market power leadership

PROF. SHIRISH S BHAKARE SEMESTER 3 STRATEGIC MANAGEMENT

TEAM NEEDS

TASK NEEDS

INDIVIDUAL

NEEDS

Why do we need a Leader?

Strategic Implementation


WHY?

HOW?

WHAT?

GREAT LEADERS APPROACH:

• SELF BELIEF

• MAKE OTHERS BELIEVE

Managing Change

Model to implement:

Leadership implementation



Managing Change

Model to implement:



Self

Top down

Lateral

Bottom up Leading

subordinates

Leading peers

Leading Your Boss

Leading Yourself


Domination style

Democratic style

Area of freedom for team in terms of decision making

Area of freedom of leader in terms of decision making

Reduced influence of leader in decision making

Reduced influence of team in decision making

Managing Change

Model to implement:




Managing Change

Model to implement:




LEADER VERSUS MANAGER

• Leader is one makes you want do things and unlike manager takes work out of you

• Leader is essentially a manager

• Leaders lead by example

• Leaders focus on doing right things and managers focus on things right

• Managers are given authority while leaders authority is innate in their approach

Managing Change

Model to implement:




Decision making participation

Corporate level

Middle level

Lower level

Flow

of d

ecisio

ns

Organizational hierarchy and decision making

Managing Change

Model to implement:




• DEFINE THE OBJECTIVE

STEP 1

• COLLECT RELEVANT INFORMATION

STEP 2

• GENERATE FEASIBLE OPTIONS (brainstorming, re engineering, benchmarking, mapping etc. )

STEP 3

• MAKE DECISION

STEP 4

• IMPLEMENTATION & EVALUATION

STEP 5

Managing Change

Model to implement:




DECISIONCR

EATIV

E

ALT

ER

NATIV

ES

FEASIBLE OPTIONS

BEST ALTERNATIVES

LOBSTER POT MODEL OF DECISION MAKING

Managing Change

Model to implement:

Decision Making



1. Scenarios inform decision makers and influence decision making

2. Scenarios add value to decision making only when managers and others use

them

3. In developing scenarios, the emphasis is on improving managers mindsets and

knowledge

4. Alternative projections must challenge managers current mental models

5. The consideration of alternative futures directly affects managers knowledge

6. Scenarios must include indicators so that managers can track how the future is

evolving

Managing Change

Model to implement:

Decision Making: Scenario Building



7. Scenarios have value only to the extent that they inform decision makers and

influence decision making

8. Scenarios add value to decision making only when managers and others use

them to systematically shape questions about the present and the future, and to

guide how to go about answering them

9. In each step of developing scenarios, the emphasis must be on identifying,

challenging, and refining the substance of managers mindsets and knowledge


Managing Change

Model to implement:



10. Alternative projections about a given future must challenge managers current

mental models by creating tension among ideas, hypotheses, perspectives, and

assumptions

11. The dialogue and discussion spawned by the consideration of alternative

futures should directly affect managers knowledge

12. Scenarios should include enough indicators so that managers can track how

the future is actually evolving so that the learning and adaptations stimulated by

the scenarios are continuous


Managing Change

Model to implement:




Achieving Effectiveness

Model to implement:Functional & Operational

Implementation

Functional plans

& policies

Finance

Operational

PersonnelInformation plans

Marketing plans

Need1. To ensure decisions are

implemented by all parts of organization

2. Method to control3. Time spent on decision

making reduces with effective decisions

4. Consistent handling of different functional areas for similar situations

5. Coordination





Implementation

Functional plans & policies

Finance

Operational

PersonnelInformation plans

Marketing plans

Considerations for integration of functional plans and policies

1. Need for Internal consistency

2. Relevance to development of organizational capability

3. Making trade off decisions4. Timing of implementation of

plans and policies





Implementation

Operational

Effectiveness

PACE

PROCESSES

PEOPLE

PRODUCTIVITY

CONVENTIONAL STRATEGY


CONVENTIONAL AND UNCONVENTIONAL STRATEGY

CONVENTIONAL STRATEGY = PLANNING

1. Conventional Strategy dealt only with plans to eliminate

mismatch between environment and organization where

as strategic management deals with understanding

linkages and changing structures if necessary

2. Traditional strategic planners analysed historical data to

make predictions. This is inadequate in a rapidly

changing world.

3. Problem solving through disjointed incrementalism has

been proposed - as better than systematic attempts at

planning


4. Strategic planning has only been programming of

existing strategies while strategy forming requires

synthesis of what managers know from all sources

5. Strategic planning leads to long time lags, and to a

myopic short term focus by senior managers

6. Strategic planning ignores creative processes which

generate breakthroughs

7. Strategic planning did not involve those executing it

8. Strategic planning works only in stable environment

9. Planning is becoming more evolutionary, and bottom up

CONVENTIONAL AND UNCONVENTIONAL STRATEGY

MARKET POWER


Firms ability to influence prices prevailing across the

industry is called market power of firm

This is possible in two scenarios:

1. Monopolistic environment

2. Oligopolistic environment

MARKET POWER


MARKET POWER

In economic terms, Market power is the ability to raise price above marginal cost and earn a positive profit. It is mathematicaly represented as:

P/MC = MOD PED/(1 + PED)Where P: Price of product

MC: Marginal cost of productPED: Price Elasticity of Demand

Implication: The higher the P/MC ratio, the more market power the firm possesses

Note: PED will be negative, so the ratio is always greater than one


Source of market power of a firm is essentially the result of

high entry barriers created by:

1. Control over scarce resources

Example: Oil & Gas

2. Technical superiority

Example: Microsoft

3. Increasing returns on scale

Example: Wireless telecommunication companies

4. Regulatory barriers

Example: Patents given to pharmaceutical companies

MARKET POWER

market power leadership

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