Corporate Management and Entrepreneurship

• Derivation of organizational goals
  • Factual goal: What services/products do we want to procide (performance program)?
  • Formal goal: Business goals for the profitabitlity and growth of an organizatin (surpluses -> dividends (for-profit), -> funds for innocation or risk reserves (non-profit)
• Objectives for organizational design
  • Efficiency / Effectiveness of the organization's performance in the current situation (Profit, market share, sales, margins) -> named exploitation in the focus of classical organizational design
  • Major changes / innovations for the organization (New business models, disruptive products/innovations/technologies,) -> named Exploration = Becoming increasingly important in the sense of "Ambidexterity"

Example Competitive Strategies:

• Cost Leadership strategy
  = Consequently approach cost optimzation in all activities = lowest costs per unit 
  Organizational conditions:
  • Low heterogeneity of product portfolio (standard products) necessary
  • Incentive systems and organizational culture towards: costs and cost reduction
• Differentiation Strategy
  = Unique product/service characteristics, which are relevant for customers
  Organizational conditions:
  • High heterogeneity of product portfolio (variants, customization) possible
  • Incentive systems and organizational culture towards: quality, creativity and customer orientation

>>> Both strategies need different organizational cpabilities and structures

• Quantity sharing (no specialization)
  • Different actors perform similar activities on similar objects or subjects
  • Primarily for simple extension of capacities (examples: supermarket checkout)
  • No specialization advantages
    >>> Note: This requires tasks that can be handled by a single person alone
• Specialization by objects (divisional specialization)
  • Acors specialize in objects (or subjects) with/on which they perform activities
  • Divisional organization (division or business unit organization) e.g. regions, products, cutomer segments
  • Object-related specializatin advanteages
• Specialization by operations (functional specialization)
  • Acors specialize in specific tasks or activities
  • Functional organization along corporate functions e.g. procurement, production, sales
  • Operation-related specialization advantages

>>> Can be applied to all levels of organizational units = jobs & competencies and departments:

• Jobs are the smallest organization unit. It is created by the permanent assignment of tasks to one or more persons.
• Competencies are the formal rights and powers vonferred on a jobholder. They legitimize him/her to perform the actions necessary for the proper fulfillment of the job task.
• Departments are a permanent grouping of organization units under a common leadership position
  • Functional (operation-oriented) departmentalization or 
  • Divisional (object-oriented) departmentalization

• Coordination involves the alignment of individual activities with regard to an overarching overall goal (Interdependencies).
• Interdependencies alway exist when the activities/decisions (or their result/success of one organizational unit dpend on the activities/decisions of another organizational unit:
  • Process interdepndencies: The output of one organizational unit is the input of another organizational unit
  • Resource interdependencies: An organizational unit accesses resources that are also used by at least one other organizational unit
  • Market interdependencies: An organizational unit interacts with market participants with whom at least one other organizational unit also interacts

Personal and Technocratic Coordination Mechanisms

• Personal Coordination Mechanisms
  Communication between the actors respnsible for the activities to be coordinated
  • Personal directive
    • Coordination vertically across hierarchical levels
    • Example: Management and control by supervisor
  • Self-coordination
    • Coordination horizontally at the sam ehierarchical level
    • E.g. meeting to exchange infromation, committees but also bilateral exchange ad hoc
  • Organizational culture
    • Informal coordination
    • Anchored norms, balues and behavioral patterns enable stable behavioral expectations and a "common language" to be formed
    • Actors from different organizational units can orient themselves to these
• Technocratic Coordination Mechanisms
  Coordination independent of persons via formalized specificaionts and systems
  • Inventive systems (connecting performance measures with benefits/sanctions)
    • Behavioral influence on effective & efficient service provision (coordination function)
    • Effects on individual goals (benefits, sanctions) are linked to decisions and actions in the organization (motivational function)
  • Planning
    • Output oriented control
    • Periodic specifications for inputs, processes and outcomes that apply to several organizational units
  • Operational guidelines ("programming")
    • Input-oriented control = procedural specificaitons (how to do things)
    • Definition of general rules for production, service provision and resource use

• Centralized (decisions rights only at top management) vs. decentralized (extensive decision-making rights "delegated" to lower hierarchical levels) organization
• Delegation: Permanent transfer of decision-making tasks as well as associated competencies and responsibilities to hierarchically subordinate units.
  Delegation is then mor likely to use,
  • The shorter the time scopp of the dicisions
  • the smaller the impact of a decision on ther areas or on the company as a whole
  • the more purely technical decisions are made
  • the more routine the cases are
• Subsidiary principle: Decisions and activities should always be located at the lowest level in an organizationo that is still capable of adequate execution

• Governes the hierarchical management relationships along which control and coordination interventions are permitted an necessary
• Design decisions:
  • How many jobs should be subordinated to a supervisor in an organizational unit (span of control)?
    • The optimal span of control is the highest possible number of empleyees that a supervisor can just effectively and permanently control or coordinate
  • How many levels of hierarchical management levels should a company have (depts of control)?
    • Number is closelyy related to the design of span of control
  • According to which system should the directive relationships be regulated (single-line vs. milti-line systems)?
    • Single-line: each lower-level unit receives instructions from only one higher-level unit (In exceptional cases, operational units may communicate directly -> Fayol bridge)
    • Multi-line Systems: Lower-level unit receives instructions from several higher-level units

Special Case of a Multiline System.

Organizational design goals for processes:

• Reduction of throughput times and resource requrements / increase in process result
• Reduction of mutual dependencies in activities
• Reduction of interface problems
• Holistic process responsibility (self-coordinatoin, motivation)
• better (internal and external) customer orientaiton
• concentration on value adding activities
• continuous improvement processes

• Motivation as a complement to coordination
  • Coordination conveys to actors what they should do
  • Motivation provides ators with reasons why they should/want to do something (see e.g. inventive systems)
• Motivation as the counterpart to specialization
  Many measures to better generate specialization advantages tend to have a negative impact on motivation = In particular, the strong decomposition of work into smallest activities:
  • reduced feelings of comprehensiveness, meaning and autonomy
  • demotivating monotony and hogh workload
• Lack of motivaiton reduces effectiveness and efficiency
  • Decreasing work quality: poorer customer orientation, more rejects/waste
  • higher absenteeism: cost/quality loss due to substitution solutions, additional need for coordination
  • higher employee turnover: Costs/quality loss due to job replacements

• Coordination related design rules:
  • Job holders should have decision-making and instruction rights that are necessary for the adequate fullfilllment of tasks
  • Rights and duties should be formulated in such a way that they can be easily fullfilled by a person qualified to do so under normal circumstances
• Always qustion towhat extent the achievable specialization advantages outweigh the disadvantages:
  • additional coordination effort?
  • demotivation effect of over-specialized activities?

• Department formation is always necessary ehen the number of employees exceeds the management capacity of a single supervisor.
• In order to form departments, sub-units must be formed whose respective manager assues managerial responibilities
• Fundamental principle:
  • The jobs or organizational units that show as many similarities and/or interdependencies as possible with regard to those activities that make the relatively greatest contribution to success should be grouped together

The higher the situational dynamics, ...

1.  the lower the degree of specialization
2. the less advantageous technocratic coordination mechanisms become
3. the more extensive the distribution of decision-making rights
4. the lower the optimal span of control

The higher the structuredness of the internal tasks, ...

1. the higher the degree of division of labor
2. the ore likely technocratic coordination mechanisms are to pay off
3. the lower the delegation (distribution of decision-making rights)
4. the higher the optimal span of control

1. In the case of a homogeneous performance program (e.g. a single-product company)
   = a functional / operations-oriented organization is advantageous
2. In the case of a heterogeneous performance program
   = a divisional / object-oriented organization is advantageous

• Rationale: Complexity is reduced in the divisions compared to the overall organization:
  • There are hardly any interdependencies between the divisions
  • Greater flexibility for necessary adjustments
  • There is no need for management to intervene in day-to-day business

1. With a cost leadership strategy
   = an operations-oriented, functional organizatinoal structure is advantageous
2. With a differentiation strategy
   = an object-oriented, divisional organizationa structure is advantageous

Information and items are free, perfect and immediately available

• Free: As soon as an item is digitalized, it can be copied numerously. The cost of the item and the storage space are very low. Also the transmission costs almost nothing but the fixed fee for the internet access. So, the marginal costs for reproduction and transmission is almost zero.
• Perfect: The quality of the copied and digitalized item/product is the same as of the original item/product no matter how often it is copied. So every copy is a perfect reproduction of the original item/product.
• Availability: As soon as the netweork is available, the perfect and free items can be transmitted with almost no time lack from one place to another

• Strong increase within the last decade
• result in network effects
• Direct and indirect network effects:
  • Direct: User growth on platform
  • Indirect: Growth of the users is affected if other network actors grow (Videogame players and game developers)
• They work by collecting, transmitting, analyzing and minetizing of personal data of the users
• Platform ecosystems change the entrepreneurial landscape by digitalizing products, services and processes
• Increase productivity by
  • efficient matching of persons (eBay, LinkedIn, etc.)
  • efficient usage of products/items (real estate, cars, workplaces, etc.)
• Result in high innovative output for ecample 9 US-platfroms registered 11'585 patents in the year of 2014
• A lot of the unicorns are platfrom business models
• Show a tendency to oligopolies

• Free
  Frtee service, in order to attract a macimum number of users. Monetizing mostly via advertisement (two-sided market)
• Freemium
  Free basis service supplemented with additional to pay for services. Only possible with little marginal costs
• Subscription
  Constant turnover, which is reducing volatility and from a user perspective leads to log in effects
• On-Demand
  Immediately purchase option for a premium. product/service to a customer segement which has more time than money
• Sharing
  Not the owning of resources/products is central, but the acces is important. Competitive advantage in comparison to owners
• Marketplace
  Offer of products, mostly beneath the market price, in order to gain market shares and by that eliminate the competition.
• Premium
  Offer of a premium-product and connect this productwith network effects
• Ecosystem
  Building-up and running an ecosystem of providers and consumers, which sets the costs of changing for both sides very high

• Unbundling
  • With unbundling is meant to separate individual products/services which are interconnected with each other
  • Example: pple iTunes. In the classical apprach iTunes enabled customers to buy individual songs of artists without buying the whole album.
• Rebundling
  • Describes the new (re-)assembling of individual services
  • Example: Spotify/Streaming providers. Streaming providers ofer the customers a huge media bibliotheca. With Spotify the customers can consume songs individually of in linkage with other things allocating individual playlists. The music is offered to the customer free, perfect and always available. For the usage of the service only a monthly subscription fee must be paid.

• Transaction platforms: Eases the transaction betwen different types of individuals, which would otherwise probably wouldn't have found each other. (Uber, Amazon Marketplace, Google, Ricardo) -> Multisided platform
• Innovation platforms: Are built on technological components, whih are used as basis for developing innovative solutions by third-party service providers. (iPhone, API) -> innovation ecosystems
• Integrated platforms: Is a technology, product or service that is both a transaction and an innovation platform. e.g. Apple, Windows

Complementary products

• Traditionally the demand for a product goes up as the price of it decreases. A downward-sloping demand curve shows the demand of a product as the price fot it gets cheaper when selling greater quantities
• On the other hand the supply curve is an upwards-sloping curve, since more suppliers will appear when a higher price can be achieved for a product and the quantity of sold products rises.
• The demand and supply curve intersect at a point called market equilibrium. In this point the demanded quantities of a product and the quantities that are supplied meet. If the price is higher than the equilibrium, the price will naturally decline and if it is below the equilibrium the price will naturally rise. The equilibrium can only be achieved at one price, since the demand curve is downward-sloping and the supply curve is upwards-sloping
• Complements are goods that can be used with another good. They are also called paired goods.
• The classical example for a paired good and to explain how complements shift curves is ground beef for hamburger patties and hamburger buns. If a shop decides to offer the ground beef at a discounted price the demand for hamburger buns will rise naturally as well.
• Two products are complements if a drop in the price of one puches out the demand vurve for the other
• When a platform is opened upt to allow outside contributions, its owners realize an important benefit: Demand for the owner's product rises as others contribute complementary goods. Then these complements are digital, many of them will be free, perfect and instant.
• Platform owners often have to curate contributions from outsider to maintain standards like e.g. apps ont eh iPhone

• Digital platforms are also spreading into industries like transportaion, lodging, shopping etc. that deal in physical goods and services. They are called O2O, online-to-offline, platforms
• Due to perishable inventory, these platforms may have marginal costs, but also capacity constraints. This makes O2O different from fre, perfect and instant economics of pure information goods.
• Examples are Lyft, Uber, Airbnb, etc.
• O2O-Platforms are mainly helping with the quick arrangement of transactions by offering access to a wide network of potential cutomers

• Before 1970s
  • Focus on optimizing the utilization of prodction capacities
  • Market-side activities = Efficient service distribution to customers
  • Until then no marketing was necessary
• From 1970's
  • Demand excess disappeared -> Market saturation
  • Changing markets
  • "Byer markets" (better position on the buyers' side)
  • Learning about customers bacame increasingly important
  • From then on marketing was necessary
• Development of a new corporate task
  • Own management function
  • Goal: Alignment of all corporate activities with market requirements
  • Much more than just expanding sales or traditional sales departments
  • It's about much more than "advertising" or pure "sales promotion"!
• Basically two types of customers / business interactions:
  • B2C = Business-to-Consumer (private costumers)
  • B2B = Business-to-Business (Business customers)

• Marketing i the
  • alignment of all business activities with market requirements
  • planning, organization, implementation and control (management aspect)
  • of all activities with the intention of achieving qualitative and/or quantitative targets (decision aspect)
  • through selection and establishment, maintenance and referencing, expansion, and intensificaiton or restoration or exclusion of business relationships (relationship aspect)
  • with relevant target groups in each case in sales, procurement, production, the environment and the media (stakeholder aspect)

• To achieve competitive advantages
• Relevant characteristics of products/services for competitive advantages:
  • ... must be relevant (expacially for puchase decision)
  • ... must be perceived
  • ... must be defensible
  • ... must be efficient

Realization of competitive advantages through better alignment of corporate activities with market requirements takes place in an interlocking process of four diferent elements:

• Task:
  • Target-oriented sourcing, structuring and evaluation of all information required for the subsequent derivation of marketing decisions
  • Definition of "TARGET" position vs. "ACTUAL" positionof own product/services
• Analyses Perspecives:
  • A: (Potential) Customers
  • B: Competition
  • Own Resources/Capabilities
  • Objective: To define own positioning
    • Results of the customer, competition and resource analysis form the basis
    • Allows mulidimensional comparisons of perceptions/preferences of the customers or customer segments

• Obtaining and interpreting all information related to the purchasing behavior of current and potential buyers
• Differentiation according to 
  • Individual purchasing behavior = Individual actors
    • Orgaizational buying behavior (B2B)
      • "Buying Center" as a perspective of the analysis of organizational buying behavior
      • Industrial goods
        • Individual organizational buyers (organizations) at the center of the analyses
        • In addition to general market cultivation, particular importance of sales staff / units
      • Procedure:
        • Goal: Systematic processing of the customers
        • Systematic recording and central data management in sales ("white book")
    • Personal buying Behavior (B2C)
      • Look at diagram
  • Aggregated buying behavior (market segements) = groups of customers
    • Aggregated demand analysis
      • Similarity of the purchasing behavior of different demanders
    • Market segments (Customer segments)
      Alignment with demand-side characteristics influencing / related to:
      • Purchasing behavior
      • Usage behavior
      • Organizational prcurement behavior

• Delimitaion of the competition
  • Prerequisite: Identification of the relevant market

1. Functional delimitation
   To what extent do customers generally perceive other services from competitors as relevant substitution options?
2. Time delimitation
   Are there substitution opportunities between customer purchase decisions, made at different times? (e.g. customers waiting for the next iPhone, before they decide to buy a new mobile phone)
3. Spatial delimitaiton
   To what extent do customers perceive competitors from other regions / country markets as relevant substitution opportunities?
   Transport: effort, time, cost -> Concrete for a construction site

For these delimitaions different tools can be used:

1. Insustry analysis with Porter's five forces: Identification of drivers/influences that apply to all competitors in an industry
2. Segment analysis (strategic group analysis)
   1. Analysis of specific market segments
   2. Identificaiot of clusters of competitors that are in similar or generalizable strategic situations
   3. Accordingly, similar competitive behavior is to be expected
3. Competitor analysis
   1. Form of competitive analysis that goes the furthest
   2. Particular Challenge: How to identify and obtain the relevant information?

Objective: As realistic and unbiased as possible analysis of the market-related strengths and weaknesses of the own company

• Relativ examination:
  • Assessment of own capabilities in comparison to competitors identified as relevant in the competitive analysis
  • Benchmarking as a suitable analysis tool
  • Systematic comparison between comanies (units) on the basis of standardized comparative variables and benchmarks

• Purpose
  • Controlling and aligning the use of marketing instruments (Step 3) with regard to defined marketing objectives
  • Longer-term validity = long-term alignment of market activities with binding framework for action
• Types:
  • A: Classic: Competitive strategies (Porter)
    Manly: Quality leadership (differentiation) vs. cost leadership
  • B: Time leadership
  • C: Relationship Management
    • Brand Management
    • Customer loyalty management