Strategic Management & Information Systems

RAB 8 Barisal

Introduction

 Strategic management is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.”

It is the process of specifying the organization‘s objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization’s objectives. Strategic management, therefore, combines the activities of the various functional areas of a business to achieve organizational objectives. It is the highest level of managerial activity, usually formulated by the Board of directors and performed by the organization’s Chief Executive Officer (CEO) and executive team. Strategic management provides overall direction` to the enterprise and is closely related to the field of Organization Studies. Strategic management is a combination of three main processes namely; 1) strategy analyzing 2) strategy formulation and 3) strategy implementation.

 Strategy implementation involves:

  • Allocation of sufficient resources (financial, personnel, time, technology support)
  • Establishing a chain of command or some alternative structure (such as cross functional teams)
  • Assigning responsibility of specific tasks or processes to specific individuals or groups
  • It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
  • When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Why Strategy Implementation is so difficult

Manager’s intent on implementing strategy must coordinate a broad range of efforts aimed at transforming strategic intentions into action. Resulting actions constitute the firm’s realized strategy; and it reflects what an organization has done and ultimately determines how the organization will fare. Strategies that are not implemented, no matter how brilliant they may be, constitute little more than academic exercises. Consequently, the ability to implement strategies is one of the most valuable of all managerial skills.

Unfortunately, strategy implementation skills are not easily mastered. In fact, virtually all managers find implementation the most difficult aspect of their jobs more difficult than strategic analysis or strategy formulation. One manager explained, “It has been rather easy for us to decide where we wanted to go”. The hard parties to get the organization to act on the new priorities. This experience is widespread. U.S. managers now spend an estimated $10 billion annually on strategic analysis and strategy formulation. Managers themselves report that less than half the plans resulting from these efforts are ever implemented.

Reasons why strategic plans fail

There are many reasons why strategic plans fail, especially:

  • Failure to understand the customer
    • Why do they buy
    • Is there a real need for the product
  • inadequate or incorrect marketing research
  • Over-estimation of resource competence
    • Can the staff, equipment, and processes handle the new strategy
  • Failure to develop new employee and management skills
    • Failure to coordinate
    • Reporting and control relationships not adequate
    • Organizational structure not flexible enough
  • Failure to obtain senior management commitment
    • Failure to get management involved right from the start
    • Failure to obtain sufficient company resources to accomplish task
  • Failure to obtain employee commitment
    • New strategy not well explained to employees
    • No incentives given to workers to embrace the new strategy
  • Under-estimation of time requirements
  • Failure to follow the plan
    • No follow through after initial planning
    • No tracking of progress against plan
    • No consequences for above
  • Failure to manage change
    • Inadequate understanding of the internal resistance to change
    • Lack of vision on the relationships between processes, technology and organization
  • Poor communications
    • Insufficient information sharing among stakeholders
    • Exclusion of stakeholders and delegates

 BACKGROUND OF THE CASE

 History of the company

 Kazuo Inamori founded Kyoto Ceramics in 1959 with an investment of US $10,000 Kyocera is a world leader in applied ceramics technology, a major force in the Japanese telecommunications industry and a global competitor in a wide range of products including electronic and optical components, instruments and equipment. Although Kyocera competes in numerous high- visibility markets, the company made its reputation in markets unfamiliar to most people. Kyocera introduced some of the first laptop computers (sold by Radio Shack under the Tandy brand), manufactured VCR equipment for Hitatchi, and produced the Yashica line of cameras. However, its excellence in producing ceramic products for markets obscured to the general public earned Kyocera respect the world over.

 The ceramics in which Kyocera specializes transform the ancient craft into an exciting technology with a seemingly endless array of applications. The company‘s greatest success has come in producing ceramic packages for integrated circuits. Koycera holds 65 percent of the global market for IC ceramic packages.

Business philosophy of Kyocera

The early years at Kyocera were not easy. For several years, the company only had 24 employees, who worked 16-hour-days (including Saturdays) before retiring in the company dormitory.

Initially, Kyocera used a much unsophisticated approach to management. For example, unaware that established industries in Japan were spending 20% of their revenues on sales, general, and administrative expenses, Kyocera held these to 12 % by relying on its own salaried sales force instead of paying distributors, a “mistake” that added eight % points to the company’s pre-tax profit margin. The business philosophy of Kyocera’s founder, Inamori, provides a central set of ideas by which the company is managed.

v  “Respect the Divine and Love People.” Preserve the spirit to work fairly and honorably, respecting people, our work, our company and our global community.

v  •”Act like a vagabond.” This statement was meant to convey the importance of independence and self-reliance.

v  Only the individual who is willing to challenge the accepted beliefs and to put in the effort to break down such barriers can open the door to the future.

v  •”Work is life“. It is obvious that man does not work just to earn money. He seeks mental satisfaction.

v  One should always seek righteousness and not the easy way out.

v  A person who can manage a great business is a person who can give profit to his customers.

 Kyocera’s Culture

 Kyocera started as a small-town factory, with no money, credentials or history. A little technology and our trusty comrades were all we had to rely on. Kyocera’s management is based on all employees exerting their greatest efforts, and managers dedicating their lives to earning the employees’ trust all believing in each other, none working for selfish motives, and all feeling fortunate that they work for the same company. Kyocera delivers products and services that delight their customers. The “customer first” principle is their top priority. Satisfying customers requires them to have strong capabilities on the work floor a necessary starting point for any work, including manufacturing as well as the “power to achieve,” which permits us to accomplish worthy goals without fail.

 The practice of the Kyocera Philosophy and the Amoeba Management System are both extremely important for this. Both originated from Kyocera’s management based on a bond of human minds. When all employees unite their efforts and participate in management, each finding joy and fulfillment in their work by realizing their maximum potential, they can elevate their minds and grow as human beings. Companies are made up of people. The quality of a technology, product or service depends on the people behind it. We want Kyocera to continuously deliver new value to his customers, with employees who relentlessly pursue their dreams, work enthusiastically and consistently achieve self-determined goals.

 The company‘s greatest success has come in producing ceramic packages for integrated circuits. Kyocera holds 65 percent of the global market for IC ceramic packages. Its success can be attributed in large part to the “The Amoeba Management System” with its unique organization structure and culture.

The Amoeba Management System (Decentralized Management)

 Amoeba management involves dividing an organization into small units that operate as independent profit-and-loss centers directly linked to their respective markets. This system fosters leaders with management awareness and creates the foundation for Kyocera’s “management by all employees.”

 Today, Kyocera organizes its 15000 employees into hundreds of amoebas that each consist of anywhere from seven to seventy individuals. Each amoeba operates as a tiny independent business within the much larger corporation, from which they all receive support. Each amoeba carries its own planning, quality control, accounting and personnel management. Amoebas may be internal suppliers or customers for other amoebas, and there may be several amoebas that perform basically the same function in competition with one another. Depending on its success and the demand for its work, an amoeba will expand, contract, or even redefine its mission.

 The problem or challenges

 The following problem areas have been identified, where situations can be improved by formulating and implementing specific strategies:

 1)   Failure of diversification strategy.

2)   Strong Competitor in ceramic packaging business.

3)   Using plastic in semi conductor for low cost.

4)   Kyocera’s culture can be sustained as the company expands.

5)   Amoeba management system cannot be so evident in global operations.

6)   Breaking the Inamuri’s Dependency. A post Inamori system does not yet exist.

Approaches to the solution

 1)   Putting the Kyocera case in the frame of the Architecture of Strategy.

2)   Discuss the challenges of change and organizational learning.

3)   Adopting one or more tool(s)/model(s) which can be helpful in utilizing Strategic Implementation including levers.

4)      Recommendations.

THE ARCHITECTURE OF STRATEGY

 Untitled

Other than considering the total framework of the Architecture of strategy, we will more concentrate on the Financial Performance and the Organizational Capacity, which are crucial for a strategic implementation thereby bringing expected changes in the organization. We may also incorporate the McKinsey’s 7-S framework, which is a very useful tool in organizational change and strategy implementation.

No doubt, Kyocera’s ultimate goal is a better Financial Performance. To achieve this target the top management of Kyocera must thinks about long term and short-term strategies, expanding world wide, re-engineering structural and operational form, reshaping staffing etc. To support the financial performance Kyocera has the competitive advantages a strong brand image, product differentiation supported by structural position and process execution supported by the enterprise synergy.

Strategy implementation and organizational change will require addressing a large number of interconnected factors simultaneously. McKinsey’s 7-S Model can be useful in helping identify these factors. We have already identified these factors in the problem/Challenges section discussed earlier.

 Untitled

Levers available for affecting change

 Context Levers: Organizational context is easily overlooked as a lever for change because it works in the background. However, it has a powerful effect on organizational actions, and is considered as one of the strongest levers available to help bring about strategic change and implement strategy

Untitled

ystem Levers: Organizational Systems must be aligned with strategies. If the system changes, the organization may need to alter the systems to keep them in the best possible alignment. Selection of control systems should be matched to the type of strategic change being made. Control systems include both control over input (for new program or activity) and control over output (strategic programming). Kyocera top management had effective control over the system that resulted in implementing strategies successfully.

Action Levers: Kyocera top management’s approach to management was attractive. Kyocera top management also delegated authority where necessary. So, we must say, Kyocera top management was successful as a role model.

Recommendations

Kyocera aims to promote “diversification”. To achieve this, Kyocera believes that each business within the components and equipment segments should be highly competitive as a specialized manufacturer in its respective field. To achieve the above-mentioned aims, each business unit strives to satisfy customer needs by always being original and innovative. Kyocera make clear objective to become a creative company.

  1. Kyocera’s management strategy is to promote “high-value-added Diversification”. Based on this policy, Kyocera Group must works to “create new businesses” and “strengthen existing businesses” by promoting “high-value-added-diversification” and aims to be a creative company that continues to grow. To achieve this goal, management constantly seek to bolster our pool of management resources. This may come in the form of incorporating resources, as with the organic packages business, or by strengthening company’s resources such as accumulated materials and processing technologies, as with the Fine Ceramics Group.
  1. Kyocera will take advantage of his strong market position to launch new products and to further expand market share. Specifically, Kyocera will leverage his advantageous position to further advance existing close relationships with customers and create new products and markets.
  1. As a common focal point, Kyocera must strive to comprehensively enhance productivity as a means to strengthening both new and existing businesses. The successful methods introduced here will be utilized in other businesses as well to enhance group-wide productivity. At the same time, Kyocera’s aim to reduce production costs and have therefore been aggressive in efforts to expand production in nations where labor costs are at their most effective, such as China.
  2. Kyocera will strengthen new product development by further advancing his traditional material technologies, including those relating to fine ceramics, which will keep him ahead of the competition. With the foundations of these fundamental technologies firmly in place, management can make effective use of the unique expertise held within Kyocera Group in the areas of fine ceramics, organic materials, crystal materials and polycrystalline silicon to supply new high-value-added products to growing markets. The need exists for further advancement in terms of performance and environmental friendliness in the devices for this equipment. In accord with this, package specifications, configuration and method of selection have all changed.
  3. The Kyocera Group aims to improve profitability and boost asset efficiency to raise corporate value. In concrete terms, management will work to increase profitability by maximizing added value per hour, using “Amoeba Management System,” in which profit is managed at the small-group level, which called “amoeba”. At the same time, management will boost asset efficiency and reduce invested capital through quicker collection of trade receivables, optimizing inventory volumes and increasing the efficiency of fixed assets, including capital expenditures. Through these measures, Kyocera intend to raise corporate value
  1. Kyocera seeks to drive corporate growth in the future by implementing the following three basic policies: Practicing the “customer-first” principle; promoting global management; and establishing highly profitable operations.

As a specific measure to build highly profitable operations, Kyocera are putting more focus on and aim to further strengthen the “Amoeba Management Systems” which has been in operation since his inception, by returning to the fundamentals of this system. By doing so, management can vitalize development, production and sales operations, thus strengthening “operational excellence.” This will also allow strengthening “exceptional excellence,” or the ability to achieve goals without fail.

  1. Kyocera, since it’s founding, has managed its operations based on a clear management principle, which is “to provide opportunities for the material and intellectual growth of all employees, and through joint effort, contribute to the advancement of society and humankind.” By setting this objective, Kyocera has achieved continuous corporate growth. Based on this key management principle, Kyocera will promote the strategies of both the components and equipment businesses, and strive to become “a creative company that continues to grow,” thereby meeting the expectations of investors and shareholders.

Reference

  • Miller, Alex, Strategic Management, Third Edition, Irwin/McGraw-Hill Company Inc.
  • David, F Strategic Management, Columbus:Merrill Publishing Comapny, 1989
  • Lamb, Robert, Boyden Competitive strategic management, Englewood Cliffs, NJ: Prentice-Hall, 1984
  • www.kyocera.com
  • www.globalkyocera.com
Advertisements