Organization Development and Change Chapter Nineteen: Competitive and Collaborative Strategies Thomas G. Cummings Christopher G. Worley

Learning Objectives for Chapter Nineteen To compare and contrast two different classes of strategic interventions: competitive and collaborative To describe two competitive strategy interventions: integrated strategic change and merger and acquisition integration To describe two collaborative interventions: forming alliances and developing networks Cummings & Worley, 8e (c)2005 Thomson/South-Western

Organizational Environments General Environment Social, Technological, Economic, Ecological, and political forces Task Environment Customer and buyer power, rivalry among competitors, substitute products/services, and potential new entrants Enacted Environment Managerial perceptions and representations of the environment Cummings & Worley, 8e (c)2005 Thomson/South-Western

Environmental Dimensions Dynamism - the extent to which the environment changes unpredictably Complexity - the number of significant elements the organization must monitor Information Uncertainty - the extent to which environmental information is ambiguous Resource Dependence - the degree to which an organization relies on other organizations for resources Cummings & Worley, 8e (c)2005 Thomson/South-Western

Environmental Dimensions and Organizational Transactions Resource Dependence Low High Low Minimal environmental constraint and need to be responsive to environment Moderate constraint and responsiveness to environment Information Uncertainty Maximal environmental constraint and need to be responsive to environment Moderate constraint and responsiveness to environment High Cummings & Worley, 8e (c)2005 Thomson/South-Western

Competitive Strategies Uniqueness All organizations possess unique bundles of resources and processes that represent the source of competitive advantage Value Organizations that arrange their unique resources and processes to produce products or services that have value (low cost, desirable features) Difficult to Imitate Competitive advantage is sustainable when it is difficult to duplicate Cummings & Worley, 8e (c)2005 Thomson/South-Western

Integrated Strategic Change (ISC) Strategic Analysis Strategic Choice Designing the Strategic Change Plan Implementing the Strategic Change Plan Cummings & Worley, 8e (c)2005 Thomson/South-Western

The Integrated Strategic Change Process Strategy S1 Strategy S2 Strategic Change Plan Organization O1 Organization O2 Implementation Strategic Analysis Strategic Choice Cummings & Worley, 8e (c)2005 Thomson/South-Western

ISC Application Stages Strategic Analysis Assess the readiness for change and top management’s ability to carry out change Diagnose the Current Strategic Orientation Strategic Choice Top management determines the content of the strategic change Designing the Strategic Change Plan Development of a comprehensive agenda to achieve the change Implementing the Strategic Change Plan Cummings & Worley, 8e (c)2005 Thomson/South-Western

Mergers and Acquisitions Merger - the integration of two previously independent organizations into a completely new organization Acquisition - the purchase of one organization by another for integration into the acquiring organization. Distinct from strategies for collaboration, such as alliances and networks, because at least one of the organizations ceases to exist. Cummings & Worley, 8e (c)2005 Thomson/South-Western

Merger and Acquisition Rationale Diversification Vertical integration Gaining access to global markets, technology, or other resources Achieving operational efficiencies, improved innovation, or resource sharing Cummings & Worley, 8e (c)2005 Thomson/South-Western

Merger and Acquisition Application Stages Pre-combination Phase The organization must identify a candidate organization, work with it to gather information about each other, and plan the implementation and integration activities Legal Combination Phase The two organizations settle on the terms of the deal, gain approval from regulatory agencies and shareholders, and file appropriate legal documents Operational Combination Phase Implementing the operational, technical and cultural integration activities Cummings & Worley, 8e (c)2005 Thomson/South-Western

Collaborative Strategies Involve two or more organizations who agree to work together to achieve their objectives Align and coordinate organization strategies, goals, structures, and processes as they become interdependent Allow organizations to perform tasks that are too costly and complicated for single organizations to perform Also known as transorganizational systems, including alliances and networks Cummings & Worley, 8e (c)2005 Thomson/South-Western

Alliance Interventions When two organizations formally agree to pursue a set of goals There is sharing of resources, intellectual property, people, capital, technology, capabilities or physical assets Common alliances are licensing agreements, franchises, long-term contracts, and joint ventures Cummings & Worley, 8e (c)2005 Thomson/South-Western

Alliance Intervention Application Stages Alliance Strategy Formulation Clarify the business strategy and why an alliance is needed Partner Selection Leverage similarities and differences to create competitive advantage Alliance Structuring and Start-up Build and leverage trust in the relationship Alliance Operation and Adjustment Cummings & Worley, 8e (c)2005 Thomson/South-Western

Network Interventions Involves three or more companies joined together for a common purpose Each organization in the network has goals related to the network as well as those focused on self-interest Characterized by two types of change: creating the initial network (transorganizational development) and managing change within an established network Cummings & Worley, 8e (c)2005 Thomson/South-Western

Application Stages for Transorganizational Development Identification Convention Organization Evaluation Who should belong to the transorganizational System (TS)? Relevant skills, knowledge, and resources Key stakeholders Should a TS be created? Costs and benefits Task perceptions How to organize for task performance? Communication Leadership Policies and procedures How is the TS performing? Performance outcomes Quality of interaction Member satisfaction Cummings & Worley, 8e (c)2005 Thomson/South-Western

Managing Network Change Create instability in the network Manage the tipping point The Law of the Few Stickiness The Power of Context Rely on self-organization Cummings & Worley, 8e (c)2005 Thomson/South-Western