chapter 10 : Building an Organization Capable of Good Strategy Execution: People, Capabilities, and Structure

In the study of strategic management, we will gain an understanding of what managers need to do to the organization to implement the strategy effectively and successfully.

In addition, we will also make sure that with everything that we learn why rent, for training, and retaining the right people is an important component of the strategy implementation.

We also need to understand that implementing a good strategy requires continuously build and upgrade resources and organizational capabilities.

In this chapter should also be emphasized profit order what issues to consider in creating a supportive organizational structure, strategy and organizing the work effort.

Finally, we need to recognize the advantages and disadvantages of centralized and decentralized decision-making in implementing the chosen strategy.

 

The 10 Basic Tasks of the Strategy Execution Process

Executing strategy is an action-oriented, operations-driven activity revolving around the management of people and business processes. The way for managers to start in implementing a new strategy is with a probing assessment of what the organization must do differently to carry out the strategy successfully. They should then consider precisely how to make the necessary internal changes as rapidly as possible.

RECRUITING, TRAINING, AND RETAINING CAPABLE EMPLOYEES

Building core competencies and competitive capabilities is a time-consuming, managerially challenging exercise that can be approached in three ways:

(1) Developing capabilities internally

(2) Acquiring capabilities through mergers and acquisitions

(3) Accessing capabilities via collaborative partnerships.

To align the firm's organizational structure with its strategy, it is important to make strategy-critical activities the main building blocks. There are four basic types of organizational structures: the simple structure, the functional structure, the multidivisional structure, and the matrix structure. Which is most appropriate depends on the firm's size, complexity, and strategy.

 

MATCHING TYPE OF ORGANIZATIONAL STRUCTURE TO STRATEGY EXECUTION REQUIREMENTS

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Assalamualaikum.

chapter 8 : Corporate Strategy: Diversification and the Multibusiness Company

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In this chapter, we will understand when we understand correctly in this chapter and how diversification can enhance shareholder value.

Beside that, we will also practice how to get a clear understanding of how related diversification strategy can produce cross-business strategic fit can provide competitive advantage.

Through strategic management studies also, we need to recognize the merits and risks to key corporate strategy of unrelated diversification, and should be instructed to target profit of analytical tools to assess the company's diversification strategy.

Last we need to understand four key corporate strategic options a company wide strategy to enhance diversity, and improve performance on of the company.

Unrelated diversification strategies surrender the competitive advantage potential of strategic fit at the value chain level in return for the potential that can be realized from superior corporate parenting. An outstanding corporate parent can benefit its businesses through 

(1) Providing high-level oversight and making available other corporate resources

(2) Allocating financial resources across the business portfolio

(3) Restructuring underperforming acquisitions.

 

Analyzing how good a company's diversification strategy is consists of a six-step process: 

Step 1: Evaluate the long-term attractiveness of the industries into which the firm has diversified. Industry attractiveness needs to be evaluated from three angles: the attractiveness of each industry on its own, the attractiveness of each industry relative to the others, and the attractiveness of all the industries as a group.

Step 2: Evaluate the relative competitive strength of each of the company's business units. The purpose of rating the competitive strength of each business is to gain a clear understanding of which businesses are strong contenders in their industries, which are weak contenders, and the underlying reasons for their strength or weakness. The conclusions about industry attractiveness can be joined with the conclusions about competitive strength by drawing an industry attractiveness–competitive strength matrix that helps identify the prospects of each business and what priority each business should be given in allocating corporate resources and investment capital.

Step 3: Check for cross-business strategic fit. A business is more attractive strategically when it has value chain relationships with the company's other business units that offer potential to 

(1) realize economies of scope or cost-saving efficiencies, 

(2) transfer technology, skills, know-how, or other resource capabilities from one business to another, 

(3) leverage use of a trusted brand name or other resources that enhance differentiation, and 

(4) build new resources and competitive capabilities via cross-business collaboration. Cross-business strategic fit represents a significant avenue for producing competitive advantage beyond what any one business can achieve on its own.

Step 4: Check whether the firm's resource mix fits the resource requirements of its present business lineup. In firms with a related diversification strategy, resource fit exists when the company's businesses add to its overall resource position and when they have matching resource requirements at the value chain level. In companies pursuing unrelated diversification, resource fit exists when the parent company has generalized resources that can add value to its component businesses and when it has corporate resources sufficient to support its entire group of businesses without spreading itself too thin. When there is financial resource fit among the businesses of any type of diversified company, the company can generate internal cash flows sufficient to fund the capital requirements of its businesses, pay its dividends, meet its debt obligations, and otherwise remain financially healthy.

Step 5: Rank the performance prospects of the businesses from best to worst, and determine what the corporate parent's priority should be in allocating resources to its various businesses. The most important considerations in judging business-unit performance are sales growth, profit growth, contribution to company earnings, and the return on capital invested in the business. Normally, strong business units in attractive industries have significantly better performance prospects than weak businesses or businesses in unattractive industries. Business subsidiaries with the brightest profit and growth prospects and solid strategic and resource fit generally should head the list for corporate resource support.

Step 6: Crafting new strategic moves to improve overall corporate performance. This step entails using the results of the preceding analysis as the basis for devising actions to strengthen existing businesses, make new acquisitions, divest weak-performing and unattractive businesses, restructure the company's business lineup, expand the scope of the company's geographic reach into new markets around the world, and otherwise steer corporate resources into the areas of greatest opportunity. 

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UMW HOLDING BHD

ASSLAM….

Case assignment questions

 UMW HOLDING BHD

 

The UMW Holdings Berhad is one of the largest companies and also one of the leading industrial enterprises, serving the economies of Malaysia and the Asia-Pacific region. The UMW Group is an RM 9.9 billion company and ranks among the foremost corporations listed on the Bursa Malaysia. Its net assets exceed RM2.3 billion and its workforce numbers more than 11,000 employees serving customers through a nation-wide distribution network.

UMW Holdings Bhd expects to execute an Initial Public Offering (IPO) to sell 30 percent of its oil and gas unit to institutional investors. The investment banking industry estimates the deal would rise up to USD 1 billion.

The history of UWM Holdings could be traced back to 1917 when Mr Chia Yee Soh, the Founder of the company, opened an automotive repair shop in Singapore. In 1936, the company acquired the agency for distributing Pennzoil lubricants product. In 1961, the company added heavy equipment to its business portfolio. By 1967, the company became a licensee of Mitsubishi Heavy Industry, obtained distributorship of Komatsu Japan heavy equipment, and acquired the agency for Toyota forklift. In 1970, UMW became the Group’s holding company and it was subsequently listed on the Kuala Lumpur Stock Exchange (KLSE) (Omar, 2008).

UMW Holdings began operation in 1917 as a business in bicycle spare parts. Oil was first discovered in Malaysia in 1910 in Miri, Sarawak. Later, the Malaysian Government passed the petroleum development act and established Petroleum Nasional Berhad (Petronas) in 1974; Petronas was entirely owned by the government (Abdullah, 2012). Since then, Petronas had been growing rapidly and had been listed in the Fortune’s 500 companies since 1995.

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Assalamualaikum.