Overall

Organisational
Performance
Chapter 2 (Page 27 – 38)
 The importance of creative thinking and problem-solving
> Identifying a problem the consumer is not even aware of yet and
finding a way to solve that problem.
> The aim of finding creative solutions to business related problems is to
create and maintain a competitive advantage.

Identify the resource gap and obtain these

resources

Explain the impact on the business and

consider different solutions

Choose the best solution(s) and explain it

in breadth AND depth
Creative problem-solving techniques:

1. Pros and Cons chart

2. Decision Tree
3. Value Chain Analysis
4. PE2STLE
5. SWOT
6. Delphi Technique
7. Resource-based approach
8. Balanced Scorecard
 Pros and Cons Chart

> Helps managers make decisions based on advantages and

disadvantages of a specific option.

Buying a McDonalds Meal

Pros Cons
• It tastes good • It is unhealthy
• Its convenient • It is an unnecessary expense
• It satisfies your hunger
• Its cheap

> So if we were to look at the above chart, we would then buy a

McDonalds meal.
 Decision Tree
> Visual representation of different outcomes to a single event.
> Helps the decision maker look at different options and the consequences
of each.
Make
something at
home
Yes
Go to
McDonalds
Am I hungry?

No Don't eat
 Value Chain Analysis

> The aim is to add value to the customer.

> It is important to look at the entire business process to
decide where value is added in a cost-effective manner
to enhance quality of the product or service rendered.
> If it is not a core-business strength, that particular activity
will probably not add value to the business process.
> If the activity does not add value it will be eliminated or
outsourced.
 PE2STLE
> We looked at this in Chapter 1…
 SWOT (Strengths, Weaknesses, Opportunities and Threats)

The things the business does well or better than

Strengths their competitors.

The things the business needs to work on or

Weaknesses things that competitors are doing better than
the business.
These are external things that could have a
Opportunities positive impact on the business if it is acted on.

These are external things that could have a

Threats negative impact on the business if it isn’t dealt
with properly.
 The Delphi Technique

> Obtaining the opinions of experts on a particular

topic, without necessarily engaging with them
face-to-face.
> The experts will remain anonymous.
> They remain anonymous so they can deliver an
unbiased opinion.
> The experts can also be asked separately to
avoid group-think.
 Resource-based Approach

> The business should find out which resources are of

strategic importance to the business.
> When a business faces a problem, it must determine which
resources are needed to solve the problem.
> If a resource is scarce and the business has access to it, it
can give the business a competitive advantage.
> Resources can be tangible and intangible.
> Depending on the available resources and/or the costs to
obtain them, different problem-solving approaches must
be considered.
 Balanced Scorecard

> Developed by Kaplan and Norton.

> Describe the key outcomes that the business would like to
“measure” in order to improve these outcomes.
> Forces management forces on issues that are important
because they create value in and for the business.
> Plans and strategies may then developed to create
/maintain /improve the competitive advantages of the
business.
 Balance Scorecard
Focuses on maximum utilization of assets and minimizing
Financial costs in order to create shareholder value.

Focuses on how customers see the business and what

Customer their expectation might be.
Focuses on innovative products and services, the
Internal management of operations and social investments to
Business improve the business.
How employees in the business continue to improve and
Learning create value. This can be done through intangible assets
and of the business such as information and capital which is
Growth developed by the human capital. Leadership,
accountability, culture and teamwork are important.
 What is strategic management?

> Top management analyses events in the

business environments.
> Trend: occurs over time
> Crisis: comes as a surprise
> Decisions and actions are taken to respond to
the analysis.
 Vision vs. mission

> Vision: what the organisation wants to become.

> Mission: description of what the organisation
does or the purpose of the business.
 Generic strategies: Low cost strategy

> Competitive advantage is created by having the lowest

costs in the industry.
> To do this, the business must be committed to saving costs.
> This can be achieved if:
1. the business has access to cheap raw materials.
2. Costs can be reduces through efficiency using mass
production, technology and re-engineering activities.
> Activities that don’t offer cost benefits must be eliminated or
outsourced.
> Works best if there is a big market share which means high
turnover volumes and high revenue.
 Generic strategies: Focus (niche market)

> All efforts are aimed at a specific market segment based

on geography, culture, age, hobbies or other criteria.
> It is a unique group with unique tastes or needs.
> The niche market becomes the focus and presents
opportunities for the business.
> It is often overlooked by competitors or viewed as not
being “worthwhile”.
> The niche must be big enough or have growth potential.
> The business must have expert knowledge of the market
and the ability to provide the needed products.
 Generic strategy: Differentiation

> All efforts are aimed at providing a unique product/service

that will ensure the consumer is loyal.
> Gives the business the opportunity to charge a premium price.
> Uniqueness can be based on:
1. Quality
2. After-sales support
3. Product features
4. Distribution or marketing efforts
> It must be difficult to copy, in order to give the business a
competitive advantage.
> Continuous re-development is key.
 Corporate strategies: Corporate combination

> Joint venture: two or more business enter into an

agreement to combine resources to improve the
functioning of both businesses.
> Merge: two or more businesses become one. The
businesses will no longer exist alone.
> Takeover: one business will buy the other and the
businesses will no longer exist alone.
 Corporate strategies: Defensive/decline

> Retrenchment: reduces the size of the business or range of

products sold to reduce expenses and improve the
financial position of the business.
> Divestiture: the business sells off some operations because
assets that are being used are under-utilized and hampers
the financial performance of the business.
> Liquidation: all assets are sold to pay for the debts of the
business and it ceases to exist.
 Corporate strategies: Growth

> Market penetration: existing product and existing market

are used to expand.
> Product development: taking a new product or modifying
an existing product and offering it to an existing market.
> Market development: an existing product is taken to a
new geographical market.
> Diversification: a business enters a new market with a new
product.
 Integration strategies: forward integration

> The business takes over one of it’s suppliers in

order to eliminate the middleman in the
distribution process and therefore reduce the
ultimate selling price.
> A good example of forward integration would
be a farmer who directly sells his crops at a local
grocery store rather than to a distribution centre
that controls the placement of foodstuffs to
various supermarkets.
 Integration strategies: backward integration
> Eliminate the power of the supplier by buying out
a supplier or creating its own manufacturing plant.
> Through backwards integration it is assured that
there will always be a supply of the products
required.
> An example of backward integration might be a
bakery that purchases a wheat processor or a
wheat farm. In this scenario, a retail supplier is
purchasing one of its manufacturers, therefore
cutting out the middleman, and hindering
competition.
 Integration strategies: horizontal integration

> The business has taken over one of its competitors.

> An example of backward integration is when
Disney purchased Pixar in 2006 at a valuation of
$7.4 billion
 Revise business mission and / or objectives

> Mission statement is: It is a description of what the business

does or the purpose the business serves.
> If the business produces / supplies merchandise which
consumers no longer want, it is time to revise its mission.
> No business can afford to ‘wait and see’ what the future
will bring.
> Management should be proactive in the approach to
possible changes in the market place and then align the
mission objectives of the business with what is desired in
the future.
> The business will need to revise the mission and objectives
immediately to ‘meet the future before it happens’.
 Allocate resources differently

> Resources refer to employees, money, machines, time,

raw materials and even skills.
> Resources should be allocated where they are most
productive, where they create the biggest competitive
advantage and generate most profits.
> If the business has decided to revise their mission and
objectives, it will have to reconsider how resources are
allocated in the business.
> If resources are allocated to a task that does not add
value, that task either has to be outsourced or terminated,
so that resources can be re-allocated to a more
productive part of the business’ operations.
 Total Quality Management (TQM) and Total Customer
Satisfaction
> TQM is a process where everybody in the business is committed to thinking
about how all actions impact on the quality of all tasks and overall customer
satisfaction.
> Customer satisfaction refers to internal customers as well.
> In order to determine the quality of a product or service, inspections can be
conducted. This is the process of measuring, examining or testing the product
or service or one or more components thereof.
> The results are compared to pre-determined specifications in order to assess if
the quality is acceptable or not.
> Sampling is a statistical method of quality control where a certain number of
items are tested from the entire production batch. If the test samples are of a
certain quality, it is assumed that all items will be of the same quality.
> The business can only improve quality if there is awareness that something is
not right. It is in the interest of the business to ask customers for feedback and
to respond to the feedback to improve the quality of the product and/or
service.
 Benchmarking

> Business looks at what the is ‘best practice’ in the

industry.
> Measuring the business’ current performance
with the standard it should be achieving (best
practice).
> If the business is underperforming, steps are
implemented to narrow or eliminate this
underperformance gap (between how it is
being done and how it should be done).