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small management dwaaddwa, Summaries of Business English

Université Cadi Ayyad Business English

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Typology: Summaries

2020/2021

Uploaded on 02/11/2023

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ESB$–$Session$8$–$19.05.2017$

$

1$

$

Greiner$developed$a$model$which$offers$a$

framework$for$considering$$the$development$of$

a$business,$but$more$particularly$the$

managerial$challenges$facing$the$founder$as$

they$recruit$more$staff.$Each$phase$of$growth$is$

followed$by$a$crisis$that$necessitates$a$change$

in$the$way$the$founder$manages$the$business.$If$

the$crisis$cannot$be$overcome,$then$the$

business$risks$failure.$

$

The$model$predicts$four$crisis:$

$

1. Leadership$–$Growth$initially$comes$through$creative$opportunity-seeking.$However,$this$growth$

lead$to$a$crisis$of$leadership$as$staff,$financiers$and$even$customers$increasingly$fail$to$understand$

the$focus$of$the$business.$

2. Autonomy$–$Entrepreneurs$have$a$strong$internal$locus$of$control,$which$means$that$there$is$a$

danger$they$will$try$to$do$everything$themselves.$

3. Control$–$There$is$a$danger$that$delegation$becomes$an$abdication$of$responsibility$and$there$is$a$

loss$of$proper$control.$

4. Bureaucracy$-$$As$the$organization$becomes$larger,$the$danger$is$that$it$might$lose$its$

entrepreneurial$drive.$

$

The$Churchill$and$Lewis$model$emphasizes$the$link$between$

management$style$organizational$structure,$formality$and$the$

strategic$imperatives$as$the$business$grows.$

$

Not$all$firms$go$through$all$stages$but$can$get$stuck$at$one$of$

them:$

$

o Stage$1:$Existence$–$With$simple$organization,$

direct$supervision$and$the$owner$lending$a$

hand$at$most$things$

o Stage$2:$Survival$–$When$the$business$must$

demonstrate$that$it$has$enough$customers$to$

be$viable.$

o Stage$3:$Success:$disengagement$–$where$the$

strategic$imperative$is$maintain$a$profitable$

status$quo.$This$is$the$typical$lifestyle$or$salary$substitute$business.$

o Stage$3:$Success:$Growth$–$becomes$a$platform$for$further$growth$and$stage$4.$

o Stage$4:$Take-off$

o Stage$5:$Maturity$

$

BUILDING(THE(ORGANIZATIONAL(STRUCTURE(

$

Entrepreneurs$tend$to$manage$staff$through$their$strong$personal$relationships,$rather$than$through$

hierarchy$and$structure.$Graphically$it$would$most$likely$look$like$a$spider$web.$This$works$quite$well$until$

up$to$20$people,$after$that$it$becomes$increasingly$inefficient$to$manage$all$linkages$between$the$

employees.$

$

Chapter(12:(Growth:(Building(the(Foundations(

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ESB – Session 8 – 19.05. Greiner developed a model which offers a framework for considering the development of a business, but more particularly the managerial challenges facing the founder as they recruit more staff. Each phase of growth is followed by a crisis that necessitates a change in the way the founder manages the business. If the crisis cannot be overcome, then the business risks failure. The model predicts four crisis:

Leadership – Growth initially comes through creative opportunity-seeking. However, this growth lead to a crisis of leadership as staff, financiers and even customers increasingly fail to understand the focus of the business.
Autonomy – Entrepreneurs have a strong internal locus of control, which means that there is a danger they will try to do everything themselves.
Control – There is a danger that delegation becomes an abdication of responsibility and there is a loss of proper control.
Bureaucracy - As the organization becomes larger, the danger is that it might lose its entrepreneurial drive. The Churchill and Lewis model emphasizes the link between management style organizational structure, formality and the strategic imperatives as the business grows. Not all firms go through all stages but can get stuck at one of them: o Stage 1: Existence – With simple organization, direct supervision and the owner lending a hand at most things o Stage 2: Survival – When the business must demonstrate that it has enough customers to be viable. o Stage 3: Success: disengagement – where the strategic imperative is maintain a profitable status quo. This is the typical lifestyle or salary substitute business. o Stage 3: Success: Growth – becomes a platform for further growth and stage 4. o Stage 4: Take-off o Stage 5: Maturity

BUILDING THE ORGANIZATIONAL STRUCTURE

Entrepreneurs tend to manage staff through their strong personal relationships, rather than through hierarchy and structure. Graphically it would most likely look like a spider web. This works quite well until up to 20 people, after that it becomes increasingly inefficient to manage all linkages between the employees.

Chapter 12: Growth: Building the Foundations

Hierarchical structure The larger an organization, the greater the need for hierarchical structure. It creates order and allows coordination of complex tasks. Hierarchy is the fundamental feature of organizational structure, not only for humans, but for all complex systems. As an organization grows further, more structure can be put in place. However, there is no one ‘best’ structure. An issue with any hierarchy is the span of control within them. Matrix structure A business that has multiple products, functions or geographic locations still needs to coordinate activities across all these dimensions. The organizational structure used to aid this is the matrix structure. Team-working structure This kind of structure is used extensively in business that seek to encourage creativity and innovation, particularly in technology-based firms.

CONTROLLING PEOPLE

The more staff you employ, the greater the need for formalizing the control you have over them. The degree of control you exert on the people in your business should reflect not only your own philosophy, but also the core value proposition on which your business is based.

AUTONOMY AND MOTIVATION

If autonomy is a motivator, the dilemma is the amount of autonomy to give. Too much, and anarchy or worse might result. Too little, and creativity, initiative and entrepreneurship will be stifled. The answer provided by Julain Birkinshaw was ‘balance’. He outlined the model to help guide and control entrepreneurial action: Direction This is the company’s broad strategy and goals. Managers should have scope to develop the strategy for their own operating unit, in line with the company’s general direction, values and mission. Space or slack Space or slack has to do with the degree of looseness in resource availability – monetary budgets, physical space and supervision of time. Boundaries These are the legal, regulatory and moral limits within which the company operates. But rigid rules that are not shared beg to be circumvented. Support This refers to the knowledge transfer systems and training and development programmes you provide to help managers do their job. Systems should encourage knowledge sharing and collaboration.

THE CHALLENGES FACING SOCIAL ENTERPRISE

A social enterprise usually combines some form of income-generating activity with a social goal. When it comes to reviewing operations and strategies it therefore has to review both sets of activities – commercial and social – and how it binds these together operationally. Leadbeater proposes the following three stage model to deal with problems social enterprise which grow can run into.

STRATEGIC FRAMEWORKS

While entrepreneurs may not always want to write a formal business plan they will need to strategize – to think about the future, analyse their options and develop strategies – and strategic frameworks. They give your thoughts structure and focus. They help you to make the right decision consistently.

REVIEWING STRATEGY

Strategies do not last forever, and launch strategies, particularly those for disruptive innovations, need to be reviewed shortly after start-up customer and competitor reaction can be gauged. The strategic frameworks identified so far can easily be adapted to apply to a new or changed environment or new product/service launch. However, it is about competitive or business strategy and the strategy literature makes the distinction between this and corporate strategy that determine the scope and structure of the organization. For SMEs this distinction is irrelevant – it is all about strategy. One of the areas that is likely to need reviews as a business grows is its involvement in corporate social responsibility. These activities may grow to such an extent that they need to be separated from the business so as to form a separate social enterprise. This allows objectives to be separated and may help resolve conflicts.

STRATEGIC ANALYSIS

SWOT analysis seeks to identify an overlap between the business environment and a firm’s resources. It is also the basis for undertaking customer analysis and deciding on market segmentation. Core competencies can also be examined under the three proposed criteria by Kay:

Reputation
The way the organization innovates
The organization’s strategic assets Prahald and Hamel suggest three different tests for core competencies:

They provide potential access to a wide variety of markets rather than generating competitive advantages only in one.
They make a significant contribution to the perceived customer benefits of the end- product – they add value
They are difficult for competitors to copy. Products are easier to copy than processes.

One of the outcomes of this analysis is that it may get you to question your original value proposition and its match to target markets because you see your core competencies as of more value to different markets. The whole process of strategy analysis is an art rather than a science. There is no prescriptive approach. To undertake a SWOT analysis brutal honesty is required.

FINANCIAL PERFORMANCE ANALYSIS

No SWOT analysis would be complete without an analysis of your financial performance using a technique called ratio analysis. It can be applied to either historic financial statements or financial forecasts, depending whether you want to look backwards or forwards.

FORMULATING STRATEGY

You decide upon an appropriate strategy by:

Matching the firm’s strategic or core competencies, capabilities and resources to market opportunities.
Using the firm’s strategic or core competencies, capabilities and resources to repair any organizational weakness that have appeared.
Using the firm’s strategic or core competencies, capabilities and resources to combat any threats. The process of developing strategy starts with your vision and is guided through it the whole time – strategic intent.

USING YOUR BUSINESS MODEL TO STRATEGIZE

Osterwalder and Pigneur encourage you to challenge conventional business models using six techniques: § Generating new ideas – encouraging you not always to accept the dominant logic of how things in a particularly industry;