Managing Change in the Organization Often Centers

Managing change in the organization often centers on one of several change strategies or approaches for implementing changes in an organization. Some are more applicable to some situations than others. A directive change strategy occurs when management takes all responsibility for the change and imposes it throughout the organization, using formal management channels already in place. This has the advantage of using existing personnel and structures and may be effective in gaining employee support through simple fiat. This approach works best if management is well-regarded and takes an active leadership position. The approach has the disadvantage of not soliciting information form all subordinates, who might have useful input. In addition, it can generate resistance if management is resented. A second approach is called negotiated change and occurs as the result of give-and-take between different interests. This has the advantage of involving all interested parties and so tends to eliminate resistance, a disadvantage is that the outcome may be different than what is desired by management. A third approach is the participative method, and this method involves the maximum number of people to achieve higher levels of agreement. This can be effective when management wants to create a culture of change so change can be more rapid in the future. This approach creates work teams and informs them at the same time, but this process also takes longer than others to achieve results and is the most complex from the point-of-view of management (Elliott, 2004).

2. Companies may pay dividends to investors or may institute a dividend reinvestment program which adds to the number of shares an investor owns and keeps the money invested in the company. Still, some companies may pay dividends even when funds could be better reinvested in the business or when the firm has to tap outside sources to pay the dividends. Changes in tax law could explain this, though currently the law favors companies with reinvestment programs, though there is also some uncertainty about that law and about how current proposals might change it. The advantage to the investor is that a cash payment is taxed as income, while an investment gain is taxed as long-term capital gains. A company might pay out dividends to keep investors happy, but this would only pertain if the investors have invested in a tax-deferred account, in which case the issue becomes one of who can best invest the profits. If the investors trust the corporate managers to invest the profits, they will encourage such a move. If the shareholders are better suited to make these decisions, then they will want that option. It is believed that if profits are high, managers may find spend their added money unwisely, and it could be that paying a premium to repurchase its stock may not be a sound investment for the company. Another possibility would come if the company pays a premium to acquire stock in another company, which might also be an unsound investment.

3. Forward integration refers to a company expanding its products or services to areas related to its primary product or service to provide for the needs of customers. Whether this is a good strategy for a company depends on the nature of its business to a great extent. Forward integration is often contrasted with horizontal expansion and is itself a form of vertical integration. Horizontal integration is a strategy for a company seeking to sell a type of product in different markets by creating several small subsidiary companies, each of which markets the same product to its own market segment or geographical territory. Companies thus expand by adding units or subsidiaries. Forward integration is tantamount to vertical integration, which in one form involves a style of ownership and control in which the companies are joined by means of a hierarchy with a common owner. Each unit of the hierarchy may produce a different product, and the central organization combines the products to satisfy a common need. Forward integration may occur when a producer decides to sell his products directly to a market rather than to a distributor or undertakes to be a distributor himself. Forward integration is not the general trend today, when horizontal integration is more common as a way of expanding a business and reducing costs. In addition, there is the perception that vertical integration does not work. Some analysts see this as a good thing given that horizontal integration has a number of advantages by allowing for maximal innovation and competition in every piece of a product or service, which in turn drives down costs and advances technology. Forward integration offers more opportunities for small operations or when only a small market segment is being addressed.

4. Strategy evaluation can be both qualitative and quantitative. Several specific criteria are often used for qualitative evaluation. One type of quantitative measure is the financial ratio. This allows for comparisons of performance over different periods if time to determine trends. Also, performance can be compared to that of the competition or to the industry as a whole. Any criteria can be quantitative if they provide measurable and verifiable elements for comparison and analysis. Measures can also address whether a given strategy has or can make significant progress toward accomplishing long-term or annual objectives, and if this is not the case, it shows that there is a need for corrective actions. The quantitative measures used may also depend on the type of business involved or the aspect of the business being addressed. A strategy for improving turnover, for instance, would measure employment matters. Marketing measures might show the reach of advertising or the number of stores carrying a product. Sales figures serve as a measure, when compared to other companies or the industry as a whole. Rates of change can also be significant, showing if a strategy is effective or not.

5. Product positioning refers to shaping the image and presentation of a product or service so that it appeals to a selected market segment. Market researchers consider all relevant pieces of information to understand how consumer purchases are made, and from this they decide how a given company can capitalize on the process. Many companies develop a target marketing strategy that includes determining demand, establishing the base of segmentation, identifying potential market segments, targeting the market, selecting the market, developing the strategy, and outlining the marketing mix. The process of dividing the market into different target groups is segmentation, leading to the development of demand patterns and segmentation bases. The company has to analyze the level of diversity for consumer needs in a particular category of goods or services. Segmenting the market is the process of classifying a market into two or more parts, each of which share common characteristics (Evans & Berman, 1995, p. 240). Target marketing uses sales forecasting techniques to help the company and the marketing department develop budgets, allocate resources, and adjust the market program as needed.

A market is defined as any individual or group of individuals "willing, able, and capable of purchasing a firm's product" (Simpson, 2000, p. 212). As noted, the separation of markets into distinct groups based on similar characteristics and similar needs is market segmentation, which is critical for reaching consumers who have different needs for a given product. The company decides which market segments to reach, and these are its target markets. A target market consists of a specific group of customers who are targeted for the company's marketing efforts.

Effective product positioning involves stages including identifying competing products, determining the defining characteristics of the product, collecting customer information, determining the preferred target market, deciding on the optimum fit with existing products, and selecting the optimum position for the product. The optimum position is related to a company's competitive advantage.

6. Rumelt offers four criteria for evaluating strategies: consistency, consonance, feasibility, and advantage. The consideration of consistency is important because different departments or units may develop strategies that are not consistent with one another, which then creates the possibility that one unit may succeed while and even because another fails. Clearly, this would not be an efficient strategy to pursue. Often, as a strategy is being implemented, such inconsistencies can be observed, as when changes in personnel do not solve management problems as intended. A strategy might offer inconsistent goals or policies, and this should not be allowed as it will lead to inconsistent outcomes.

Consonance refers to the need for matching internal and external factors as a strategy is formulated and implemented. This can be difficult, but it is important to bring the two forces together as much as possible for a clear outcome. Strategy is perceived as an adaptive response to forces in the external environment, but the capabilities of the internal structure must be matched with these external forces through the strategic decisions and moves made. In a way, this seeks another form of consistency so that the response matches the external threat or demand and does not veer off on a tangent.

7. What is called the "grand strategy" approach is based upon industry or product revenue growth rates and is specific to a business unit with one major industry or product focus. In this case, it is being applied to a firm that is a weak competitor in a slow-growing market. The situation can be analyzed using a two-by-three matrix of strategic choices from which to select the grand strategy. The matrix for a company with a small share and no money holds that if the industry is growing, the company should increase its penetration, seek strategic partnerships, use backend strategies, sell the client base, and sell the product line. If the industry is showing negative growth, the company needs to assert cost reduction, sell the product line, or sell the company (Stratamax Grand Strategy Matrix, 2005).

8. Strategy formulation and strategy implementation are directly related, but there are differences between the two. The first difference is timing, with strategy formulation coming first I the process, for the strategy must be formulated before it can be implemented. Strategy formulation involves relatively few people who analyze the situation and develop the response to be followed for that situation. Strategy implementation, on the other hand, involves far more people, in the broadest sense including every person in the organization as they work to put the strategy into operation. A third difference is found in terms of relative importance. Both formulation and implementation are important, but execution is most important because even if a careful process is followed form the development of a strategic plan, success is not guaranteed unless the execution is just as well done as the plan. A fourth difference is in terms of focus, with the process of strategy formulation focusing on effectiveness, on what it is believed will work. The process of strategy implementation focuses on efficiency, on what works best in the given situation. This latter point suggests another difference, with formulation being an intellectual process of analysis and decision-making, while implementation is an action process focusing on putting processes into action in a given situation and on practical matters.

9. The two variables that are of the most importance in the success or failure of strategy implementation efforts are market segmentation and product positioning. Market segmentation refers to the process of subdividing a market into distinct subpopulations of customers based on needs and buying habits. Positioning is a related concept referring to the formation of an image for the product and its placement in the market so that it can compete with similar products in the same market. The two concepts are related in that how a product is positioned depends on the market segment to which it is targeted. Part of marketing is making a decision as to the target consumer in order to now how to appeal to that buyer. More often today, companies are finding that shifting to a customer-targeted marketing orientation can increase profitability, allowing goods and services to be targeted specifically to various types of customers for different purposes.

Thorson (1989) writes of the process of market segmentation,

Market segmentation is the selection of groups of people who will be most receptive to a product. The most frequent methods of segmenting include demographic variables such as age, sex, race, income, occupation, education, household status, and geographic location; psychographic variables such as life-style, activities, interests, and opinions; product use patterns; and product benefits. Much segmentation involves combinations of these methods. No matter how segments are defined, however, they are characterized by considerable change over time (Thorson, 1989).

Demographic information is important to companies, but it is not the only information used to make marketing decisions. Companies also rely on how consumers choose the products they do, examining the psychology of buying and how consumers make decisions. To this end, researchers learn about the lifestyles of consumers and determine what the implications of that lifestyle analysis are (Evans & Berman, 1995, p. 238).

Product positioning also involves identifying the customers in the target market segment and deciding how to focus on these customers to meet their demands and needs. A company might seek a vacant market niche of one less crowded. Each market segment may be and should be addressed with its own market strategy. Both processes are vital in order to avoid marketing too broadly, wasting resources on segments or customers that will not pay off and that will not enhance the company's competitive advantage. Different companies use market segmentation in different ways to promote their product or service and to achieve a strategic advantage. How the market is segmented may determine how the supply chain is formed. Virtual integration harnesses the economic benefits of two very different business models by offering the advantages of a tightly coordinated supply chain that have traditionally come through vertical integration, and at the same time, it benefits from the focus and specialization that drive virtual corporations. Supply chain management has as its goal keeping the supply chain running smoothly. Traditional methods used in vertical integration are altered to fit the virtual integration approach, but the ultimate goal remains the same. The supply chain assures that goods and services are available for the market segment targeted when the need is manifested.