapter, identify a company about which you can gather information (use their Web site, industry-related Web sites, news articles, etc.) and determine how it is working to gain or sustain a competitive advantage. Ask the following questions as you do your research:

2. Quality – Does this company use TQM or other quality programs to improve or maintain the quality of its operations, products or services? Is it known for its quality? Give examples if you can.

3. Efficiency – What production techniques does this company use to improve efficiency (just-in-time inventories, self-managed work teams, information technology, unique facilities layout or process engineering, etc.)

4. Innovation – How does this company reduce product development time? How does it promote innovation among its employees?

5. How do the employees of this company view the companies for which they work? In other words, does establishing a competitive advantage result in more fulfilled employees? Why or why not?