Organizational Theory #2 What core competences give an organization competitive advantage? What are examples of an organization's functional-level strategies?

Core competencies are those capabilities that are critical to a business achieving a competitive advantage in the marketplace. Typically, core competencies can be identified by certain common characteristics -- offering a benefit to the customer, difficult to imitate, uniquely identify the organization and easily leveraged to create many products or operate in many markets (Kern, 2010). The organization that is best able to use its resources to create value is in an ideal position to outperform the competition, thus creating advantage (Jones, 2010). Core competencies tend to change in response to changes in the environment. They are flexible, evolve over time and enable the company to enter apparently different markets with a clear and distinctive brand proposition. Examples of core competencies include manufacturing, research and development, new technology or organizational design and change. They should be difficult for competitors to imitate -- truly unique in nature (Kern, 2010).

Functional-level strategy relates to a single functional operation and all its related activities. Decisions at this level within the organization are often described as tactical (Jones, 2010). Functional strategy deals with relatively restricted plans providing objectives for specific function. It also involves the allocation of resources among different operations within that functional area and coordination between them (Kern, 2010). Below the functional-level strategy, there may be operations level strategies as each function may be divided into several sub-functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, and distribution -- all contributing to the functional strategy. Human resources, research and development, and information technology are all examples of functional levels.

References

Jones, G. (2010). Organizational theory, design, and change (6th ed.). Upper Saddle River, NJ: Prentice Hall.

Kern, A. (2010). Continuous improvement or core-competency? Hydrocarbon Processing, 89(7), 90.

2. Why would an organization choose a corporate level strategy to expand its value-creation activities beyond its core domain? Discuss how an organization's structure and culture might change as the organization begins to enter new domains.

Corporate-level strategy uses core competences attained at the business level to protect and grow its existing domain and expand into new domains (Jones, 2010). Expanding makes sense if resources to do so are available and additional value creation cannot occur in the present core domain (Carlopio, 2011). Organizations must be re-evaluated as firms grow and change strategies. In new domains, more complex structures may be necessary so that the value creation skills present in the divisions and in corporate headquarters combine to improve the competitive position of all divisions (Jones, 2010). Corporate strategists apply the various combined resources of an organization in creative ways to maximize value, rather than relying on each division to operate singularly.

There are three main types of corporate-level strategies: vertical integration (ownership of suppliers and distributors; related diversification (entry into relevant, new domains); and unrelated diversification (entry into unrelated, new domains). An organization needs to create a culture that reinforces and builds on the strategy it pursues (Carlopio, 2011). As the corporate direction and strategy change, so too must the strategy. To distinguish between a value-creation opportunity and a value-losing one, managers must evaluate the costs and benefits associated with entering a new domain (Jones, 2010). Interorganizational strategies increase value by allowing an organization to avoid bureaucratic costs often associated with managing a new organization in a new domain. For example, as divisions increase in number within an organization so too do the costs associated with managing interdivisional activities. Strategic alliances and joint ventures can help create cooperation between divisions or organizations while controlling overall costs.

References

Carlopio, J. (2011). Development Strategy By Design. World Future Review, 3(2), 11-16.

Jones, G. (2010). Organizational theory, design, and change (6th ed.). Upper Saddle River, NJ: Prentice Hall.

3. What is organizational change? Describe and explain the forces for and resistances to organizational change.

Significant organizational change occurs as an organization shifts and moves through various life cycles such as changing its overall strategy for success, dissolving a division of the business, or changing the corporate culture and operational practices (Carnall, 1995). Organizational change is usually undertaken to improve the performance and competitive standing of a company (Jones, 2010).

Six main categories of theories of change assist in understanding, describing, and developing insights about the change process: (1) evolutionary, (2) teleological, (3) life cycle, (4) dialectical, (5) social cognition, and (6) cultural. Each model has a distinct set of assumptions about why change occurs, how the process unfolds, when change occurs, how long...

The main assumption underlying evolutionary theories is that change is a response to external circumstances, situational variables, and the environment faced by each organization (Morgan, 1986). Teleological theories or planned change models assume that organizations are purposeful and adaptive. Change occurs because leaders, change agents, and others see the necessity for it. The process for change is rational and individual managers are instrumental to the process (Carnall, 1995).
Life-cycle models evolved from studies of child development and focus on stages of growth, organizational maturity, and organizational decline (Levy and Merry, 1986). Change is conceptualized as a natural part of human or organizational development. Dialectical models -- also referred to as political models -- classify change as the result of clashing ideology or belief systems (Morgan, 1986). Its change processes are considered to be predominantly bargaining, consciousness-raising, persuasion, influence and power, and social movements (Bolman and Deal, 1991).

Social-cognition models describe change as being tied to learning and mental processes. Change occurs because individuals see a need to grow and change their behavior. In cultural models, change occurs naturally in response to alterations in the human environment; cultures are always changing (Morgan, 1986). The change process tends to be long-term and slow and means altering values, beliefs, myths, and rituals (Schein, 1985).

Resistance to organizational change includes power and conflict, differences in functional orientation (tunnel vision), mechanistic structure (heavy expectation and adherence to norms), and organizational culture in general (status quo). Groups or individuals may also be stumbling blocks to progress. Groupthink or general uncertainty and insecurity about new structures, processes, or value statements may come into play (Jones, 2010). Managers should analyze how proposed changes will affect people, functions, and divisions inside the organization.