BUSINESS STRATEGY 51110 MKT3002

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BUSINESS STRATEGY 51110 / MKT3002

• LECTURE Eleven
• Topic 11 Resource allocation and control

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Module 11 Resource allocation and control

• Learning outcomes- at the conclusion of this
  module, students should be able to
• Define business processing re-engineering
• Undertake a critical success factor analysis
• Define administrative, social, and self controls
• Describe different control process
• Create a balanced scorecard for the organisation
• Explain the different ways in which information
  management can underpin competitive advantage
• Analyse how an organisations strategy can best
  be supported by the various elements of
  organisational design and
• Define reinforcing cycles and explain why they
  occur.

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Key words and concepts

• Protecting unique resources
• Fitting resources together
• Business process re-engineering
• Exploiting experiences
• Sustaining competitive advantage
• Critical success factors
• Planning priorities
• Control through planning systems, direct
  supervision, performance targets
• Social / cultural control
• Control through market mechanism
• Self-control and personal motivation
• In formation A key resource
• Influences on organisational design and control

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Introduction

• This module emphasises on how resources are
  allocated in order to develop and sustain
  critical competencies for the firm within its
  industry and business environment in order to
  support firm-specific strategies.

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Resource configuration
Creating capabilities for the future
Protecting unique resources
Fitting resources together
Business process re-engineering
Exploiting experience
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Protecting unique resources

• It is important to ensure that the uniqueness of
  a particular resource is protected.
• Example
• Product patent (through legal or regulatory
  framework, IP Australia).
• Import restriction (through lobbying).
• Software houses, consultancies requires tacit
  knowledge from individuals or groups (through pay
  packages, promotion and working conditions).

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Fitting resources together

• The organisation must be able to bring together
  an appropriate mix of resources to create
  competencies.
• Critical to have the ability to link the
  resources together in an efficient and effective
  manner.
• Example
• Value chain Support activity (HR management) and
  primary activity (Marketing and Sales).
• RD and Manufacturing.

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Business process re-engineering (BPR)

• BPR is the process of reconfiguring activities
  to create a dramatic improvement in performance.
• (Johnson Scholes 1999, p. 449)
• New Buzz word for the 90s
• Applies to how existing resources within an
  organisation can be adapted to fit new
  strategies.
• Resources Undertake in-house or outsource?
• Is BPR resource intensive?
• Is it applicable to small businesses?
• How does it relate to strategy?
• It enables strategy to be implemented
  effectively
• Is there a set framework or method of enacting
  BPR?

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Exploiting experience

• Organisations can improve their competencies
  through the experience of undertaking activities
  repeatedly and learning to do them in an more
  efficient and effective manner. Eg. Learning
  curve
• Successful implementation requires continual
  learning and improvement.
• Investments for the future (eg. training,
  observation or exposure to new ideas).
• How can a firm be a learning organisation?
• Is this a source of competitive advantage?

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Sustaining competitive advantage

• Vary from organisation to organisation and
  strategy to strategy.
• Reposition organisations / SBUs have to develop
  new competencies since the old competencies are
  less important or redundant.
• Example
• Low-price positioning greater negotiating power
  (purchase large quantities), gain knowledge and
  experience on buyers, drive down costs through
  economies of scale.
• Differentiation understand customers needs,
  multiple linkages within the value chain,
  creativity and innovations.
• Switching costs reward programs, technologies.

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Sustaining competitive advantage
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Resource plans

• The purpose of resource plans identify the
  critical success factors (CSFs) for success of a
  particular strategy, and set priorities,
  schedules, and budgets.
• Two specific areas in resource plan
• CSFs and
• Planning priorities.

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Critical success factors

• CSFs are those components of strategy where the
  organisation must excel to outperform
  competition.
• (Johnson Scholes 1999, p. 458)
• CSF analysis can be used as a basis for preparing
  resource plans.
• Steps in a CSF analysis.
• Identify CSF and underpinning core competencies.
• Scrutinise the list.
• Identify performance standard.
• Assess the extent of imitation from competitors.
• Impact of potential competitive moves and
  counteractions.

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Planning priorities

• Act as a sequence of actions or a timetable of
  priories in a written plan that allows
  co-ordination between those activities.
• Network analysis (critical path analysis) a
  technique for planning projects.

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Processes of allocation and control
Approaches to resource allocation and control
Perceived need for innovation and change
Low
Strategic planning
Extent of devolution
Strategic control
Financial control
High
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Processes of allocation and control

• There are 3 types of control
• Administrative control (through systems, rules
  and procedures).
• Social control (through the impact of culture on
  the behaviour of individuals and groups)
• Self-control (people exert over their own
  behaviour)

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Control through planning systems

• Implementation is achieved through systems which
  plan and control the allocation of resources and
  monitor the actual utilisation against the plan.
  (eg. Common in the manufacturing sector)
• Particularly useful where the degree of change is
  low, but will need to operate differently in
  centralised as against devolved regimes.
• Centralised regimes planning is usually
  top-down, use a formula approach.
• Devolved regimes planning is bottom-up.

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Control through direct supervision

• Direct supervision is the direct control of
  resource allocation by one or more individuals.
• (Johnson Scholes 1999, p. 467)
• Common form of control in
• Small organisations and
• Organisational crisis (appointed receivership).

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Control through performance targets

• Control through centrally imposed targets. (eg.
  Regulators control organisations through
  price-capping)
• Ability to gain some form of the benefits of
  devolution and yet with minimal changes.

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Social / cultural control

• Social controls are concerned with the
  standardisation of norms.
• (Johnson Scholes 1999, p. 471)
• These controls are critically important to
  organisations that are
• Highly devolved structures (primary mechanism for
  co-ordination in the organisation)
• Facing complex and dynamic environments
  (organisational configuration likely to be
  adhocracy)
• Investment in training and development to
  maintain social controls.

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Control through market mechanisms

• Control by market mechanisms involves some
  formalised system of bidding or contracting for
  resources.
• (Johnson Scholes 1999, p. 471)
• Bidding from within the organisation (eg.
  Divisions, departments) to increase performance
  and value for money.
• Problems with this control
• Escalation in bargaining between units (waste
  management time).
• Reduces collaboration between units and
  encourages competition and contractual
  relationship.

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Self-control and personal motivation

• Self-control resource allocation and control
  are exercised by the direct interaction of
  individuals without supervision.
• (Johnson Scholes 1999, p. 474)
• Some important issues with this form of control
• Co-ordinating mechanism.
• Requires proper support of resources.
• Maintaining the credibility of managers and
  leaders.

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Information A key resource

• Information on individual resources.
• IT development has erode competitive advantage.
• Creating competencies through information.
• Reduce the cost of processes (eg. e-commerce).
• Improve the quality (eg. speed and accuracy of
  information, service standard).

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Information A key resource (Cont)

• Information, performance targets and market
  mechanism.
• Improved the capability of control systems to
  measure performance against targets because of
  the speed and lower cost of information
  processing.
• Considerable capital investment in systems may be
  required to be effective in the market mechanism.
• Information, cultural and self controls
• The internet has increased the ability of
  individuals to communicate with one another
  without supervision.

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Influences on organisational design and control

• Elements that influence an organisational design
  and control.
• Type of strategy.
• Operational processes, technology and innovation.
• Organisational ownership and accountability.
• The environment.

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Influences on organisational design and control
(Cont)

• Reinforcing cycles are created by the dynamic
  interaction between the various factors of
  environment, configuration and systems.
• (Johnson Scholes 1999, p. 474)
• Organisations operating in a particular
  configurations tend to seek out strategies which
  best fit this configuration since they tend to be
  cohesive, robust and difficult to change.

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Lecture 11 review

• Resource configuration
• Resource plans
• Processes of allocation and control
• Information A key resource
• Influences on organisational design and control

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Next lecture

• Module 12 Managing strategic change
• (Study book Module 12 - Text Chapter 11)

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Next tutorial

• Assignment 2. (preparation)
• Exam prep