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Strategy Making as iterated Processes of resource allocation

Strategy Making as iterated Processes of resource allocation. By Tomo Noda & Joseph L. Bower Presented by YS Kwak. Contents . Introduction B-B Process Model Bell South & U S WEST Conclusion- Propositions I, II, III Contribution Critique. introduction. Discussion of strategy:

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Strategy Making as iterated Processes of resource allocation

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  1. Strategy Making as iterated Processes of resource allocation By Tomo Noda & Joseph L. Bower Presented by YS Kwak

  2. Contents • Introduction • B-B Process Model • Bell South & U S WEST • Conclusion- Propositions I, II, III • Contribution • Critique

  3. introduction • Discussion of strategy: • Chandler, 1962 & Andrews, 1971 • Ansoff, 1965 & Porter, 1980 • Allison, 1971 • Barnard, 1938 & Simon, 1945 & Cyert and March, 1963 & Crozier, 1964 • Schumpeter, 1934 & Nelson and Winter, 1982 & Thompson, 1967 & Pfeffer and Salancik, 1978 & Miles, 1982 • Mintzberg and McHugh, 1985 • Lindbloom, 1959

  4. B-B Process Model • Bower-Burgelman process model of strategy making: • 3 organizational levels & 4 subprocesses • Levels: bottom, middle, and top managers • Subprocesses: Definition and Impetus (interlocking bottom-up core processes) & Structural and Strategic context determination (overlaying corporate processes) • Goal: -To explore critical gap and extend B-B model, then describe the research design and field study based on extended version of B-B model to explain propositions -Using TWO firms (1983 – 1994)

  5. Bell South & U S WEST • Similarities: • 1. Start point- same age • 2. Technology • 3. Market- great deal of uncertainty Result: largest vs. smallest

  6. Bell South & U S WEST • Different strategies • 1st period (1983 – 1985) • Different business strategies taken by business unit officers • Different management style: Traditional centralized vs. Decentralized – different business development practices • Different structural context in financial grip on business units • Different strategic contexts • Different business plans for business units • Different operating results in relatively similar local markets

  7. Bell South & U S WEST • 2nd period(1986 – 1989) • Strategic forcing by business-unit officers • Strategic building by middle managers • Confidence building by top corporate executives • Influence of corporate contexts on the impetus process

  8. Bell South & U S WEST • 3rd period (1989 – 1994) • More vs. Less investment to wireless communications businesses • Different cellular operations by middle managers • Different top manager’s conductions

  9. Conclusion- Propositions I • Top managers exercise a critical influence on the strategic initiatives of lower-level managers by setting up the context in which these managers make decisions and take actions • Both strategic and structural contexts influence bottom-up initiatives in the definition process, and shape resource allocation in the impetus process in a way what virtually defines a course of business development and subsequent emergence of a corporate strategy for the new business • A firm’s structural context is relatively stable over time, and its persistent impact on the subsequent business development process constrains the discretion of top managers who may want to change the firm’s course of actions in response to the development of technology and the market for a new business

  10. Propositions II • In the case of a new business development that involves a high degree of uncertainty, the iterations of the resource allocation process generate a pattern of escalation or deescalation of a firm’s strategic commitment based on early results from operations that confirm or disconfirm the premises of the first investment and the credibility of the champions

  11. Propositions III • In the case of successful business development, continuous, incremental learning of top managers during business development, and the resulting fine turning of strategic context, shift resource allocation and precede the articulation or change in official statements of the corporate strategy for the new business

  12. Contribution • Shows that role of middle managers is significant factor for success • Comparative longitudinal study • May help strategy researchers in the iterative approach and formal strategy making process

  13. Critique • Why are Bell South and U S WEST different so far? • Is it able to achieve same success when we use same strategies that Bell South had been conducted? • If it is not, then why? • Is it the best strategies only in high uncertain market condition?

  14. THANK YOU

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