Last Name1Wu 1ENG 104 – Prof. KingLong” Essay 2.docx

Last Name1
Wu 1
ENG 104 – Prof. King
“Long” Essay 2 – Imagery and Metaphor
How do authors use imagery and/or metaphor to communicate
additional key information about what’s happening in a story,
without actually coming out and telling us?
These are the questions I want you to think about as you write
your first essay. The first draft is due via Blackboard, no later
than Monday, February 28, at11:59 pm. Here is the formal
essay topic. Do not simply answer these questions in order, but
they should be addressed somewhere in your essay. Make sure
your essay “flows” nicely, organically, naturally:
Think of several of the stories we have read over the last few
weeks. Imagery is very important in all of them, not just to
describe the scene more clearly, but also to give the reader
clues about what characters are thinking and feeling, or to give
us an “emotional read” on a setting – what is the prevailing
atmosphere or mood.
Consider AT LEAST THREE of the following stories, and
discuss how what the protagonists of each see with their eyes
gives the readers clues about their nature, personality, thoughts,
fears, hopes, beliefs, or worries:
· “Never” by H.E. Bates

· “The Gift of the Magi” by O. Henry
· “The Story of an Hour” by Kate Chopin
· “A Worn Path” by Eudora Welty
You must have the following:
· A clear thesis statement
· 1200+ words
· Correct MLA formatting and typesetting, including a proper
heading, header, and title
· Proper paragraphing, and at least 5 paragraphs
· Evidence/quotations in each section of your essay, clearly
presented and carefully explained
· Proper citation of outside source(s), if you use any (not
required in this essay)
Your essay must incorporate at least THREE of the following
literary concepts and/or the following literary terms:
· Setting/set
· Imagery
· Protagonist/main character/title character
· Theme
· Metaphor
· Symbol(-ism)
LECTURE NOTES 112
Leadership in Organization (Part II)
I. Leading Change in Organizations
(a) Resistance to Change
One of the most important and difficult leadership

responsibilities is to guide and facilitate the process of making
a major change in an organization. People tend to resist major
change in organizations for many reasons as follows: Lack of
trust; belief that change is unnecessary; belief that the change is
not feasible; economic threats; relative high cost; fear of
personal failure; loss of status and power threat to values and
ideals; and resentment of interference.
(b) Influencing Organization Culture
@ A major function of culture is to help us understand the
environment and determine how to respond to it, thereby
reducing anxiety, uncertainty, and confusion. The internal and
external problems are closely interconnected, and organizations
must deal with them simultaneously.
@ Ways to influence culture
Primary Ways
Secondary Ways
· Attention
· Reactions to crises
· Role modeling
· Allocation of rewards
· Criteria for selection and dismissal
· Design of systems and procedures
· Design of organizational structure
· Design of facilities
· Stories, legends, and myths
· Formal statements
Cultural Forms: symbols, slogans, and rituals
@ Developing a Vision: Vision has many different meanings: it

is unclear whether a mission statement, strategic objective,
value statement, or slogan constitutes an effective vision. The
procedures for developing a vision are follows:
(1) Involve key stakeholders,
(2) Identify strategic objectives with wide appeal,
(3) Identify relevant elements in the old ideology,
(4) Link the vision to core competencies, and
(5) Evaluate the credibility of the vision, and continually assess
and refine the vision.
@ Guidelines for Implementing Change
(1) Determine who can oppose or facilitate change,
(2) Build a broad coalition to support the change,
(3) Fill key positions with competent change agents,
(4) Use task force to guide implementation,
(5) Make dynamic and symbolic changes that affect the work,
and
(6) Monitor the progress of change.
@ Guidelines for Increasing Learning and Innovation for
change
(1) Encourage appreciation for flexibility and innovation,
(2) Encourage and facilitate learning by individuals and teams,
(3) Help people improve their mental models,
(4) Leverage learning from surprises and failures,
(5) Encourage and facilitate sharing of knowledge and ideas,
(6) Set innovation goals, and
(7) Reward entrepreneurial behavior.
II. Leadership in Teams and Decision Groups
(a) Four Types of Teams
(1) Functional operating teams,
(2) Cross-functional teams,
(3) Self-managed teams, and

(4) Virtual teams
(b) Determinants of Team Performance
(1) Commitment to shared objectives,
(2) Member skills and role clarity,
(3) Internal organization and coordination,
(4) External coordination,
(5) Resources and political support,
(6) Mutual trust and cooperation,
(7) Collective efficacy and potency
(c) Guidelines for Team Building
(1) Emphasize common interest and values,
(2) Use ceremonies and rituals,
(3) Use symbols to develop identification with the group,
(4) Encourage and facilitate social interaction,
(5) Tell people about group activities and achievements,
(6) Conduct process analysis sessions,
(7) Conduct alignment sessions, and
(8) Increase incentives for mutual cooperation.
(d) Determinants of Group Processes (Decision-making)
(1) Group size;
(2) Status differentials
(3) Cohesiveness
(4) Member diversity
(5) Emotional maturity
(6) Physical environment
(7) Communication technology
III. Strategic Leadership by Executives
There have been three arguments on strategic leadership by
executives and the top management team.

First, the performance of an organization is largely determined
by factors beyond the leader’s control, including economic
conditions, market conditions, government policies, and
technological change.
Second, the discretion of an individual executive is limited by
internal and external constraints, so that only political
coalitions have enough influence to make major changes in
organizations.
Third, people exaggerate the influence of individual leaders on
organizations, and they are given more credit for successes and
more blame for failures than they actually deserve.
(a) Constraints on Executives
(1) Internal Constraints: Powerful inside forces or coalitions in
the organization, which are counter-powers such as labor unions
as well as a strong organizational culture, block changes which
a leader wants to make.
(2) External Constraints: the nature of the organization’s
primary products and services, the type of markets in which the
organization operates, powerful external shareholders, political
and legal limitations.
(3) Constraints and Executive Traits as Joint Determinants:
Internal and external constraints interact with each other and
with the leader’s personality and skills to influence the leader’s
behavior.
(b) Biased Attributions about CEO
(1) A leader who takes decisive action to deal with a crisis is
likely to be viewed as exceptional if organization performance
improves soon afterward. In contrast, a leader who fails to take
decisive action in a crisis, or who takes action that fails to
resolve the crisis quickly, is likely to be viewed as incompetent.

(2) Follower perception of leader competence is influenced
more by highly visible actions to deal with an immediate crisis
than by actions to improve conditions and avoid a future crisis.
(c) How Leaders Influence Organizational Performance
(1) Efficiency and Process Reliability
(2) Innovation and Adaptation
(3) Human Resources and Relations
(4) Leader Influence on Performance Determinants
(5) Flexible and Adaptive Leadership
(d) Strategic Management
(1) Evaluation of Environment: Where we are now
(2) Formulation of Strategy: How to get there
(3) Implementation of Strategy: Where we want to be
IV. Developing Leadership Skills
(a) Conditions for Successful Training
(1) Clear learning objectives,
(2) Clear, meaningful content
(3) Appropriate sequencing of content
(4) Appropriate mix of training methods,
(5) Opportunity for active practice,
(6) Relevant and timely feedback,
(7) High trainee self-confidence
(8) Appropriate follow-up activities
(b) Developmental Activities
(1) Multisource feedback,
(2) Developmental assessment centers,
(3) Developmental assignments,
(4) Job rotation programs,
(5) Action learning,

(6) Mentoring,
(7) Executive coaching,
(8) Outdoor challenge programs,
(9) Personal growth programs.
V. Ethical Leadership and Diversity
(a) Ethical Leadership
(1) Ethical Criteria of an individual leader: the person’s values,
stage of moral development, conscious intentions,, freedom of
choice, use of ethical and unethical behavior, and types of
influence used.
(2) Ethical Criteria of Specific Types of Leadership Behavior:
basic law of society, other person’s rights, the health and lives
of other people, and benefits of others.
(b) Dilemmas in Evaluating Ethical Leadership
Leaders are usually expected to influence follower commitment
to an existing task or a new activity. However, this influence is
also the source of ethical concerns. The problem for evaluating
ethical leadership is to determine when such influence is proper.
In many situations, the influence process may involve (1)
creating enthusiasm for a risky strategy or project, (2) inducing
followers to change their underlying belief and values, and (3)
influencing decisions that will benefit some people at the
expense of others. Each type of influence involves some ethical
dilemmas.
(c) Leadership in Different Cultures
Manage diversity and provide equal opportunities !
(1) Power Distance
(2) Individualism
(3) Uncertainty Avoidance
(4) Gender Egalitarianism

VI. An Integrating Conceptual Framework
Leader
Power-Influence
Situational Variables
Leader
Traits
Leader
Behavior
Integrative Approach
To involve more than one type of leadership variables
(traits, power and influence ,situation, and behavior)
Biases in the Conceptualization of Leadership
1. Heroic Individuals versus Shared Leadership
2. Dynamic versus Collective Focus
How leadership is conceptualized has important implications for
theory and research. The assumption that effective leadership
can be explained in terms of dynamic influence by a heroic
leader limits the scope of research and theory and discourages
exploration of shared leadership, collective processes, and
reciprocal influence. A more balanced perspective is desirable

in the future. Most leadership theories are also limited by a
lack of adequate attention to explanatory processes. The
theories often propose relationships or causal effects without
explaining why they occur. Future theories must do more to
explain as well as predict the effects of leaders on individuals,
groups, and organizations.
The Essence of Effective Leadership
1. Help people to find the meaning of complex events,
especially when the pace of change is accelerating and touching
every part of our lives.
2. Create alignment on objectives and strategies to build a
consensus about these choices.
3. Build task commitment and optimism in the face of obstacles
and setbacks.
4. Build mutual trust and cooperation when people understand
each other, appreciate diversity, and are able to confront and
resolve differences in a constructive way.
5. Strengthen collective identity when boundaries are often
unclear and loyalties are divided in the era of fluid teams,
virtual organizations, and joint ventures.
6. Organize and coordinate activities to make efficient use of
people and resources.
7. Encourage and facilitate collective learning for continuous
innovation in a highly competitive and turbulent environment.
8. Obtain necessary resources and support for favorable
exchanges with external parties.
9. Develop and empower people to prepare people for leadership
roles, new responsibilities, and major changes.
10. Promote social justice and morality by a climate of fairness,
compassion, and social responsibility. Effective leaders set an
example of moral behavior, and they take necessary actions to
promote social justice.
(End of Lecture Notes)
2

LECTURE NOTES #11
Leadership in Organization I
Definition of Leadership
Leadership is the process of influencing others to understand
and agree about what needs to be done and how to do it, and the
process of facilitating individual and collective efforts to
accomplish shared objectives. @ The leadership theories hold
three key variables including the leaders, the followers, and the
situation. @ The leadership theories consider five approaches
including trait, behavior, power-influence, situational, and
integrative approaches. @ The level of conceptualization: the
leadership can be conceptualized as (1) an intra-individual
process, (2) a dynamic process, (3) a group process, or (4) an
organizational process.
I. Traits Theories of Leadership
Trait theories consider personal qualities and characteristics
that differentiate leaders from non-leaders.
(a) Managerial traits and effectiveness
· Self-confidence
· Internal locus of control orientation, more depending on own
actions
· Emotional stability and maturity
· Personal integrity
· Power motivation: a strong need for power more likely seeks
positions and authority
· Achievement orientation
· Low need for affiliation

(b) The big five personality traits:
http://en.wikipedia.org/wiki/Big_Five_personality_traits
@1. Openness to experience: (inventive/curious vs.
consistent/cautious). Appreciation for art, emotion, adventure,
unusual ideas, curiosity, and variety of experience. Openness
reflects the degree of intellectual curiosity, creativity and a
preference for novelty and variety a person has. It is also
described as the extent to which a person is imaginative or
independent, and depicts a personal preference for a variety of
activities over a strict routine. Some disagreement remains
about how to interpret the openness factor, which is sometimes
called "intellect" rather than openness to experience.
@2. Conscientiousness: (efficient/organized vs. easy-
going/careless). A tendency to show self-discipline, act
dutifully, and aim for achievement; planned rather than
spontaneous behavior; organized, and dependable.
@3. Extraversion: (outgoing/energetic vs. solitary/reserved).
Energy, positive emotions, surgency, assertiveness, sociability
and the tendency to seek stimulation in the company of others,
and talkativeness.
@4. Agreeableness: (friendly/compassionate vs. cold/unkind). A
tendency to be compassionate and cooperative rather than
suspicious and antagonistic towards others. It is also a measure
of one's trusting and helpful nature, and whether a person is
generally well tempered or not.
@5. Neuroticism: (sensitive/nervous vs. secure/confident). The
tendency to experience unpleasant emotions easily, such as
anger, anxiety, depression, or vulnerability. Neuroticism also
refers to the degree of emotional stability and impulse control
and is sometimes referred to by its low pole, "emotional
stability".
(c) Managerial skills and effectiveness
· Technical skills include knowledge about methods, processes,

and equipment for conducting the specialized activities of the
manager’s organizational unit. They also include factual
knowledge about the organization, and knowledge about the
organization’s products and services.
· Conceptual skills involve good judgment, foresight, intuition,
creativity, and the ability to find meaning and order in
ambiguous or uncertain events.
· Interpersonal skills include knowledge about human behavior
and group processes, ability to understand the feelings,
attitudes, and motives of others, and ability to communicate
clearly and persuasively.
II. Behavioral Theories of Leadership
(a) Leadership behavior influences subordinate satisfaction and
performance in terms of consideration and initiating structure.
· Initiating Structure is the extent to which a leader is likely to
define and structure his or her role and those of employees in
the search for goal attainment.
· Consideration is the extent to which a leader is likely to have
job relationship characterized by mutual trust, respect for
subordinates’ ideas, and regard for their feelings.
(b) University of Michigan Leadership Studies found three types
of leadership behavior
· Task-oriented behavior emphasizes the technical or task aspect
of the job: (1) Planning work activities; (2) Clarifying roles and
objectives; (3) Monitoring operations and performance
· Relation-oriented behavior emphasizes interpersonal relations:
(1) Supporting; (2) Developing; and (3) Recognizing
· Participative leadership applies more group supervision
instead of supervising individuals.
(c) Participative Leadership

Varieties of Participation in Decision-Making
Degree of Participation
Decision Procedures
No Influence by Others
High Influence by Others
Autocratic Decision
Consultation
Joint Decision
Delegation
Delegation: The manager gives and individual or group the
authority and responsibility for making a decision; the manager
usually specifies limits within which the final choice must fall,
and prior approval may or may not be required before the
decision can be implemented.
Potential Benefits of Participation
Decision quality
Decision acceptance
Satisfaction with the decision process
Development of participant skills
(d) Leader-Member Exchange Theory
@ Leader-member exchange theory describes the role-making
processes between a leader and each individual subordinate and
the exchange relationship that develop over time.
@ Leader attributions about subordinates: How a leader acts
toward a subordinate varies depending on whether the

subordinate is perceived as competent and loyal, or incompetent
and untrustworthy.
@ Follower attributions: How followers perceive a leader has
important implications for organizations. Leaders perceived to
be competent are likely to retain their position or be advanced
to a higher position, whereas leaders perceived to be
incompetent are likely to replaced.
III. Power and Influence in Leadership
(a) Conceptions of Power and Influence
· Power involves the capacity of one party (the agent) to
influence another party (the target). The term power is usually
used to describe the absolute capacity of an individual agent to
influence the behavior or attitudes of one or more designated
target persons at a given point of time.
· Authority involves the rights, prerogatives, obligations, and
duties associated with particular positions in an organization or
social system. A leader’s authority usually included the right to
make particular types of decisions for the organization.
· Outcomes of Influence Attempts: Commitment, Compliance,
and Resistance
· Influence Processes: Instrumental compliance, Internalization,
and Personal Identification
(b) Power types and sources
Position Power
Personal Power
(1) Legitimate power
(2) Reward power

(3) Coercive power: authority over punishments
(4) Information power: control over information
(5) Ecological power: control over physical environment,
technology, and organization of the work provide indirect
influence
(1) Referent power: giving strong feelings of affection,
admiration, and loyalty
(2) Expert power: task-relevant knowledge and skill
(c) Influence Tactics:
@ General types of influencing tactics:
(1) Impression management tactics;
(2) Political tactics;
(3) Proactive tactics
@ Most Effective Proactive Tactics: (1) Rational persuasion;
(2) Apprising or appraise; (3) Inspirational approach; (4)
Consultation; (5) Exchange tactics; (6) Collaboration; (7)
Personal appeals; (8) Ingratiation; (9) Legitimating tactics; (10)
Pressure; (11) Coalition tactics
VI. Contingency Theories of Leadership
(a) The Fiedler Contingency Model: The model proposes that
effective groups depend on a proper match between a leader’s
style of interacting with subordinates and the degree to which
the situation gives control and influence to the leader.
Three Steps of the Model
Explanation
1 Identifying Leadership Style
A key factor in leadership success is the individual’s basic

leadership style. He created the least preferred co-worker
(LPC) questionnaire to identify that style by measuring whether
a person is task or relationship oriented.
2 Defining the Situation
Fiedler identifies three contingency or situational variables:
Leader-member relations are the degree of confidence, trust,
and respect members have in their leaders.
Task structure is the degree to which the job assignments are
procedurized.
Position power is the degree of influence a leader has over
power variables such as hiring, firing, discipline, promotions,
and salary increases.
3 Matching Leaders and Situations
Combining the three contingency dimensions yields eight
possible situations in which leaders can find themselves.
Exhibit: Findings from the Fiedler Model
Task oriented ----
---------------
Performance Relationship
oriented
------------------------------
-----------
High

----------------
Poor
Favorable Moderate
Unfavorable
Category
I
II
III
IV
V
VI
VII
VIII
Leader-member rela
Good
Good
Good
Good
Poor
Poor
Poor
Poor
Task structure
High
High
Low
Low
High
High
Low
Low
Position power
Strong

Week
Strong
Week
Strong
Week
Strong
Week
Evaluation
Favorable
Moderate
Unfavorable
The Fiedler’s LPC contingency model was one of the earliest
contingency theories of leadership, and its major contribution
may have been to encourage greater interest in situational
factors.
(b) Path-Goal Theory of Leadership
Path-Goal Theory is the leader’s job to assist followers in
attaining their goals and to provide the necessary direction
and/or support to ensure that their goals are compatible with the
overall objectives of the group or organization.
(1) Explanatory Processes: In choosing between a maximal
effort and a minimal effort, a person considers the likelihood
that a given level of effort will lead to successful completion of
the task and the likelihood that task completion will result in
desirable outcomes (higher pay, recognition, promotion, sense
of achievement), while avoiding undesirable outcomes (layoffs,
accidents, reprimands, rejection by coworkers, excessive
stress). The perceived probability of an outcome is called an
expectancy, and the desirability of an outcome is called its
valence.
(2) Leader Behaviors: Four behaviors are defined as below:
Supportive leadership, Directive leadership, Participative
leadership, and Achievement-oriented leadership.

@ Supportive leadership: reduces boredom and make job more
tolerable, increasing the intrinsic valence of work; and increases
self-confidence and lower anxiety, increasing effort-
performance expectancy; both increase effort.
@ Directive leadership: reduces role ambiguity, increasing the
effort-performance expectancy; increases size of incentives,
increasing outcome valences for task success; and strengthens
reward contingencies, increasing performance-reword
expectancies; three of which increase subordinate effort.
(3) Situational Variables: Task characteristics and subordinate
characteristics.
(c) Situational Leadership Theory
Situational Leadership Theory focuses on the followers’
readiness or the extent to which they are willing and able to
accomplish a specific task. A leader should choose one of four
behaviors depending on follower’s readiness: able & willing,
unable & willing, able & unwilling, and unable & unwilling.
(c) Leadership Substitutes Theory
Substitute or Neutralizer
Characteristics
(1) Subordinate Characteristics
1. Experience, ability, training
2. Professional orientation
3. Indifference toward rewards
(2) Task Characteristics
1. Structured, routine task

2. Feedback provided by task
3. Intrinsically satisfying task
(3) Organization Characteristics
1. Cohesive work group
2. Low position power
3. Formalization of roles and procedures
4. Inflexibility of rules and policies
5. Dispersed subordinate work sites
(1) The theory makes a distinction between two kinds of
situational variables: substitutes and neutralizers. Substitutes
make leader behavior unnecessary and redundant. Neutralizers
prevent a leader from acting in a specified way or nullify the
effects of the leader’s actions.
(2) In the 1970s when this theory was formulated, most
leadership theories emphasized the role of formal leaders as the
primary determinant of subordinate motivation and satisfaction.
Leadership substitutes theory deemphasized the importance of
formal leaders by showing how their influence can be replaced
by work design, reward systems, informal pear leadership, and
self-management.
(d) Multiple-Linkage Model
@ The model describes how a leader can influence intervening
variables to improve group effectiveness. The performance of a
group or organization subunit is highest when members have
high task skill and motivation, they are efficiently organized,
the level of member cooperation is high, adequate resources are
available, and unit activities are coordinated with those of
interdependent units.
@ The model consists of four types of variables: managerial

behaviors, intervening variables, criterion variables, and
situational variables. The situational variables affect other
three types of variables: (1) they constrain managerial behavior
and moderate its effects; (2) they directly influence intervening
variables; and (3) they determine the relative importance of the
intervening variables.
The leader may take possible actions to improve the situation as
follows:
(1) Gain more control of acquisition of resources to do the
work,
(2) Gain more control over the demand for the unit’s products
and services,
(3) Initiate new more profitable activities for the work unit,
(4) Initiate long-term improvement programs to upgrade
personnel, equipment, and facilities,
(5) Modify the formal structure of the work unit to solve
chronic problems, and
(6) Alter the organization’s culture to emphasize values, beliefs,
and norms.
(e) Cognitive Resources Theory
The theory examines the conditions under which cognitive
resources such as intelligence and experience are related to
group performance. According to this theory, the performance
of a leader’s group is determined by a complex interaction
among two leader traits (intelligence and experience), one type
of leader’s behavior (directive leadership), and two aspects of
the leadership situation (interpersonal stress and the nature of
the group’s task).
Social Stress for Leader
Leader’s Intelligence
Leader’s Experience Decision
Quality

(f) Conclusion - Applications of the Contingency Theories
For Effective leadership behaviors in different situations
(1) Maintain situational awareness,
(2) Use more planning for a long, complex task,
(3) Consult more with people who have relevant knowledge,
(4) Provide more direction to people with interdependent rules,
(5) Provide more direction and briefings when a crisis occurs,
(6) Monitor a critical task or unreliable person more closely,
(7) Provide more coaching to an inexperienced subordinate, and
(8) Be more supportive to someone with a highly stressful task.
V. harismatic Leadership and Transformational Leadership
Leadership Types
Key Characteristics
Charismatic Leaders
@ Followers make attributions of heroic or extraordinary
leadership abilities when they observe certain behaviors.
@ Key characteristics - vision and articulation, personal risk,
sensitivity to follower needs, and unconventional behavior
Transactional Leaders
@ The leaders guide or motivate their followers in the direction
of established goals by clarifying role and task requirements.
@Key characteristics - contingent reward, management by
active exception, management by passive exception, and

laissez-faire
Transformational Leaders
@ The leaders inspire followers to transcend their own self-
interests and are capable of having a profound and extraordinary
effect on followers.
@Key characteristics - idealized influence, inspirational
motivation, intellectual stimulation, and individualized
consideration.
VI. Integrative Approach: See Lecture Notes #11
7
LECTURE NOTES #10
Chapter 13 Strategic Issues on Entrepreneurial Ventures and
Small Businesses
In general, strategic management deals with large and
established business corporations. However, small businesses
cannot be ignored. There are 23 million small businesses (over
99% of all businesses) in the United States, although tens of
thousands of them fail every year. A small business firm in the
United States is one that employs fewer than 500 people and
that generates sales of less than $20 million in a year. They are
in lack of strategic planning practices because not enough time,

unfamiliar with strategic planning, lack of skills, and lack of
trust and openness.
I. Strategic Decision-Making Process
The strategic planning process can be far more information in
small businesses than it is in large corporation. As
entrepreneurial firm matures, its strategic planning process
tends to be more formal. The strategic decision-making process
for entrepreneurial ventures consists of several steps:
A. Develop the basic business idea – a product and or service
that has target customers and or markets: It may be a brand-new
concept (radical innovation) or an improvement to a current
product or service (incremental innovation). The idea can be
developed from a person’s experience or generated in a moment
of creative insight.
B. Scan and assess (evaluate) the external environment to locate
factors in the societal and task environments that pose
opportunities and threats, and scan and assess the internal
factors relevant to the new business.
C. Analyze the strategic factors in light of the current situation
by using SWOT, and decide go or not go. In go, generate a
business plan that specifies how the opportunity will be
transformed into reality.
D. Implement the business plan through the use of action plans
and procedures, and evaluate the implemented business plan
through comparison of actual performance against projected
performance result.
II. Issues in Strategic Evaluation and Formulation

The basic differences in strategy formulation lie in the
relationship between owners and managers. The CEO of a small
business is very likely to be the owner – the company’s primary
stake holder so that personal and family needs can strongly
affect its mission and objectives. Size can affect the selection
of an appropriate corporate strategy. Large corporations often
choose growth strategies for their many side benefits for
management as well as for shareholders. A small company may
choose a stability strategy because the entrepreneurial is
interested mostly in generating employment for family
members, providing the family a decent living, and being the
boss of a firm small enough that he or she can manage it
comfortably. Entrepreneurial strengths can be the key to
company success, and personal weaknesses can be a primary
cause of failure. Sources of innovation may include
unexpected success or failure; discrepancy between reality and
expectation; a weak link in a particular process; changes in
industry or market structure; demographic changes; changes in
perception, mood, and meaning; and new knowledge. The
Success of New Ventures is affected by the structure of the
industry entered, the new venture’s business strategy, and
behavioral characteristics of the entrepreneur.
A. Industry Structure: rapidly changing industries, in early but
high-growth stages of development with less competition, and
in low degree concentration. A new ventures is more likely to
be successful when it enters an industry with heterogeneous
products and relatively unimportant to the consumer’s total
purchasing needs.
B. Business Strategy: the keys to success for most new
ventures are @ to differentiate the product from those of other
competitors in the areas of quality and services (differentiation)
and @ to focus the product on customer needs in a segment of
the market (narrow-market approach) in order to achieve a
dominant share of that part of the market.

C. Entrepreneurial characteristics: successful entrepreneurs
have the ability to identify potential venture opportunities better
than most people; a sense of urgency that makes them action
oriented; a detailed knowledge of the keys to success in the
industry and the physical stamina to make their work their lives;
and access to outside help to supplement their skills,
knowledge, and abilities.
III. Issues in Strategy Implementation
All small businesses are either in Stage I (simple structure) or
trying to move into Stage II (functional structure). There are
five sub-stages of development in small businesses: existence,
survival, success, take-off, and resource maturity. Small
businesses are often family businesses, and over one-third of
the U.S. fortune 500 companies are either family owned or
dominated, so that the family members are extremely valuable
assets to the entrepreneur because they are often willing to put
in long hours at low pay to help the business succeed. The
problem is that only 30% of family firms survive to the second
generation, and just 15% survive to the third generation: the
first generation creates, the second inherits, and the third
destroys. Family businesses go through four sequential phases
from the time in which the venture is strictly managed by the
founder to the time in which the next generation takes charge:
phase 1 owner-managed business, phase 2 training and
development of new generation, phase 3 partnership between
generations, and phase 4 transfer of power. Instead of selling
the company when he or she can no longer manage the business,
the founder has the option in a family business of turning it
over to the next generation as part of their inheritance. In small
businesses, balance sheets and income statements do not always
give an accurate picture, so that standard ratios such as return
on assets and debt-equity are unreliable. There are five reasons
why owners, operators, and outside observers should be wary of

using standard financial methods to indicate the health of a
small, privately owned company:
@ The line between debt and equity is blurred;
@lifestyle is a part of financial statements,
@ Standard financial formulas don’t always apply,
@Personal preference determines financial policies, and
@ Banks combine personal and business wealth.
Chapter 14 Strategic Issues in Not-for-Profit Organization
I. Sources of Not-for-Profit Revenue
In Figure 1, the government or welfare agency (D) is fully
funded by tax payers or sponsors on the far right, and the profit-
making organization (A) are operated by own sources from
sales. Between A and D, the private university (B) is partially
funded by customers, and the public university (C) is partially
funded by sponsors. In other words, a private university is
heavily dependent on student tuition and other client-generated
funds for about 70% of its revenue. Hence, the students’
desires are likely to have a stronger influence on the
university’s decision making. In contrast, a public university is
more heavily dependent on outside sponsors such as a state
legislature for revenue funding, while student tuition and other
client-generated funds form a small percentage of total revenue.
Therefore, the university’s decision making is heavily
influenced by the sponsors and only marginally influenced
directly by the students. The fund sources are the sources of
managerial influence.
Figure 1 The Effects of Sources of Revenue on Patterns of
Client-Organization Influence
Rev100

Sponsor Generated
Customer Generated
Rev 0
(A) Profit Organization (B) Private University (C) Public
University (D) Welfare Agency
Some strategic management concepts can be equally applied to
both business and not-for-profit organizations, whereas others
cannot. Industry analysis and competitive strategy are primarily
relevant to not-for-profits that obtain most of their revenue from
user fees rather than from donors or tax payers. For example,
as hospitals relying increasingly on patient fees for their
revenue, they use competitive strategy to gain advantage versus
other hospitals. The concept of competitive advantage is less
useful to a typical not-for-profit than the related concept of
institutional advantage, which sets aside the profit-making
objective of competitive advantage. TOWS analysis, mission
statements, stakeholder analysis, and corporate governance are
just as relevant to a not-for-profit as they are to profit-making
organizations.
II. Impact on Strategic Management
In strategy formulation, @ goal conflicts interfere with rational
planning. Because a not-for-profit organization typically lacks a
single clear-cut performance criterion (such as profits),
divergent goals and objectives are likely, especially with

multiple sponsors. @ A integrated planning focus tends to shift
from result to resources. Because not-for-profit organizations
tend to provide services that are hard to measure, they rarely
have a net bottom line. @ Ambiguous operating objectives
create opportunities for internal politics and goal displacement.
The combination of vague objectives and a heavy concern with
resources allows managers considerable leeway in their
activities. @ Professionalization simplifies detailed planning
but adds rigidity. Since professionals play important roles,
their values and traditions can prevent the organization from
changing its conventional behavior patterns to fit new service
missions turned to changing social needs.
In strategy implementation, decentralization is complicated,
linking pins for external-internal integration become important,
and job enlargement and executive development can be
restrained by professionalism. In control, rewards and penalties
have little relationship to performance, and inputs rather than
outputs are heavily controlled.
III. Not-for-Profit Strategies
There is the tendency of nonprofits to make program decisions
based on a mission rather than on a strategy. Without a clear
long-term strategy, this will eventually stretch the not-for-
profit’s core capabilities into unintended directions and create a
budget with more expenses than revenues. The term strategic
piggybacking (money making activity) refers to the
development of a new activity for a not-for-profit organization
that would generate the funds needed to make up the difference
between revenues and expenses. Dwindling resources are
leading an increasing number of not-for-profits to consider
mergers as a way of reducing costs through economies of scope
and reducing program duplication and raising prices because of
increased market power. Not-for-profit organizations often use
strategic alliances as a way to enhance their capacity to serve

clients or to acquire resources while still enabling them to keep
their identities. Strategic alliances and mergers are becoming
commonplace among not-for-profit organizations. The next
logical step is strategic alliances between business firms and
not-for-profits. Already, business corporations are forming
alliances with universities to fund university research in
exchange for options on the results of that research. Business
firms find it cheaper to pay universities to do basic research
than to do it themselves. Universities are in need of research
funds to attract top professors and to maintain expensive labs.
Such alliances of convenience are being criticized, but they are
likely to continue.
(End of Lecture Notes #10)
LECTURE NOTES #10
Chapter 13 Strategic Issues on Entrepreneurial Ventures and
Small Businesses
In general, strategic management deals with large and
established business corporations. However, small businesses
cannot be ignored. There are 23 million small businesses (over
99% of all businesses) in the United States, although tens of
thousands of them fail every year. A small business firm in the
United States is one that employs fewer than 500 people and
that generates sales of less than $20 million in a year. They are
in lack of strategic planning practices because not enough time,
unfamiliar with strategic planning, lack of skills, and lack of
trust and openness.

I. Strategic Decision-Making Process
The strategic planning process can be far more information in
small businesses than it is in large corporation. As
entrepreneurial firm matures, its strategic planning process
tends to be more formal. The strategic decision-making process
for entrepreneurial ventures consists of several steps:
A. Develop the basic business idea – a product and or service
that has target customers and or markets: It may be a brand-new
concept (radical innovation) or an improvement to a current
product or service (incremental innovation). The idea can be
developed from a person’s experience or generated in a moment
of creative insight.
B. Scan and assess (evaluate) the external environment to locate
factors in the societal and task environments that pose
opportunities and threats, and scan and assess the internal
factors relevant to the new business.
C. Analyze the strategic factors in light of the current situation
by using SWOT, and decide go or not go. In go, generate a
business plan that specifies how the opportunity will be
transformed into reality.
D. Implement the business plan through the use of action plans
and procedures, and evaluate the implemented business plan
through comparison of actual performance against projected
performance result.
II. Issues in Strategic Evaluation and Formulation
The basic differences in strategy formulation lie in the
relationship between owners and managers. The CEO of a small
business is very likely to be the owner – the company’s primary

stake holder so that personal and family needs can strongly
affect its mission and objectives. Size can affect the selection
of an appropriate corporate strategy. Large corporations often
choose growth strategies for their many side benefits for
management as well as for shareholders. A small company may
choose a stability strategy because the entrepreneurial is
interested mostly in generating employment for family
members, providing the family a decent living, and being the
boss of a firm small enough that he or she can manage it
comfortably. Entrepreneurial strengths can be the key to
company success, and personal weaknesses can be a primary
cause of failure. Sources of innovation may include
unexpected success or failure; discrepancy between reality and
expectation; a weak link in a particular process; changes in
industry or market structure; demographic changes; changes in
perception, mood, and meaning; and new knowledge. The
Success of New Ventures is affected by the structure of the
industry entered, the new venture’s business strategy, and
behavioral characteristics of the entrepreneur.
A. Industry Structure: rapidly changing industries, in early but
high-growth stages of development with less competition, and
in low degree concentration. A new ventures is more likely to
be successful when it enters an industry with heterogeneous
products and relatively unimportant to the consumer’s total
purchasing needs.
B. Business Strategy: the keys to success for most new
ventures are @ to differentiate the product from those of other
competitors in the areas of quality and services (differentiation)
and @ to focus the product on customer needs in a segment of
the market (narrow-market approach) in order to achieve a
dominant share of that part of the market.
C. Entrepreneurial characteristics: successful entrepreneurs
have the ability to identify potential venture opportunities better

than most people; a sense of urgency that makes them action
oriented; a detailed knowledge of the keys to success in the
industry and the physical stamina to make their work their lives;
and access to outside help to supplement their skills,
knowledge, and abilities.
III. Issues in Strategy Implementation
All small businesses are either in Stage I (simple structure) or
trying to move into Stage II (functional structure). There are
five sub-stages of development in small businesses: existence,
survival, success, take-off, and resource maturity. Small
businesses are often family businesses, and over one-third of
the U.S. fortune 500 companies are either family owned or
dominated, so that the family members are extremely valuable
assets to the entrepreneur because they are often willing to put
in long hours at low pay to help the business succeed. The
problem is that only 30% of family firms survive to the second
generation, and just 15% survive to the third generation: the
first generation creates, the second inherits, and the third
destroys. Family businesses go through four sequential phases
from the time in which the venture is strictly managed by the
founder to the time in which the next generation takes charge:
phase 1 owner-managed business, phase 2 training and
development of new generation, phase 3 partnership between
generations, and phase 4 transfer of power. Instead of selling
the company when he or she can no longer manage the business,
the founder has the option in a family business of turning it
over to the next generation as part of their inheritance. In small
businesses, balance sheets and income statements do not always
give an accurate picture, so that standard ratios such as return
on assets and debt-equity are unreliable. There are five reasons
why owners, operators, and outside observers should be wary of
using standard financial methods to indicate the health of a
small, privately owned company:

@ The line between debt and equity is blurred;
@lifestyle is a part of financial statements,
@ Standard financial formulas don’t always apply,
@Personal preference determines financial policies, and
@ Banks combine personal and business wealth.
Chapter 14 Strategic Issues in Not-for-Profit Organization
I. Sources of Not-for-Profit Revenue
In Figure 1, the government or welfare agency (D) is fully
funded by tax payers or sponsors on the far right, and the profit-
making organization (A) are operated by own sources from
sales. Between A and D, the private university (B) is partially
funded by customers, and the public university (C) is partially
funded by sponsors. In other words, a private university is
heavily dependent on student tuition and other client-generated
funds for about 70% of its revenue. Hence, the students’
desires are likely to have a stronger influence on the
university’s decision making. In contrast, a public university is
more heavily dependent on outside sponsors such as a state
legislature for revenue funding, while student tuition and other
client-generated funds form a small percentage of total revenue.
Therefore, the university’s decision making is heavily
influenced by the sponsors and only marginally influenced
directly by the students. The fund sources are the sources of
managerial influence.
Figure 1 The Effects of Sources of Revenue on Patterns of
Client-Organization Influence
Rev100
Sponsor Generated

Customer Generated
Rev 0
(A) Profit Organization (B) Private University (C) Public
University (D) Welfare Agency
Some strategic management concepts can be equally applied to
both business and not-for-profit organizations, whereas others
cannot. Industry analysis and competitive strategy are primarily
relevant to not-for-profits that obtain most of their revenue from
user fees rather than from donors or tax payers. For example,
as hospitals relying increasingly on patient fees for their
revenue, they use competitive strategy to gain advantage versus
other hospitals. The concept of competitive advantage is less
useful to a typical not-for-profit than the related concept of
institutional advantage, which sets aside the profit-making
objective of competitive advantage. TOWS analysis, mission
statements, stakeholder analysis, and corporate governance are
just as relevant to a not-for-profit as they are to profit-making
organizations.
II. Impact on Strategic Management
In strategy formulation, @ goal conflicts interfere with rational
planning. Because a not-for-profit organization typically lacks a
single clear-cut performance criterion (such as profits),
divergent goals and objectives are likely, especially with
multiple sponsors. @ A integrated planning focus tends to shift
from result to resources. Because not-for-profit organizations
tend to provide services that are hard to measure, they rarely

have a net bottom line. @ Ambiguous operating objectives
create opportunities for internal politics and goal displacement.
The combination of vague objectives and a heavy concern with
resources allows managers considerable leeway in their
activities. @ Professionalization simplifies detailed planning
but adds rigidity. Since professionals play important roles,
their values and traditions can prevent the organization from
changing its conventional behavior patterns to fit new service
missions turned to changing social needs.
In strategy implementation, decentralization is complicated,
linking pins for external-internal integration become important,
and job enlargement and executive development can be
restrained by professionalism. In control, rewards and penalties
have little relationship to performance, and inputs rather than
outputs are heavily controlled.
III. Not-for-Profit Strategies
There is the tendency of nonprofits to make program decisions
based on a mission rather than on a strategy. Without a clear
long-term strategy, this will eventually stretch the not-for-
profit’s core capabilities into unintended directions and create a
budget with more expenses than revenues. The term strategic
piggybacking (money making activity) refers to the
development of a new activity for a not-for-profit organization
that would generate the funds needed to make up the difference
between revenues and expenses. Dwindling resources are
leading an increasing number of not-for-profits to consider
mergers as a way of reducing costs through economies of scope
and reducing program duplication and raising prices because of
increased market power. Not-for-profit organizations often use
strategic alliances as a way to enhance their capacity to serve
clients or to acquire resources while still enabling them to keep
their identities. Strategic alliances and mergers are becoming
commonplace among not-for-profit organizations. The next

logical step is strategic alliances between business firms and
not-for-profits. Already, business corporations are forming
alliances with universities to fund university research in
exchange for options on the results of that research. Business
firms find it cheaper to pay universities to do basic research
than to do it themselves. Universities are in need of research
funds to attract top professors and to maintain expensive labs.
Such alliances of convenience are being criticized, but they are
likely to continue.
LECTURE NOTES #9
In the previous lectures, we have discussed about evaluation of
the current status of a firm, formulation of the strategic plan,
and its implementation. In the first phase - evaluation, we
analyzed opportunities and threats of the external environment,
and strengths and weaknesses of the internal environment for
the strategic management. In the second phase - formulation,
the first step was to recognize those four factors (OTSW) for
the firm; the second step was to adjust the mission and
objectives to the changing environments; and the third step was
to formulate new strategies and policies. In the third phase –
implementation, we focused on the adjustment of subsystems of
the corporation to new strategies and policies, which mainly
included the change of the organizational structure, personnel,
finance, and leadership factors such as command, control, and
coordination. The coming lectures are on strategic issues on (a)
technology and innovation, (b) entrepreneurial venture and
small business, and (c) not-for-profit organization. Let’s start

from strategic issues on managing technology and innovation.
Chapter 12 Strategic Issues on Managing Technology and
Innovation
Due to increased competition and accelerated product
development cycles, innovation and the manage-ment of
technology are becoming crucial to corporate success. Now
corporate success is positively associated with new product
development. Innovation has been emphasized in mission
statements of various corporations. Proctor & Gamble: “Our
success is based on a deep understanding of consumers, their
habits, and product needs; and ability to attract and support the
best innovations in the world; our ability to acquire, develop,
and apply technology across P&G’s broad array of product
categories; and our capability to collaborate with external
innovation partners.” IBM: “We strive to lead in the creation,
development, and manufacture of the industry’s most advanced
information technologies, including computer systems,
software, networking systems, storage devices and
microelectronics.” Merck & Co.: “The mission of Merck is to
provide society with superior products and services by
developing innovations and solutions that improve the quality
of life and satisfy customer needs, and to provide employees
with meaningful work and advancement opportunities, and
investors with a superior return.”
I. Evaluation of Current Technology
A. Internal Scanning
Corporations try to scan their external environment for new
developments in technology.
1. Technological Developments: Most new developments that
threaten existing business practices and technologies do not

come from existing competitors or even from within traditional
industries. A new technology that can substitute for an existing
technology at a lower cost and provide high quality can change
the very basis for competition in an industry. Therefore,
managers need to actively scan the periphery for new product
ideas because this is where breakthrough innovations will be
found. For example, consider the impact of internet technology
on the personal computer software industry: Microsoft spent
huge amounts of time and resources to catch up to Netscape’s
dominant market share with its Internet Explorer browser.
2. Impact of Stakeholders on Innovation: The stakeholders like
customers, suppliers, and distributors could be sources of
product and service improvements. These groups of people
have the most to gain from innovative new products or services.
Under certain circumstances, they may propose new directions
for product development. Some of the methods of gathering
information from key stakeholders are lead users, market
search, and new product experimentation.
(a) Lead Users: Customers are a key source of innovation in
many industries. Companies
should look to lead users for help in product development,
especially in high-technology industries where things move so
quickly that a conduct is becoming obsolete by the time it
arrives on the market. They are the first to adopt a product
because they benefit significantly from its use even if it is not
fully developed.
(b) Market Research is to survey current users regarding what
they would like in a new
product. This method has been successfully used by companies
to identify consumer preferences. It is especially useful in
directing incremental improvements to existing products.
(c) New Product Experimentation and Acquisition: Some
companies develop products by probing potential markets with
early version of the products, learning from the probes.
Microsoft has successfully followed a strategy of monitoring
the competition for new developments.

B. External Scanning: There are two issues in research and
development: resource allocation and time to market.
1. Money: a company’s R&D intensity, that is the ratio of R&D
spending to sales revenue, is a principal means of gaining
market share in global competition. The amount of money
spending on R&D often varies by industry as well as by
country. Research indicates that consistency in R&D strategy
and resource allocation across lines of business improves
corporate performance by enabling the firm to better develop
synergies among the product lines and business units.
2. Another consideration in the effective management of R&D is
time to market. Time to market is an important issue because
60% of patented innovations are generally imitated within four
years. In 1980s, Japanese auto manufacturers gained incredible
competitive advantage over U.S. manufacturers by reducing new
products’ time to market to only three years.
II. Strategy Formulation
Figure 1. Product and Process R&D in the Innovation Life
Cycle
Mostly Product R&D
Mostly Process R&D
Negative Cash Flow
Positive Cash Flow
A. Product versus Process R&D: The proportion of product and
process R&D tends to vary as a product moves along its life
cycle. In the early stages, product innovations are most
important because the product’s physical attributes and
capabilities most affect financial performance. Later, process

innovations such as improved manufacturing facilities,
increasing product quality, and faster distribution become
important to maintain its economic returns. Generally, product
R&D has been at the core of successful cost-leadership
strategies.
B. Technology Sourcing: A decision, either to make or to buy
technology, can be important in a firm’s R&D strategy. Firms
that are unable to finance alone the huge costs of developing a
new technology may coordinate their R&D with other firms
through a strategic R&D alliance. They are @ joint programs or
contracts to develop a new technology, @ joint ventures
establishing a separate company to take a new product to
market, or @ minority investments in innovative firms wherein
the innovator obtains needed capital and the investor obtains
access to valuable research.
C. Importance of Technological Competence: Research
suggests that companies must have at least a minimal R&D
capability if they are to correctly assess the value of technology
developed by others. Absorptive capacity is a firm’s ability to
recognize, assimilate, and utilize new external knowledge.
Firms that have absorptive capacity are able to use knowledge
obtained externally to increase the productivity of their research
expenditures. Without this capacity, firms could become locked
out in their ability to assimilate the technology at a later time.
D. Category of Innovation: Innovation ranges from incremental
to radical. A corporation’s capabilities (existing or new)
interact with its strategic scope (limited or unlimited) to form
four basic categories of innovation as shown in Table 1.
1. Improving Core Businesses: It focuses on incremental
innovations that can be developed rapidly and inexpensively. It
includes line extension and more convenient packaging and is
often a part of a horizontal growth strategy. Its potential

weakness is market myopia – its emphasis on current products
and customers like PepsiCo.
2. Exploiting Strategic Advantages: This type of innovation
focuses on taking existing brands and product lines to new
customers and markets without requiring major change in
current capabilities. It means moving beyond the company’s
current strategic scope by leveraging capabilities by spreading
them across a broader ranger of markets and customers via
concentric diversification. Its potential weakness is the relative
ease with which competitors with similar capabilities can
imitate the innovation.
3. Developing New Capabilities: The company may develop or
purchase new technologies, talents, or businesses to better serve
the firm’s current scope of customers and markets. It may
involve a vertical growth strategy. Its potential weakness is the
investment cost and implementation time.
4. Creating Revolutionary Change: It focuses on radical
innovations that transcend current product lines or brands to
make fundamental change in both its strategic scope and its
capabilities. This can mean a new business model and a
revolutionary new future for the company. Its potential
weakness is a high risk of failure.
Table 1. Categories of Innovation
Classification
Strategic Scope
Limited
Unlimited
Organizational Capabilities

New
4. Develop New Capabilities
3. Create Revolutionary Change
Existing
1. Improve Core Business
2. Exploit Strategic Advantage
Source: C. Hickman and C. Raia, “Incubating Innovation,”
Journal of Business Strategy (may/June 2002), p. 15. Reprinted
by Wheelin and Hunger, p. 303.
Table 2. Organizational Designs for Corporate Entrepreneurship
Organizational
Related Ness
Strategic Importance
Vary Important
Uncertain
Not Important
Unrelated
3. Special Business Unit
6. Independent Bus Unit
9. Complete Spin-off

Partly Related
2. New Product
Business Department
5. New Venture Division
8. Contracting
Strongly Related
1. Direct Integration
5. Micro New Venture Department
7. Nurturing and
Contracting
Source: Wheelin and Hunger, p. 307.
III. Strategy Implementation
A. Developing an Entrepreneurial Culture: To create a more
innovative corporation, top management must develop an
entrepreneurial culture opening to the transfere of new
technology into company activities and product and services.
The company must be flexible and accept-ing of change. It
should include a willingness to withstand a certain percentage
of product failures on the way to success. The characteristics
include positive attitude toward change, decentralized decision
making, complexity, informal structure, interconnectedness,
organizational slack (unused resources), large size, and system
openness.

B. Organizing for Innovation: A large corporation that wants to
encourage innovation and creativity within its firm must choose
a structure that will give the new business unit and appropriate
amount of freedom while maintaining some degree of control at
headquarters. It is designed by two elements: strategic
importance of a new business to the corporation, and the
relatedness of the unit’s operations to those of the corporation.
Table 2 shows the combination of both factors.
1. Direct Integration: A new business with a great deal of
strategic importance and operational relatedness must be a part
of the corporation’s mainstream.
5. New Venture Division: A new business with uncertain
strategic importance that is only partly related to present
corporate operations belongs in a new venture division.
9. Complete Spin-off: If both the strategic importance and the
operational relatedness of the new business are negligible, the
corporation is likely to completely sell of the business to
another firm or to the present employees.
IV. Evaluation and Control
For successful innovation, appropriate evaluation and control
techniques are used to ensure whether the end product is
originally planned.
A. Evaluation and Control Techniques include the stage-gate
process and house of quality. The stage-gate process is a
method of managing new product development to increase the
likelihood of launching new products quickly and successfully.
The process is a series of steps to move products through the six
stages of new product development according to categories of
innovation shown in Table 1. The house of quality is another
method of managing new product development. It is a tool to
help project teams make important design decisions by getting
them to think about what users want and how to get it to them

most effectively. The method is a combination of two elements:
customer requirements and engineering attributes.
B. Evaluation and Control Measures: Index and R&D
effectiveness is calculated by dividing the percentage of total
revenue spent on R&D into new product profitability, which is
expressed as a percentage. The top companies kept spending on
marginal products to a minimum by running frequent checks on
product versus market opportunities and canceling questionable
products quickly.
5
LECTURE NOTES #8
Chapter 10. Strategy Implementation: Staffing and Directing
I. Staffing
Staffing follows strategy: New strategies require the change of
the organizational structure, and staffing and leading are
accordingly adjusted. The implementation of new strategies and
policies often calls for new human resource management
priorities and a different use of personnel. Such staffing issues
can involve hiring new people with new skills, firing people
with inappropriate or substandard skills, and/or training existing
employees to learn new skills. Staffing follows strategy. If
growth strategies are implemented, new people may need to be
hired and trained. Experienced people with the necessary skills
need to be found for promotion to newly created managerial
positions. If a firm adopts a retrenchment strategy, a large
number of people may need to be laid off or fired; and top
management and the divisional managers need to specify the

criteria to be used in making these personnel decisions. @
Changing Hiring and Training Requirements: Selecting and
training of employees were crucial to the success of the new
manufacturing strategy. @ Matching the manager to the
strategy: Current CEO may not be appropriate to implement a
new strategy. There may be a career life cycle for top
executives: learning stage, harvest stage, and decline stage.
(a) Selection and Management Development: Executive
succession is the process of replacing a key top manager. The
average tenure of a chief executive of a large U.S. company
declined from nearly nine years in 1980 to just over seven years
in 2001. Given that two-third of all major corporations
worldwide replace their CEO at least once in a five-year period,
it is important that the firm plan for this eventuality.
Prosperous firms tend to look outside for CEO candidates only
if they have no obvious internal candidates. For example, only
10% of Fortune 100 companies have CEOs appointed from the
outside. Firms in trouble, however, overwhelmingly choose
outsiders to lead them. The probability of an outsider being
chosen to lead a firm in difficulty increases if there is no
internal heir apparent, if the last CEO was fired, and if the
board of directors is composed of a large percentage of
outsiders. Outsiders have been found to be very effective in
leading strategic change for firms in Chapter 11 bankruptcy.
(b) Problems in Retrenchment: Downsizing refers to the
planned elimination of positions or jobs. This program is often
used to implement retrenchment strategies. Because the
financial community is likely to react favorably to
announcements of downsizing from a company in difficulty,
such a program may provide some short-term benefits, such as
raising the company’s stock price. If not done properly,
however, downsizing may result in less, rather than more,
productivity. A good retrenchment strategy can be implemented
well in terms of organizing but poorly in terms of staffing.

Research shows that when companies use downsizing as part of
a larger restructuring program to narrow company focus, they
enjoy better performance. In order for successful downsizing, it
is desirable to eliminate unnecessary work instead of making
across-the-board cuts, to contract out work that others can do
cheaper, to plan for long-run efficiencies, to communicate the
reasons for actions, to invest in the remaining employees, and to
develop value-added jobs to balance out job elimination.
(c) International Issues in Staffing: Implementing a
strategy of international expansion takes a lot of planning and
can be very expensive. Because of cultural differences,
managerial style and human resource practice must be tailored
to fit the particular situations in other countries. A lack of
knowledge of national and ethnic differences can make
managing an international operation extremely difficult. To
improve organizational learning, many MNCs are providing
their managers with international assignments lasting as long as
five years. Once a corporation has established itself in another
country, it hires and promotes people from the host country into
higher-level positions. Another approach to staffing the
managerial positions of MNCs is to use people with
international orientation, regardless of their country of origin or
host country assignment. Some U.S. corporations take
advantage of immigrants and their children to staff key
positions when negotiating entry into another country and when
selecting an executive to manage the company’s new foreign
operations.
II.Leading or Directing
A corporation is led by a director who leads the organization.
The direction may take the form of management leadership,
which commanding and coordinating the subsystems of the firm:
goals and values, structure, personnel, finance, and technology.

Figure 1 Methods of Managing the Culture of Acquired Firm
How much members of the acquired firm
value preservation of their own culture
Very Much
Not at All
Perception of
the attractiveness
of the acquirer
Very
Attractive
Integration
Assimilation
Not at All
Attractive
Separation
Deculturation
(a) Managing Corporate Culture: An organizational culture
is influential on behavior of all employees, so that it can

strongly affect a company’s ability to shift its strategic
direction. If it is in opposition to the accepted culture of the
company, a change in mission, objectives, strategies, or policies
is not likely to be successful. An optimal culture is one that
best supports the mission and strategy of the company of which
it is a part. This means that, like structure and staffing,
corporate culture should support the strategy. Unless strategy is
in complete agreement with the culture, any significant change
in strategy should be followed by a modification of the
organization’s culture. @ Assessing Strategy-Culture
Compatibility: Is the planned strategy compatible with the
company’s current culture? Can the culture be easily modified
to make it more compatible with the new strategy? Is
management willing and able to make major organizational
changes and accept probable delays and a likely increase in
costs? Is management still committed to implementing the
strategy? @ Managing Cultural Change through
Communication: Communications increase mutual
understanding. Rationale for strategic changes should be
communicated to workers not only in newsletters and speeches
but in training and development programs. The CEO and other
top managers had a strategic vision of what the company could
become and communicated that vision to employees at all
levels.
@ Managing Diverse Cultures with an Acquisition: When
merging with or acquiring another company, top management
must give some consideration to a potential clash of corporate
cultures. There are four general methods of managing two
different cultures: integration, separation, assimilation, and
deculturation. (a) Integration involves a relatively balanced
give-and-take of cultural and managerial practices between the
merger partners – and no strong imposition of cultural change
on either company. It merges the two cultures in such a way
that the separate cultures of both firms are preserved in the
resulting culture. (b) Assimilation involves the domination of

one organization over the other. The domination is not forced,
but it is welcomed by members of the acquired firm, who may
feel for many reasons that their culture and managerial practices
have not produced success. The acquired firm surrenders its
culture and adopts the culture of the acquiring company. (c)
Separation is characterized by a separation of the two
companies’ cultures. They are structurally separated, without
cultural exchange. In this case, the merger is not working. (d)
Deculturation involves the disintegration of one company’s
culture, resulting from unwanted and extreme pressure from the
other to impose its culture and practices. This is the most
common and most destructive method of dealing with two
different cultures. It is often accompanied by much confusion,
conflict, resentment, and stress; and many executives tend to
leave after their firm is acquired.
(b) Action Planning: Activities can be directed toward
accomplishing strategic goals through action planning. After a
program has been selected to implement a particular strategy,
and action plan should be developed to put the program in
place. Action Plan includes program objective, program
activities, action steps, responsibility, and start-end dates:
Specific actions to be taken to make the program operational;
Dates to begin and end each action; Person responsible for
carrying out each action; Person responsible for monitoring the
timeliness and effectiveness of each action; Expected financial
and physical consequences of each action; and contingency
plans.
(c) Management by Objectives (MBO) is a technique that
encourages participative decision making through shared goal
setting at all organizational levels and performance assessment
based on the achievement of stated objectives. The MBO
process involves establishing and communicating organizational
objectives; setting individual objectives (through superior-
subordinate interaction) that help implement organizational

ones; developing an action plan of activities needed to achieve
the objectives; and periodically, reviewing performance as it
relates to the objectives and including the results in the annual
performance appraisal. One of the real benefits of MBO is that
it can reduce the amount of internal politics operating within a
large corporation.
(d) Total Quality Management (TOM) is an operational
philosophy committed to customer satisfaction and continuous
improvement. Because TQM aims to reduce costs and improve
quality, it can be used as program to implement an overall low-
cost or a differentiation business strategy. TQM has four
objectives: better, less variable quality of the product and
service; quicker, less variable response in processes to customer
needs; greater flexibility in adjusting to customers’ shifting
requirements; and lower cost through quality improvement and
elimination of non-value-adding work. TQM’s essential
ingredients are (a) an intense focus on customer satisfaction, (b)
internal as well as external customers; (c) Accurate
measurement of every critical variable in a company’s
operations; (d) continuous improvement of products and
services; and (e) new work relationships based on trust and
teamwork.
(e) International Considerations in Leading: In measuring
the differences among the dimensions of national culture from
country to country, a certain management practice might be
successful in one nation but fail another.
(1) Power distance is the extent to which a society
accepts an unequal distribution of power in organizations.
Malaysia and Mexico scored highest, whereas Germany and
Austria scored lowest. People in countries scoring high on this
dimension tend to prefer autocratic to more participative
managers.
(2) Uncertainty avoidance is the extent to which a
society feels threatened by uncertain and ambiguous situations.
Greece and Japan scored highest on disliking ambiguity,

whereas the United States and Canada scored highest on
individualism, whereas Mexico and Guatemala scored lowest.
People in nations scoring high on this dimension tend to want
career stability, formal rules, and clear-cut measures of
performance.
(3) Individual-ism – collectivism is the extent to
which a society values individual freedom and independence of
action compared with tight social framework and loyalty to the
group. The United States and Canada scored highest on
individualism, whereas Mexico and Guatemala scored lowest.
The high score means high competition in individualism, and
the low score means high collectivism.
(4) Masculinity-femininity is the extent to which
society is oriented toward money and things or toward people.
Japan and Mexico scored highest on masculinity, whereas
France and Sweden scored lowest (thus highest on femininity),
which is actually based on equality of sexes where power is
shared.
(5) Long-term orientation is the extent to which
society is oriented toward the long versus the short term. Hong
Kong and Japan scored highest on long-term orientation,
whereas Pakistan scored the lowest. A long-term time
orientation emphasizes the importance of hard work, education,
and persistence as well as the importance of thrift. Nations
with a long-term time orientation tend to vale strategic planning
and other management techniques with a long-term payback.
@ When one successful company in one country
merges with another successful company in another country, the
clash of corporate cultures is compounded by the clash of
national cultures. Since cultural differences create
implementation problem in merger, the management of cultures
has become a key issue in the cross-cultural leadership.
Chapter 11. Evaluation and Control

Evaluation and control in strategic management is the
continuous process, comparing actual performance with the
standard and taking corrective action if necessary. Evaluation
and control process: determine what to measure, establish
predetermined standards, measure performance, compare
performance with standards, and take corrective action.
I.Measuring Performance
Performance is the end result of activity. The choice of
measures depends on the organizational unit to be appraised and
the objectives to be achieved. Some measures such as return on
investment are appropriate for a firm’s ability to achieve an
objective of profitability, but it is not adequate for evaluating
additional corporate objectives such as social responsibility or
employee development. The inventory turnover ratio, for
example, in which a retailer’s cost of goods sold is divided by
the average value of its inventories, could be another measure:
the higher the ratio, the less the cost.
(a) Types of Controls: Controls can be established to focus
on actual performance results (output), on the activities that
generate the performance (behavior), or on resources that are
used in performance (input). Behavior controls specify how
something is to be done through policies, rules, standard
operating procedures, and others from a superior. Output
controls specify what is to be accomplished by focusing on the
end result of the behaviors through the use of objectives and
performance targets or milestones. Input controls focus on
resources, such as knowledge, skills, abilities, values, and
motives of employees. Those controls are not interchangeable.
(b) Activity-Based Costing is a recently developed
accounting method for allocating indirect and fixed costs to
individual products or product lines based on the value-added
activities going into that product. This accounting method is
thus very useful in doing a value-chain analysis of a firm’s

activities for making outsourcing decisions. Traditional cost
account-ting, in contrast, focuses on valuing a company’s
inventory for financial reporting purposes. ABC accounting
allows accountants to charge costs more accurately than the
traditional method because it allocates overhead far more
precisely.
(c) Enterprise Risk Management is an integrated process
for managing the uncertainties that could negatively or
positively influence the achievement of a corporation’s
objectives. Individuals would manage process risk, safety risk,
and insurance, financial, and other assorted risks. The process
of rating risks involves three steps: identify the risks, using
scenario analysis or brain-storming or by performing risk self-
assessments; rank the risks, using some scale of impact and
likelihood; and measure the risks, using some agreed-upon
standard.
(d) Primary Measures of Corporate Performance:
(1) Traditional Financial Measures: the most commonly
used measure of corporate performance (in terms of profit) is
return on investment. It is simply the result of dividing net
income before taxes by the total amount of invested in the
company (typically measured by total assets). Earnings per
share involves dividing net earnings by the amount of common
stock, also has several deficiencies as an evaluation of past and
future performance. Return on equity involves dividing net
income by total equity, also has limitations because it is also
derived from accounting-based data. Operating cash flow
involves the amount of money generated by a company before
the cost of financing and taxes, is a broad measure of a
company’s funds. This is the company’s net income plus
depreciation, amortization, interest expense, and income tax
expense.
(2) Stakeholder Measures: each stakeholder has its own set

of criteria to determine how well the corporation is performing.
These criteria typically deal with the direct and indirect impacts
of corporate activities on stakeholder interests. Stakeholders
include customers, suppliers, financial community, employees,
congress, consumer advocate, and environ-mentalists.
(3) Shareholder Value can be defined as the present value
of the anticipated future stream of cash flows from the business
plus the value of the company if liquidated. Economic value
added is a popular shareholder value method of measuring
corporate and divisional performance and replaces the return on
investment as the standard performance measure. EVA = after-
tax operating income – the cost of equity (@average earning in
stock 6% and @ treasury bills 7.5%). Market value added is the
difference between the market value of a corporation and the
capital contributed by shareholders and lenders. It measures the
stock market’s estimate of the net present value of a firm’s past
and expected capital investment projects.
(4) Balanced Scorecard Approach Using Key Performance
Measures: The balanced scorecard combines financial measures
(including cash flow, quarterly sales growth, and return on
equity), customer satisfaction, internal processes, and
innovation and improvement activities.
(5) Evaluating Top Management: The Board of Directors
evaluates top management not only on the typical output-
oriented quantitative measures but also on behavioral measures
– factors relating to its strategic management practices: firm’s
performance, leadership of the organization, team building and
management succession, leadership of external constituencies.
Management audit is useful to the board of directors in
evaluating management’s handling of various corporate
activities.
(e) Primary Measures of Divisional and Functional
Performance: Companies use a variety of techniques to evaluate
and control performance in divisions, strategic business unit
(SBUs), and functional areas. (a) Responsibility Centers:

Control systems can be established to monitor specific
functions, projects, or divisions. Budgets are one type of
control system that is typically used to control the financial
indicators of performance. Responsibility Centers are used to
isolate a unit so that it can be evaluated separately from the rest
of the corporation. They are standard cost centers, revenue
centers, expense centers, profit centers, and investment centers.
(b) Bench-marking is the continual process of measuring
products, services, and practices against the toughest
competitors or those companies recognize as industry leaders.
@ Major issues of inter-national measurement are in the
transfer of international prices as well as piracy problems. In
addition, control problems in measuring performance lie in the
lack of quantifiable objectives or performance standards, and
the inability of the information system to provide timely and
valid information.
II. Problems in Measuring Performance
(a) Short-term Orientation: Executives often believe that
short-run considerations are more important than long-run
considerations.
(b) Goal Displacement is the confusion of means with ends
and occurs when activities originally intended to help managers
attain corporate objectives become ends in themselves. There
are two types of goal displacement: behavior substitution and
sub-optimization.
(1) Behavior Substitution refers to a phenomenon
when people substitute activities that do not lead to goal
accomplishment for activities that do lead to goal
accomplishment to avoid the wrong activities being rewarded.
(2) Sub-optimization refers to the phenomenon of a
unit optimizing its goal accomplishment to the detriment of the
organization as a whole. The emphasis in large corporations on
developing separate responsibility centers can create some

problems for the corporation as a whole. The competition
between divisions to achieve a high ROI can result in one
division’s refusal to share its new technology or work process
improvements.
(c) Proper Control: Controls should follow strategy.
@Control should involve only the minimum amount of
information needed to give a reliable picture of events; too
many controls create confusion. @Controls should monitor
only meaningful activities and results, regardless of
measurement difficulty; if cooperation between divisions is
important to corporate performance, some form of qualitative or
quantitative measure should be established to monitor
cooperation. @Control should be timely so that corrective
action can be taken before it is too late. @Long-term and short-
term control should be used. @Controls should aim at
pinpointing exceptions. @Emphasize the reward of meeting or
exceeding standards rather than punishment for failing to meet
standards.
(d) Strategic Incentives: (1) The weighted-factor method is
appropriate for measuring and rewarding the performance of top
SBU managers and group-level executive when performance
factors and their importance vary from one SBU to another. (2)
Long-term evaluation method compensates managers for
achieving objectives set over a multiyear period. The board of
directors may set a particular objective in terms of growth in
earning per share during a five-year-period. (3) Strategic-funds
method encourages executives to look at developmental
expenses as being different from expenses required for current
operations. It is possible to distinguish between expense dollars
consumed in the generation of current revenues and those
invested in the future of a business.
2

LECTURE NOTES #7
Chapter 9. Strategy Implementation: Organization for Action
I. Strategy Implementation
Strategic implementation is the sum total of the activities and
choices required for the execution of a strategic plan. It is the
process by which objectives, strategies, and policies are put into
action through the development of programs, budgets, and
procedures. Although implementation is usually considered
after strategy has been formulated, implementation is a key part
of strategic management. In fact, strategy formulation and
implementation should be considered as two sides of the same
coin. Then, who carries out the strategic plan? What must be
done for a company to follow its operations to the new intended
direction? How is everyone going to work together to do what
is needed? In multi-industry corporations, the implementers are
everyone in the organization: plant managers, project managers,
and unit heads put together plans for their specific plants,
departments, and unite. Therefore, every operational manager
down to the first-line supervisor and every employee is involved
in some way in the implementation of corporate, business, and
functional strategies. There can be a lot of resistance for
changes unless the importance of new mission, objectives,
strategies, and policies are fully communicated with them.
Table 1. A Strategic Management Model
Phase
Description
I. Evaluation of

the Current Status
1. Supra-system or External Environment: Opportunities and
Threats
2. Subsystems or Internal Environment: Strengths and
Weaknesses
II. Formulation of
The Strategic Plan
1. Situational Analysis and Choice of Strategy
2. Corporate Strategy: Directional, Portfolio, and Parenting
Strategies
3. Functional Strategy and Strategic Choice
III. Implementation of the Strategic Plan
Basic Actions for Implementation
Programs: Activities needed to accomplish a plan
Budgets: Cost of the programs
Procedures: Sequence of steps needed to do the job
Managerial Actions for Implementation
Goals and Values: New Mission, Objectives, Strategies, and
Policies
are established by the Formulation of the Strategic Plan
This is the Adjustment of Subsystems:
1. Organizational Structure: Need Adjustment to New
Strategy
2. Staffing and Funding: Need Adjustment to New Strategy
3. Directing and Coordinating: Need Adjustment to New

Strategy
Continuous Evaluation
Performance Evaluation through Feedback Operations
Until another Strategic Plan is Necessary.
II. What Must Be Done?
The managers of divisions and functional areas develop
programs, budgets, and procedures for the implementation of
new strategy in order to establish and maintain a company’s
distinctive competitiveness - programs, budgets, and
procedures.
(a) Programs are target activities to accomplish the new
strategic plan. If a corporation chooses a turnaround strategy, it
should reduce its costs and expenses: a program is developed to
identify and improve a poorly performing process.
(b) Budgets: After the programs have been developed, the
budget process begins. Without appropriate budgets, new
programs cannot be successfully implemented.
(c) Procedures: after budgets are approved for various
programs, procedures (Standard Operating Procedures or SOPs)
must be developed. They detail the various activities, as
organizational routines, to be carried out to complete those
programs. Procedures must be updated to reflect any changes in
technology and in strategy.
@ Achieving Synergy: It is achieved between and among
functions and business units in strategic implementation.
Synergy causes the return of investment of each division to be
greater than what the return would be if each division were an
independent business. Synergy can take place in one of six

forms as below: shared know-how, coordinated strategies,
shared tangible resources, economies of scale or scope, polled
negotiating power, new business creation.
III. How Is Strategy to Be Implemented?
The starting point to implementation of new strategy is in the
organizational structure which is adjusted to the new strategic
plan and programs, followed by staffing and directing if funding
is properly provided. This section deals with the structural
change followed by staffing and directing in the coming
sections.
1. Stages of Corporate Development:
Table 2. Basic Organizational Structures
Structure
Directing and Controlling
Line of Command
Stage I
Simple Structure
Owner and/or
Manager
Directly to Workers
Stage II
Functional Structure

Top Management
Functional Managers of Manufacturing, Sales, Finance, and
Personnel – Workers
Stage III
Divisional Structure
Top Management
Product A – Functional Managers – Workers
Product B – Functional Managers – Workers
Successful corporations tend to follow a pattern of structural
development as they grow and expand. Beginning with the
simple structure of the entrepreneurial firm, successful
corporations usually get larger and organize along functional
lines with marketing, production, finance, and personnel
departments. With continuing success, the company adds new
product lines in different industries and organizes itself into
interconnected divisions as shown in Table 2 above. The
differences among structural stages of corporate development
come from typical problems, objectives, strategies, reward
systems, and others.
Stage I Simple Structure: The simple structure consists of
owner – worker relations. The entrepreneur tends to make all
the important decisions personally and is involved in every
detail and phase of the organization. The Stage I company has
little formal structure, which allows the entrepreneur to directly
supervise the activities of every employee. Planning is usually
short range or reactive. The typical managerial function of
planning, organizing, staffing, directing and controlling are
usually performed to a very limited degree. The greatest

strengths of a State I firm are its flexibility and dynamism,
while its greatest weakness is its extreme reliance on the
entrepreneur to decide general strategies as well as detailed
procedures. If the entrepreneur falters, a crisis of leadership
may appear.
Stage II Functional Structure: The entrepreneur is replaced by
several functional managers: manufacturing, sales, finance, and
personnel. The transition to this stage requires a substantial
managerial style change for the chief officer of the company,
especially if he or she was the Stage I entrepreneur. In stage II,
the corporate strategy favors protectionism through dominance
of the industry, often through vertical and horizontal growth.
The great strength of stage II corporation lies in its
concentration and specialization in one industry, while its great
weakness is that all its eggs are in one basket. Once the firm
diversifies product lines into other products in different
industries, the advantages of the functional structure break
down. People managing diversified product lines need more
decision-making freedom than top management is willing to
delegate to them, which is a crisis of autonomy. Then, the
company needs to move to a different structure.
Stage III Divisional Structure: The divisional structure manages
diverse product-lines in numerous industries, and decentralizes
the decision-making authority. The divisional structure holds
decentralized operating divisions under a central headquarters
to cover wider geographical areas: each division or business
unit is a functionally organized stage II company. It could be a
conglomerate structure if top management chooses to keep its
collection of stage II subsidiaries operating autonomously. A
crisis of control can now develop, in which the various units act
to optimize their own sales and profits without regard to the
overall corporation. Recently, divisions have evolved into the
Strategic Business Units (SBUs) to reflect product-market
considerations. These entities are large enough and

homogeneous enough to exercise control over most strategic
factors affecting their performance. They are managed as self-
contained planning units for which discrete business strategies
can be developed. A SBU can encompass an entire company, or
can simply be a smaller part of a company set up to perform a
specific task. The units are not tightly controlled but are held
responsible for their own performance result. The company
should has a decentralized decision process. The greatest
strengths of a stage III corporation is its almost unlimited
resources, but its most significant weakness is that it is usually
so large and complex that it tends to become relatively
inflexible, which causes a red tape crisis.
Stage IV Beyond SBUs: Under conditions of (1) increasing
environmental uncertainty, (2) greater use of sophisticated
technological production methods and information systems, (3)
the increasing size and scope of worldwide business
corporations, (4) a greater emphasis on multi-industry
competitive strategy, and (5) a more educated cadre of managers
and employees, new advanced forms of organizational structure
are emerging. The structure emphasizes collaboration over
competition in the managing of an multiple overlapping projects
and developing businesses. It emphasizes horizontal over
vertical connections between people and groups, and organizes
work around temporary projects in which sophisticated
information system support collaborative activities: the fourth
stage requires an advanced types of the matrix and the network.
This stage of development may cause a sort of pressure-cooker
crisis from the intensity of teamwork and the heavy pressure for
innovative solutions.
Blocks to Changing Stages: Corporations often find themselves
in difficulty because they are blocked from moving into the next
logical stage of development. Blocks to development may be
internal (such as lack of resources, lack of ability, or refusal of
top management to delegate decision making to others) or

external (such as economic conditions, labor shortages, and lack
of market growth). Entrepreneurs who start businesses
generally have four tendencies that work very well for small
new venture but became Achilles’ heels for these same
individuals when they try to manage a larger firm. Loyalty to
comrades: This is good at the beginning but soon becomes a
liability as favoritism. Task oriented: Focusing on the job is
critical at first, but then becomes excessive attention to detail.
Single-mindedness: A grand vision is needed to introduce a new
product, but can become tunnel vision as the company grows
into more markets and products. Working in isolation: This is
good for a brilliant scientist, but disastrous for a CEO with
multiple constituencies. This difficulty in moving to a new
stage is compounded by the founder’s tendency to maneuver
around the need to delegate by carefully hiring, training, and
grooming his or her own team of managers. This may be a
strength as well as a weakness.
2. Organizational Life Cycle:
Table 3. Organizational Life Cycle
Stage
Dominant Issue
Popular Strategies
Likely Structure
Stage I
Birth
Connection in a niche
Entrepreneur dominated

Stage II
Growth
Horizontal and vertical growth
Functional
management emphasized
Stage III
Maturity
Concentric and
conglomerate diversification
Decentralization into profit
or Investment centers
Stage IV
Decline
Profit strategy
followed by retrenchment
Structural surgery
Stage V
Death
Liquidation or bankruptcy
Dismemberment of structure
Instead of considering stages of developing in terms of
structure, the organizational life cycle approach places the
primary emphasis on the dominant issue facing the corporation.

The organizational life cycle describes how organizations grow,
develop, and eventually decline just like the product life cycle.
The first three stages are similar to the three commonly
accepted stages of corporate development discussed previously.
Movement from growth to maturity to decline and finally to
death is not inevitable: a revival phase may occur sometime
during the maturity or decline stages. The corporation’s life
cycle can be extended by managerial and product innovations.
This often occurs during the implementation of a turn-around
strategy. However, unless a company is able to resolve the
critical issues facing it in the decline stage, it is likely to move
into stage death with liquidation or bankruptcy. Few
corporations move through these five stages in order. Some
corporations might never move past stage II. The key is to be
able to identify indications that a firm is in the process of
changing stages and to make the appropriate strategic and
structural adjustments to ensure that corporate performance is
maintained or even improved.
3.Advanced Types of Organizational Structures:
The basic structures are simple, functional, divisional, and
conglomerate. A new strategy may require more flexible
characteristics than the traditional functional or divisional
structure can offer. Today’s business organizations are
becoming less centralized, with a greater use of cross-functional
work teams. Although many variations and hybrid structures
contain these characteristics, two forms are considered: the
matrix structure and the network structure as shown in Table 4
below.
Table 4. Matrix and Network Structures
Top Management

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