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University of Cassino
Faculty of Economy
Business Organization
BUSINESS MANAGEMENT
A.Y. 2008 -2009
Prof. Francesco Polese
1
Business Organization
Premises
Growing up of business dimensions,
developing of business relationships with the
market, and the nowadays management
procedures have lead to assume for Direction
and Organization functions more importance
and strategical remarkable contents.
2
Business Organization
Business Directional Process
The function of Business Direction demands the
simultaneous assumption of decision actions, of
employment of resources, of leading of workers
and of appraisal of the performances, according
to an integrated cycle that previews for each
activity the development of different moments
(phases,
stages)
closely
and
mutually
interdependent.
3
Business Organization
Business Directional Cycle
Planning
Decisions Actions
Control
Organization
Evaluation Actions
Direction Actions
Leading
Guide Actions
4
Business Organization
Business Directional Cycle
Every cycle is carried out, in its several
moments, by means of the finding, the
management and of the communication of
informations that flow inside of the enterprise
and that must necessarily be integrated with
those coming from the outside; in this sense
we can speak also about an informative cycle.
5
Business Organization
Informative Cycle for Direction
Environmental
Informations
Executive
Guidelines
Internal
Control Data
Executive
Results
6
Business Organization
Organizational Function
The Enterprise works as a system, constituted from
several elements that act for a common purpose,
coordinated by means of the accomplishment of
specialistic functions and oriented to the attainment of a
final (survival) goal .
The study of the Organization can be carried out by
means of the analysis of the Structural aspect related to
the ordering of tasks and responsibilities, and of the
Behavioural aspect of the organizational system,
considered as a whole.
7
Business Organization
Organizational Decisions
The planning (or re-planning) of the Organization
demands the assumption of a set of decisions:
Definition of the
Objectives
Definition ofvertical
integration degree (efficient
border)
Analysis of the complex of
existing ties (Professional
abilities, Investments,
Structural costs)
Construction of the
Organizational Structure
Characterization of the
Functions (inside the Business
System)
Characterization of the strength
elements and valorization of the
main meaningful potentialities
8
Business Organization
Organizational Decisions
To define an Organizational Structure it is necessary the definition of an
outline of connections between the several organizational positions
finalized to the activation of authority relationships, of cooperation,
information around which the business life is developed, as well as it
concerns the “vertical” development, the “horizontal one”, the “crosssectional one” and “functional one” (of lines or staff).
The planning of the structure demands also the definition of
procedures (organizational routines) that establish the adoptable
behavioral rules for the solution of periodical (or extraordinary)
problems; they come planned in starting phase, enriched in itinere for
effect of the accumulation of knowledge and experience, and they
translate in decisional and operating rules. Therefore we distinguish
operative, of control, informative and decisional procedures
9
Business Organization
Structural Models for Organization
Several models of Organizational Structure exist to define the inner
articulation of the relationships, the roles and the existing
responsibilities in an enterprise:
Functional Pattern:
Its characteristic: the subdivision of
the areas of responsibility for groups of
tasks in terms of management functions
What is the main principle: the
principle of specialization of each
operating areas, and of sub-division of
the managerial process in connection with
the different nature of the problems to
train, approaching the responsibles
competences according to the kind of
task to carry out
The definition on which it is based:
the function consist of a set of
complementary and interdependent tasks
and duties (functions) in relation to an
aim
What it is the limit: possible difficulty
of coordination between the different
Responsibility Area
To who it is apt: to enterprises with
greater operating stability
10
Business Organization
Functional Structural Model
Top Government
Business Management
Business Direction
Marketing
Management
Production
Management
Sales Office
Planning
Office
Public
relations
Office
Customer
care Office
Systems and
Methods
Office
Human
resources
Management
Administration
and Financial
Management
Accounting
Office
Plant Office
Controll
Office
Planning Office
Production
Office
Finance Office
Supplies Office
Purchase
Office
11
Business Organization
Structural Models for Organization
Several models of Organizational Structure exist to define the inner
articulation of the relationships, the roles and the existing
responsibilities in an enterprise:
Divisional Pattern:
Its characteristic: the division of the
management responsibilities for groups or
various families of products, each
entrusted to a divisional director, who is
the only responsible of economic and
operating
result
(also
geographical
meaning)
What is the main principle : the
subdivision of the business (enterprise) in
more parts, considered distinct centers of
profit (and cost) with elevated autonomy,
above all operative.
The definition on which it is based:
the business focuses its attention on the
result rather than on the tasks and
stimulates
the
assumption
of
responsibilities (decentralization)
What it is the limit: possible creation of
inner conflicts (often it’s due to not the
convergence of the specific interests)
To who it is apt: to mainly dynamic
enterprises in the (entrepreneurial)
managerial behaviors
12
Business Organization
Multi-divisional Structural Model
Top Government
Business Management
Human
resource
Business Direction
Alfa Product
Division
Production
Division
Plant
Division
Finance and
accounting
Beta Product
Division
Marketing
Division
Studies and
plan
Division
Sales
Division
Production
Division
R&D
Division
Gamma Product
Division
Marketing
Division
Public
relation
Division
Sales
Division
Production
Division
Planning
Division
Marketing
Division
Budget
Division
Sales
Division
13
Business Organization
Structural Models for Organization
Several models of Organizational Structure exist to define the inner
articulation of the relationships, the roles and the existing
responsibilities in an enterprise:
Matrix Pattern:
Its
characteristic:
the
corporate
structure introduces a reticular character,
with interlacing of functional competences,
flexible form and interconnection of
responsibility (institutionalized evolution of
the Organizational plan)
What is the main principle: the
definition of the amplitude and the limits
of the delegation of the directional powers
according to the degree of decentralization
realized in the government of the business
system
The definition on which it is based:
the requirement of <<department
division>> of the job and the
responsibilities
What it is the limit: the processes of
information and decision can be carried
out with a minor tie of institutionalized
hierarchical filter
To who it is apt: to the enterprises
highly (deeply) dynamic in the managerial
behaviors
14
Business Organization
Matrix Structural Model
Top Government
Production
Manager
Mkt Manager
Administration
Management
Human resources
Management
Alpha
Products
Technical
Manager
Sales
Manager
Head
accountant
Human resources
Responsible
Beta
Products
Technical
Manager
Sales
Manager
Head
accountant
Human resources
Responsible
Gamma
Products
Technical
Manager
Sales
Manager
Head
accountant
Human resources
Responsible
15
Business Organization
Themes
Business Functions
Purchases/Supply
Production
Logistics
Marketing
Quality
R&D
Definitions
Evolution
Purchase Mkt
Make or buy
Suppliers Relationship
Suppliers Integration
Supply Chain
Supply Chain Management
16
Business Organization
Purchases/Supply
Purchases
Supplies
Definition
the set of the activities
turned to stipulates contracts
for the supply of the
necessary assets/ services
the set of the activities
turned to guarantee a regular
standard flow of goods and
services according to a
predetermined
business
planning
Relevance
decisional
process
operating tasks (even if the
managed amounts can be
also much considerable) and
moderated
decisional
autonomy
greater
delegation
General
Framework
in
The short run trend, with a
“passive” attitude to answer
the
demands
for
the
production
discretion
and
The long run trend, with a
“proposal” guidance for plans
17
Business Organization
Purchases/Supply
The purchases office must, at first, comprise the requirements of
production (quantity, quality and timing) according to:
1) To estimate and to choice of the suppliers
It’s not necessary to put more suppliers in competition and to choose lower
purchase price. Risks and opportunities estimation of the only supplier (single
sourcing)
2) To deal and to define the conditions:
Choosing between open contracts or orders spot. Quality and delivery time turn out
critical. The acceptance or test control can be made from the supplier
3) To speed up the deliveries and to define the anomalies:
It’s the more delicate phase because the anomalies can have origin from problems
of the supplier or inner problems of the plant. In the great enterprises the center
purchases function only takes care of the heavy supplies addressed to several
plants while the little ones purchases are managed from local offices.
18
Business Organization
Purchases/Supply
The supplying function has acquired during last years an increasing importance and
strategic relevance regarding:
Elevata
Gestione strategica degli
approvvigionamenti
Criteri di rendimento
fondamentali:
Criteri di rendimento
fondamentali:
costo/prezzo
gestione del flusso
gestione dei costi
fondi affidabili a breve
termine
Gestione degli acquisti
Modesta
Importanza degli acquisti
Gestione dei materiali
Criteri di rendimento
fondamentali:
efficienza funzionale
Gestione delle fonti di
approvvigionamento
Criteri di rendimento
fondamentali:
disponibilità a lungo
termine
Modesta
Elevata
Complessità del mercato della fornitura
Purchases relevance,
It’s expressed as an added
value for line of product, or
costs percentage of raw
materials on the total costs
complexity
of
supply market,
the
It’s linked to lack of supply,
technological development in
new
materials,
entrance
constraints, cost / complexity
of
logistic
factors,
any
condition of monopoly /
oligopoly.
19
Business Organization
Purchases/Supply
Elevata
Modesta
Importanza degli acquisti
There are two paths in the development of the supply function:
Gestione dei materiali
Gestione degli acquisti
Gestione delle fonti di
approvvigionamento
Gestione strategica degli
approvvigionamenti
Modesta
Elevata
Complessità del mercato della fornitura
through materials
management, in relation
to the recognition of the
costs of purchase
(more frequently);
through the
management of the
supplying sources, with
regard to the strategic
or technological
criticality of the
purchases.
20
Business Organization
Purchases/Supply
Il marketing purchase
It’s based on the systematic study of the supply market in order to consider
and manage suppliers as a resource.
It’s based on procurement mix:
Product: = all decisions relating to materials supplied. The product policies are
linked to critical state of economic situation and risk of supply.
Price = the negotiation of economic conditions and issues related to quality and
deliveries impacting on the total cost of supply.
Sources supplying = the monitoring of the market supply is finalized to the
identification of potential suppliers, their evaluation, selection and qualification, and
to verify suppliers related to critical performances
Communication = promoting the corporate image towards potential and
consolidated suppliers, through financial and technical assistance and through
lightness in production schedules
21
Business Organization
Purchases/Supply
Kraljic Matrix
Alto
Materiali colli di
bottiglia
Materiali strategici
No important intervention
Leverage Items:
to optimize costs through the analysis
of value and the search for new
sources
Materiali non critici
Basso
Rischio di approvigionamento
Non-critical Items:
Materiali con effetto
leva
Alto
Basso
Impatto sulla redditività aziendale
Bottleneck Items:
Reliability, deliveries to guarantee also
to higher costs
Strategic Items:
cooperation with the suppliers
22
Business Organization
Purchases/Supply
The outsourcing choices are due to :
The search of elasticity margins according to fluctuations in demand;
The exploitation of cost differentials;
The need to cope with insufficient production capacity;
The outsourcing of stages characterized by low crucial degree;
The outsourcing working on bulky and weight materials;
the outsourcing of parts to be carried in small quantity.
The outsourcing choices are due to :
- a "positive" attitude of search for greater flexibility, productivity and cost
- a “precautionary” attitude link to the will to to relegate outside risk and
impediment factors
23
Business Organization
Purchases/Supply
The evaluation of outsourcing choices considers:
Internal costs
Exsternal Costs
the cost of the direct materials;
purchase price;
the cost of the direct labor;
services charges, if not included in the
price, such as transportation (logistics)
costs, packaging, insurance and so on;
other variable costs; changes in fixed
costs
the cost of plants, specific equipment and
so on, however charged on customer;
amortization of specific investments;
financial charges on specific equipment;
any start-up costs, understood in a
broad sense
any increased costs related to initial
development
24
Business Organization
Purchases/Supply
In the relationships with suppliers different requirements must be distinguished:
Specialty sub-supply
It provides elasticity to the production
process in terms of production volumes
Capacity sub-supply
It is incremental and not internally available, it
brings technological expertise not possessed
from the purchaser
Permanent sub-supply
It’s the result of a constant and structured
relationship
Occasional sub-supply
It’s the result of episodic relationship and
linked up contingent requirements
Suppliers are regarded as business assets :
- Investing in suppliers relationship
- Consolidating long-term relationships
25
Business Organization
Purchases/Supply
The enterprises reduce the
number of their suppliers:
Fornitore
Cliente
Through centralization of same
category purchases
Fornitore
secondario
Standardizing the components
and subset
Fornitore
primario
Cliente
Buying units/subunits rather than
individual components
26
Business Organization
Purchases/Supply
The development of consolidated suppliers relationship and the sharing
of the information on the production plans is finalized to reduce total
costs, and to manage efficienlty the storage
Assemblaggio/
Produzione
sottoassiemi
Produzione
componenti
Assemblaggio/
Produzione
prodotto finito
Catena del valore secondo una logica di rapporto tradizionale
(Le scorte assorbono le variazioni della domanda)
Produzione
componenti
Assemblaggio/
Produzione
sottoassiemi
Assemblaggio/
Produzione
prodotto finito
Catena del valore secondo una logica di rapporto evoluto
(Le informazioni sostituiscono le scorte)
27
Business Organization
Purchases/Supply
The consolidation of suppliers relationship requires:
organizational integration: to common interbusiness procedures
computer science integration: to invest in innterorganizational systems for the
exchange/sharing of the data
cultural integration: to invest in an acculturation /understanding process
Levers of
integration
Organization
Information
technology
Culture
Operational
- Quality control integrated
procedures, sending orders,
invoicing, transport,
planning and production
control
- Integrated management
-Uniformity in strategic
guidelines on
manufacturing (Production
flow)
- Uniformity of values
(Manufacturing excellence,
service orientation)
systems
- EDI for launch orders,
forecasts, invoices
-Uniformity of language (for
example , materials tagging)
Technological - New products integrated
developing procedures (for
example materials and common
processes tagging)
- Uniformity of language
- Integrated planning
information systems
(CAD-CAM)
- EDI for project
data communication
- Uniformity in the product
design (Modularization,
standardization)
- Uniformity of values (eg.,
Technological excellence)
28
Business Organization
Purchases/Supply
The reduction of time to market increases through the establishment of new
monitoring tools on the entire supply chain.
Materie
prime
Feed-back dallo
Feed-back dallo
Feed-back dallo
stadio a valle
stadio a valle
stadio a valle
Componenti
Sottoassiemi
Prodotto
finito
Mercato
Sistema di monitoraggio del mercato in un rapporto cliente-fornitore tradizionale
Feed-back dal mercato finale
Materie
prime
Feed-back dallo
Feed-back dallo
stadio a valle
stadio a valle
Componenti
Sottoassiemi
Prodotto
finito
Feed-forward sullo
Feed-forward sullo
stadio a valle
stadio a valle
Mercato
Feed-forward sul mercato finale
Sistema di monitoraggio del mercato in un rapporto cliente-fornitore evoluto
29
Business Organization
Purchases/Supply
SUPPLY CHAIN
• What is Supply chain?
• Objective of a supply chain
• Supply Chain Management
30
Business Organization
Purchases/Supply
What is Supply chain?
Supplier
Manufacturer
Distributor
Retailer
Customer
Consists of all parties involved, directly or indirectly, in fulfilling a
customer request
It refers to the distribution channel of a product, from its sourcing,
to its delivery to the end consumer (also known as the value
chain). The supply chain is typically comprised of multiple
companies who are increasingly coordinating activities via an
extranet
31
Business Organization
Purchases/Supply
Objective of a supply chain
• Maximise overall profit
• Profit
• Revenue generated from customer - costs incurred along the
entire chain
•
(e.g. manufacturing / storing / distributing the product)
• When is Supply chain effective?
• Manage Product, Information and Fund flow
32
Business Organization
Purchases/Supply
Objective is to be able to have the right products in the right quantities
(at the right place) at the right moment at minimal cost
33
Business Organization
Purchases/Supply
SUPPLY CHAIN MANAGEMENT
Supply chain management is the integration of
key business processes from end user through
original supplier that provides products,
services, and information that add value for
customers and other stakeholders.
34
Business Organization
Purchases/Supply
Supply chain management is a set of
approaches used to efficiently integrate
suppliers, manufacturers, warehouses, and
customers so that merchandise is produced and
distributed at the right quantities, to the right
locations, and at the right time in order to
minimize system wide costs while satisfying
service-level requirements.
35
Business Organization
Purchases/Supply
Supply Chain Management
•Business association
•Cluster secretariat
Education
and research
organisations
Specialised
services and
closely-related
industries
(certification,
etc.)
Producers
•Technical/technology demonstration centre
•Technology transfer centre
• Distribution
• Marketing
• Packaging
36
Business Organization
Purchases/Supply
F
I
N
A
L
C
O
N
S
U
M
E
R
S
SUPPLIERS
COMPANY
INTERMEDIATE
CUSTOMERS
Value Creation (Product/Service Development) Process
Information/Demand Flows
Sourcing
Operations
Logistics
Value Delivery (Order Fulfillment) Process
Value Maintenance (After Sale Service & Support) Process
F
I
N
A
L
C
O
N
S
U
M
E
R
S
37
Enterprise Organization
Topics
Business Functions
Supply
Production
Logistics
Marketing
Quality
R&D
Definition
Production cycle centrality
Production process
Supply chain, outsourcing
Inferences on Strategy
Process Organization
Production programs and plans
Control
38
Enterprise Organization
Production
Definition
The production function deal with the transformation
process of goods, and with all the operations with which
the acquired resources (input) are converted into finished
goods (output) for the market
INPUT
Transformation
process
OUTPUT
Market
39
Enterprise Organization
Production
Production cycle centrality
The production cycle is central in every business, proceeded by the
supplying process and followed by distribution, continually interconnected
with marketing, design, finance, human resources, R&D
Production
Function
Incoming logistics
Supplying and raw material management
Outgoing logistics
Distribution and products delivery and
management
Marketing
Marketing mix etc.
Human resources
Jobs organizations and resources
management
Finance
Mng and planning of financial necessities
R&D
Design, new products development
40
Enterprise Organization
Production
Production chain
Rappresents the system of enterprises involved and participating to the transformation of
inputs into finished products, contributing to deliver into final market
Outsourcing
Enterprises sometimes need external support in logistics, production, finance support, etc., in
order to became more flexible in costs (from fixed to variables), financial need decrease,
know-how concentration, networks support fulfillment, core business focusing
Production de-centralization
Growing trend leading to great enterprises transformed in a central unit as controlling and
dispatching outside processes and activities, maintaining internally market distribution and
overall management and coordination.
41
Enterprise Organization
Production
Choises
Strategies
Price-competition
Costs
Differentiation
Choices
Mix production definition
Plants definition
Logistics determinations
Focus
Quality
Production
Focus
Mix, Quality, Quantity
Dimensional targeting, technologies,
external services
Vertical integration, production decentralization
42
Enterprise Organization
Production
Production organization typologies
Production
Cycle characteristics
Operating process
Distinct units/goods
Intermittent
Lab (job shop)
Differentiated mass production
Mix
Batch
Standard mass production
Continuous
Line production
Homogeneous products
Continuous
Continuous flow production
43
Enterprise Organization
Production
Production plants
Design
a) Lay out
b) Tech and economical flexibiliy
c) Flexible automation
d) Capacity
Economic
flexibility
Technical
flexibility
Plant capacity to remain
competitive under subutilization
Plant capacity to adapt to
different products with low
switching costs
44
Enterprise Organization
Production
Stocks as a balance between production and selling
Accumulo di scorte
QUANTITA’
Prelievo di scorte
LIVELLO DI
PRODUZIONE
LIVELLO DI
VENDITA
TEMPO
45
Enterprise Organization
Production
Production function organization
I. Production system’s Reporting
II. Production control systems
III. Reactive production systems
46
Enterprise Organization
Production
I. Production system’s Reporting
A.
B.
C.
D.
E.
F.
G.
Production orders
Material invoice
Operation master lists
Material requests reports
Work timing reports
Resources availability reports
Production status report
47
Enterprise Organization
Production
A. Production orders
Production orders authorize every production unit to process their
job
B. Materials invoices
List of materials composing each product
C. Operation master lists
List of operation sequence of human resources and machinery necessary for each
product
D. Material requests reports
These requests prepare materials and authorizes their release from stocks for
48
production purposes
Enterprise Organization
Production
E. Work timing report
Useful to document production timing and work management of every production order
F. Resources availability reports
Detailed stock availability report of materials/products necessary to operations
G. Production status report
Details completed productions vs orders and how these relate to global production.
Orders are monitored and registered
49
Production control systems
Production
control
Operating units
Stocks control
Costs
accounting
General
register
1
1
Production 2
3
control
N
Order to
production
2
Order to
production
2
Production order
completed
2
Production order
completed
Production
reports
Journal
Voucher
Journal
Voucher
Overal cost of
production
Costs production
status
To Management
50
Enterprise Organization
Production
Just-In-Time Production
 Just-in-time Production (JIT) describes a production
systems in which parts (Components and midproducts) are produces only if requested by following
production phases
JIT system is different for limited stock
levels in all production phases
51
Enterprise Organization
Production
III. Quick response production systems
A.
B.
C.
D.
E.
Definition of reacting production systems
Physical production systems (CAD, CAM)
MRP systems
MRP II systems
Internal control
52
Enterprise Organization
Production
A. Definition of quick response production systems
• CIM
system
integrates
CAD
and CAM) with
MRP
II
(manufacturing
resource planning)
• A quick response
manufactoring
system is a CIM
system integrated
by ICT.
53
Enterprise Organization
Production
B. Physical systems production
1. Computer-Aided Design (CAD)

CADD system uses SW to define production functions.

Designers may store products descriptions on a database, in order to
manage them consequentially
2.
Computer-Aided Manufacturing (CAM)

CAM systems are useful in production processes planning and management

Statistical process control systems let output monitoring and control on possible
deviations from planned production, in order to act and minimize out of control
processes
54
Enterprise Organization
Production
C. MRP systems
Material Requirement Planning (MRP) systems include
these 4 sub-systems:
1.Production planning
2.Production Scheduling
3.Costs accounting
4.General Production Reporting
55
Enterprise Organization
Production planning
Marketing
1
Production planning
Materials invoices
1.
Operations list
Requests on production depend upon selling orders and previews
56
Enterprise Organization
Production planning
1
Marketing
2
Stock control
Production planning
Materials invoice
Operation list
2. Previewed selling should be coherent with stocks of finished products
57
Enterprise Organization
Production
planning
1
Marketing
2
Stock control
3
Production planning
Materials invoice
Operation list
3. Raw material availability necessary to production purposes
is communicated with a specific report
58
Enterprise Organization
Production
planning
1
Marketing
2
Stock control
3
4
Production planning
Production units
Materials invoice
Operation list
4. Technical and human resources availability necessary for production
is due upon available factors reports
59
Enterprise Organization
Production
planning
1
Marketing
2
Stock control
3
4
Production planning
5
Production units
Materials invoice
Operation list
5. Production processes orders are reported into production scheduling
60
Enterprise Organization
Production
2. Production Scheduling
It indicates the sequence of operational phases necessary for production in every
production unit, the process timing, the expected performance in every task, etc.
3. Cost accountability
Production reports evaluation with reference to expected costs (direct and indirect)
4. Reporting
Specific data about every production order, including stock levels changes (raw materials
and products)
61
Enterprise Organization
Production
D. MRP II Systems
Manufactoring Requirement Planning (MRP II) systems
the goal is not only the identification of materials to buy
(as in MRP), but involves the quantification about
resources needed for production (human, technical,
machinery, etc) and the evaluation of the feasibility of
production programs planned with MRP.
62
Enterprise Organization
Production
E. Internal control
Quick response production systems internal
control may be a problem due to
transactions, eventually solved with a strong
human resources role. With ICT controls are
to be integrated within the productiuon
process and cannot be at the end of the
pipe!
63
Enterprise Organization
Themes
Functions
Supply
Production
Logistics
Marketing
Quality
R&D
Definition
Marketing Process
Focus
Strategies
Politics
Critical factors
Limits
Relational Marketing
64
Enterprise Organization
Marketing
Definition
Process with which a business studies its market,
trends, concurrency searching for opportunities and
hints for production related to potential buyers,
creating demand for new products and delivering
these through the new selected distribution flows.
65
Enterprise Organization
Marketing
Context analysis
Marketing Strategy
The Marketing
Process
Marketing Mix
Action and control
66
Enterprise Organization
Marketing
Context analysis
Marketing Strategy
Marketing Mix
–
–
–
–
–
Enterprise
Partner
Clients
Concurrents
Phisical Context
Action and control
67
Enterprise Organization
Marketing
Context analysis
Marketing Strategy
Marketing Mix
Action and control
•
•
•
•
Segmentation
Targeting
Positioning
Value Proposition
68
Enterprise Organization
Marketing
Context analysis
Marketing Strategy
Marketing Mix
Action and control
•
•
•
•
Product
Price
Place
Promotion
69
Enterprise Organization
Marketing
Context analysis
Marketing Strategy
Marketing Mix
Action and control
• Marketing Plan
• Product introduction
70
Enterprise Organization
Marketing
Selling Cycle
client
research
clients relationships
management
deal
Product
delivery
technical
assistance
invoice
Financial rules
71
Enterprise Organization
Marketing
Marketing policies orientation
CUSTOMER
SATISFACTION
(Quality)
a) Time to market
Reduction
TIME – BASED
COMPETITION
b) Time to customer
Reduction
CUSTOMER
RETENTION
(Fidelity)
c) Flexibility (upon
changes in clients
needs)
72
Enterprise Organization
Marketing
Consumer behaviour
- concurrent needs
Buying process
- concurrent goods/services
- concurrent brands
- rational
Buying impulses
- emotive
- irrational
Mind the relation between price and available financial resources
73
Enterprise Organization
Marketing
MARKETING STRATEGIES
- INDIFFERENTIATED MARKETING :
Considers market being homogeneous
- DIFFERENTIATED MARKETING:
Is targeted towards several great market segment with different
marketing programs
- CONCENTRATED MARKETING:
Is targeted to one, os just a few, market segment with a unique
marketing program
74
Enterprise Organization
Marketing
Strategical issues on product policies
Offer width
Differentiation of assortments
Productions innovation and originality
Choices variety (products, brand, packaging, etc)
75
Enterprise Organization
Marketing
Depth, range and choice
Range
Settore “A”
Settore “B”
Settore “C”
Choice
Linea
1
Linea
2
Linea
3
Linea
4
MOD
11
MOD
21
MOD
31
MOD
41
MOD
12
MOD
22
MOD
32
MOD
42
MOD
33
MOD
43
MOD
13
Linea
5
MOD
51
MOD
52
MOD
53
Linea
6
Linea
7
Linea
8
MOD
61
MOD
71
MOD
81
MOD
62
MOD7
2
MOD
82
MOD
73
76
Enterprise Organization
Marketing
Product life cycle
Incomes and profits
Incomes
Profits
Introduction
Development
Maturity
Decline
Time
77
Enterprise Organization
Marketing
Incomes
Rivitalized Product life cycle
Time
78
Enterprise Organization
Marketing
MARKETING approaches in different product life cycle
Characteristics
Introduction
Incomes
Low incmes
Costs
High cost for
client
Profits
Negative
Clients
Innovators
Concorrents
Few
Development
Maturity
Growing incomes Incomes peak
Fare cost for client
Increasing
Early adopters
Increasing
Low cost for client
Decline
Decreasing
incomes
Low cost fol
client
High
Decreasing
Majority
Late entrant
Stable
Decreasing
79
Enterprise Organization
Marketing
Marketing approaches in different life cycle stages
Strategies
Introduction
Development
Maturity
Decline
Pubblicity
Product
knowledge
among retailers
and early clients
Diffuse product
knowledge
among mass
market
Brand
differences
and
advantages
Reduce
maintainance
costs for loyal
clients
Promotion
Intense promotion
to favor product
selling
Reduce, to benefit
from growing
demand
Increase to
limitate brand
change
Riduce to
minimum
80
Enterprise Organization
Marketing
Price
81
Enterprise Organization
Marketing
Product
82
Enterprise Organization
Marketing
Promotion
83
Enterprise Organization
Marketing
Place
84
Enterprise Organization
Marketing
People
85
Enterprise Organization
Marketing
Process
86
Enterprise Organization
Marketing
Physical Environment
87
Enterprise Organization
Marketing
Traditional Marketing limits
Traditional marketing is too much focused on produtc, interpreting clients
as consumers (just capable of giving input for strategies definition).
Marketing Mix (4P) doesn’t grant enough importance to clients and to
stabel relationships with them, thus missing to consider clients as a pillar
of value creation process (Value Constellation, Relational Marketing), as a
strategic resource for competitive advantage.
This has been referred to as Marketing Mix “Miopia”.
88
Enterprise Organization
Marketing
Passagge from…
Marketing
Internal
Relational
Mix
Marketing
Marketing
Integrated Marketing
Total relational Marketing
89
Enterprise Organization
Marketing
Marketing Mix
Relational Marketing
Transactional Marketing
Interactive Marketing
Client
Client
Passive, anonimous, target
Strategic actor
Time
Time
Short run
Long run
Quality
Quality
produced
perceived
Strategic issues
Strategic issues
Mkt Mix
Client interaction
Client participation to production
process
90
Enterprise Organization
Marketing
Relational Marketing
Marketing goal becomes to keep clients loyal, rather
than to increase the market, not caring about the
offered service quality.
Business capacity to stabilize relationships with clients
thought a reciprocal exchange and fulfillment of
promises.
91
Enterprise Organization
Marketing
Relational Marketing
Long run relationships with clients may be interpreted as relationships’
life cycle:
First contact phase. To create the interest of potential
clients, thus actions are limited to traditional marketing
mix (with focus on communication).
Purchase phase. The attention switches from purchase
to service promises definition: traditional marketing mix
tools (publicity and promotions) are coupled with
interactive marketing ones (direct communication with
potential buyers).
Consumption phase. Enterprises have to mainain
promises. Relational marketing comes to the fore.
92
Enterprise Organization
Marketing
Internal Marketing
Since quality depends so much on the participation of everyone
among the producer organization, to strenghten service cultre in
employees and to foster relational marketing approaches internal
marketing programa are to be done (i.e. training, communication,
focus groups, etc.).
Internal marketing focuses on the increase about client attention
both of managers and employees. The first client of every
organization, in fact, is the internal one, thus he is the first to be
satisfied! The clear determination of roles, hierarchy, methods,
activities strongly influences perceived quality of clients.
93
Enterprise Organization
Marketing
Integrated Marketing
Il external marketing: traditional mkt management, focused
on creating expectations delivering promises to market.
Internal marketing: focused on the creation and maintainance
of service culture and client orientation within the organization,
necessary to create the premises to fulfill the promises.
Relational marketing: relational management among
employees and clients, to stabilize relationships and fulfill
promises.
94
Enterprise Organization
Marketing
Total relational Marketing
Businesses in contact with their clients in value co-creating logics deliver a new
concept of marketing.
Total relational Marketing is marketing based on relations,
networks and interactions; it is based on win win interactions with
clients and stakeholders, and value is co-created jointly among
involved parties.
95
ORGANIZING ENTERPRISE
Themes
Business functions
Purchases/Supplies
Production
Logistics
Marketing
Quality
R&D
Model EQA
Process control
Organization TQM
Evolutionary ladder
Route quality
Model EFQM
96
ORGANIZING ENTERPRISE
Quality
MODEL 2001 EQA
Instrument of government enterprise for excellence in sustainable over time
HUMAN
FACTOR
LEADERSHIP
POLICIES
&
STRATEGIES
RESOURCES
&
PARTNERS
ENABLERS
50%
STAFF
SATISFACTION
PROCESSES
CUSTOMER
SATISFACTION
IMPACT
ON
COMPANY
RESULTS
50%
BUSINESS
RESULTS
ORGANIZING ENTERPRISE
Quality
ISO 9000
To facilitate the achievement of the objectives for quality, have been
identified eight principles of quality management:
Customer-oriented organization
Leadership
Involvement of staff
Approach to processes
Systems approach to management
Continuous improvement
Decisions based on facts
Relationships of mutual benefit with suppliers
ORGANIZING ENTERPRISE
Quality
PROCESS
A set of related activities or interacting elements that transform into elements in output
INPUT
Process
1
Process
3
Process
4
OUTPUT
Process
2
Note 1: The elements entering into a process generally come from elements in output by other
processes.
Note 2: The processes in an organization are generally planned and executed under controlled
conditions in order to add value.
Note 3: A process must be validated (qualified) when the compliance of the resulting product
can not be readily or economically verified.
ORGANIZING ENTERPRISE
Quality
the person or organization which
is intended output of a process
The customer may be internal or external
For a process (ex. providing a training course) may be needed more subprocesses
(identifying needs, planning, promotion, collection of entries, selection, delivery ......
Final exams .. ... billing ....)
Process
Loop
(for each process)
identification of
customer needs and
PI
provision under
controlled
conditions
design
setting
requirements
ORGANIZING ENTERPRISE
Quality
Analysis of critical processes
o
o
CREATION OF A TEAM WORK
DESCRIPTION OF THE PRESENT PROCESS (RULES OF EXECUTION, RESPONSIBILITY,
RESOURCES ....)
o
o
o
o
o
DATA COLLECTION
IDENTIFICATION OF THE CLIENT/S NEEDS
TRANSLATION IN TARGETS OF PROCESS (PROCESS INDICATORS)
EVALUATION CAPACITY OF PROCESS
POSSIBLE REDESIGN OF PROCESS (RULES OF EXECUTION, RESPONSIBILITY, RESOURCES
....)
o
IDENTIFICATION OF THE ELEMENTS OF CONTROL PROCESS (SYSTEM FOR MONITORING,
DIRECT MEASURES ON PROCESS AND INDIRECT MEASURES ON OUTPUT)
o
TRAINING ON THE STAFF
ORGANIZING ENTERPRISE
Quality
CONTROL OF A PROCESS
o
PLAN:DETERMINE THE TARGETS AND CRITERIA FOR ACCEPTANCE,
MADE THE CHOICES (4M), DETERMINE THE METHODS TO ACHIEVE
THE TARGETS, TRAINING STAFF (DESIGN)
o
o
DO:EMPLOYMENT (PERFORMANCE)
CHECK:MESASURE, CHECK THE EFFECTS OF APPLICATION
(DIAGNOSIS)
o
ACT:RULE, ADOPTING THE ACTION REQUIRED OF CORRECTION AND
IMPROVEMENT (THE FEEDBACK)
ORGANIZING ENTERPRISE
Quality
THE PROCESS
INPUT
materials
instructions
information
documents
people
POINT OF
MEASURE
THE PROCESS
OUTPUT
processing
(added value)
materials
instructions
information
documents
people
POINT OF
MEASURE
POINT OF
MEASURE
ORGANIZING ENTERPRISE
Quality
Organization oriented TQM
The activity of defining the objectives and strategies
(strategic planning) division of labor, guidance,
coordination and control (leadership, management and
personnel management and system) is geared to the
principles of quality
The culture of listening and comparison (involving all
internal and external partners), effectiveness and
efficiency, planning and systematic, prevention,
diagnosis and verification as continuous improvement
ORGANIZING ENTERPRISE
Quality
EVOLUTIONARY LADDER
ISO Vision 2000
ISO 9000
TQM
METHODS / ACTIVITIES
EXCELLENCE
INTEGRATION COMPANY / MARKET
MARKET IN
GLOBAL SYSTEM
TOTAL QUALITY
ALL COMPANY
QUALITY ASSURANCE
MARKET ORIENTED
PRODUCTION SYSTEM
CQ PRODUCT
PRODUCT OUT
FINAL TEST
PRODUCTION
BUSINESS AREAS
FINISHED PRODUCT
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
TIME
ORGANIZING ENTERPRISE
Quality
The ideal of an organization geared to TQM
• Organic structure
• flexible
• managed to processes and / or small groups
or teams
• a "pyramid" reversed
• with great development of communication
(computerized) internal and external
ORGANIZING ENTERPRISE
Quality
Globalization
Legislative changes
Integration of areas
CHANGES
WITHOUT PRIOR
A world in Network
Removal of geographical
barriers
Price Pressure
The location of Quality
’THE EVOLUTION OF QUALITY CONCEPT
CONFORM
OF
PRODUCT
PLANNING
CONTROL
THE PROCESS
PLANNING
CONTROL
ORGANIZATION
“VALUE "FOR
CUSTOMERS
STAFF,
COMPANIES ‘
SHAREHOLDERS
THE EVOLUTION OF BUSINESS APPROACHES
INSPECTION AND
STATISTICAL
CONTROL
STATISITCAL
CONTROL
PROCESSES
TOTAL QUALITY
CONTROL
QUALITY SYSTEMS ,
ENVIRONMENT, SAFETY
TOTAL QUALITY
MANAGEMENT
MODELS
STANDARDS
PRODUCT
RULES FOR
THE CONTROL
RULES OF CONTROL
PROCESSES
RULES / GUIDELINES
FOR
DEVELOPMENT AND
MANUFACTURING
RULES / GUIDELINES /
LAWS FOR SYSTEMS
ORGANIZATIONAL
(ISO 9000/ISO14000
LEGGE 626/HACCP...)
NATIONAL MODELS /
INTERNATIONAL
FOR EXCELLENCE
ORGANIZATION
ORGANIZING ENTERPRISE
Quality
Model EFQM for Excellence and the rules ISO9000
MODEL for excellence
ISO 9001:2000
ISO 9001:1994
 Management
responsibilities
Quality system
Procedures
Tests, inspections,
testing
Corrective and
preventive actions
Measures, analysis
 Summit responsibility
Quality system
Customer focus
Processes
Resources
Continuous improvement
 Leadership
Policies and Strategies of
organization
Development and justification of
people
Resources
Quality System
Processes
Learning and Research best
Practices
Continuous Improvement
Challenging targets
Results
Customers
People
Impact Company
Products, Processes, Economics
and Finance
Benchmarking
ORGANIZING ENTERPRISE
Quality
Model EFQM for Excellence and the rules ISO9000
Excellence
S
T
R
A
T
E
G
I
E
S
T
Q
M
COMPETITIVENESS
ISO 9000:2000
ISO 9000:94
MINIMUM
REQUIREMENTS
M
O
D
E
L
CONTINUOUS
IMROVEMENT
QUALITY
SYSTEM
E
F
Q
M
ORGANIZING ENTERPRISE
Quality
The EFQM Excellence: The basic concepts
Attention to
Customer
Oriented to
results
Leadership
The Foundamental
Public
responsibilities
concepts
of excellence
(EFQM)
Partnership
Innovation and
improvement
Process
management
People
involvement
Business Organization
Research and Development
BUSINESS FUNCTIONS
Purchases/Supplies
Production
Logistics
Marketing
Quality
R&D
Definitions
Collaborations
Self-development
Choice methods
Team Work
112
Business Organization
Research and Development
Definition
The research and development (R&D) is
defined as the combination of creative work
undertaken in a systematic way to increase
the range of knowledge (including knowhow, culture and society) and to use this
knowledge for new applications
Source: Manuale di Frascati, OECD, 2002
113
Business Organization
Research and Development
Types
• Basic Research: experimental or theoretical work
undertaken primarily to acquire new knowledge on the
fundamentals of the phenomena and facts that might
remark, not intended for a specific application or use.
• Applied research: original work undertaken primarily to
acquire knowledge and aimed at a practice and a specific
application or use.
• Experimental development: systematcal work, based
on existing knowledge gained through research and
practical experience, led to complete, develop or improve
materials, products and production processes, systems and
services.
114
Business Organization
Research and Development
Innovation Tecnology
"Activities related to technological innovations of
product and process cover every scientific,
technological, organizational, financial and trade
effort to make or made available on the market
versions characterized by a significant improvement
in functional or content respect to previous
versions, or an alternative solutions aimed at
solving the same problems / satisfaction of those
needs "
Source: Oslo Manual, 2004, OCSE
115
Business Organization
Research and Development
Input indicators
- Expenditure on R&D
-Employees in R & D
-Intensive R & D = (Expenditure on R & D/Turnover)*100
Output indicators
- Scientific publications and citations
- Patents and patent citations
- New products / services launched on the market
- Turnover (profits) generated from new products launched on
the market
116
Business Organization
Research and Development
Trends in industrial R&D
•
Restructuring of corporate R&D by the largest companies
worldwide
•
The increasing orientation towards the activity of applied
research and technological development (at the expense of
basic research)
•
The increase in the propensity to patent and increasing
attention to the commercial exploitation of technology
•
Specialization in process steps of innovation and growth of
technology outsourcing
•
The role and contribution of small enterprises for technological
development and economic growth
117-
Business Organization
Research and Development
Collaborations in R & D
Sometimes the development of a project requires complementary
activities to those undertaken by an enterprise, without which it
would be difficult transformation of a core of technological
knowledge into a marketable product.
Many times, companies must then choose whether to pursue its
innovative activities either alone or in collaboration with partners.
The collaboration could allow the company to achieve more
ambitious goals more quickly and with less cost and risk.
Through collaboration with other companies, an organization
access to a wealth of knowledge and skills not supplied, which
could cost time and money (in case of internal development).
The cooperation strategies , however, involve a sharing of power
control and distribution of profits, in addition to having to pay for
the risk of unfair and opportunistic behavior of partners.
118
Business Organization
Research and Development
Collaborations nella R&S: Why?
Issues related to the company functioning
– Scale economies
– Purpose economies (differentiated resource exploitation for various
commercial applications)
– Distribution costs and risks
– Enlargement resource base and internal expertise
Structural characteristics of competitive contest
– Specialization economies and the role of complementary resources
– Network economics
– Allegations of markets for technology
Environmental characteristics
– Evolutionary characteristics of scientific-technological progress
– Practice communities
– Risks of inefficient duplication of investments
119-
Business Organization
Research and Development
The different forms of cooperation
Depending on the type of relationship
– Vertical agreements
– Horizontal agreements
– Transversal agreements
According to the legal nature of the agreement
– Contractual collaboration (non-equity)
– Company collaboration (equity)
According to the purpose of the competitive agreement
– Non-competitive agreements
– Pre-competitive agreements
– Competitive agreements
120-
Business Organization
Research and Development
The different forms of cooperation
• Joint venture: is a particular form of covenant that requires
participants to adopt a formal structure, almost always a new
entity legally separate, with equity.
• Licensing: is a contractual agreement that gives an organization
(or individual) the rights to use intellectual property of another
organization, usually in exchange for a royalty.
• Outsourcing:is a formula under which a company moves outside
certain processes rather to achieve its own.
• Research organizations: are organizations formed to promote
collaboration among a group of players, for example, companies
and public research institutions.
121
Business Organization
Research and Development
The choice of partners
Compatibility of resources: in which measure the
potential partner is consistent with the resource
requirements of the project?
Compatibility strategic: see if the objectives, styles
business, organizational behavior of the partner are
consistent
Impact on the opportunities and threats in the
competitive environment: what influence will hold the
strategy of cooperation on the bargaining power of
customers and suppliers, the degree of competitive rivalry,
the threat of new entrants or substitutes?
122
Business Organization
Research and Development
The pilot customer
•
•
•
•
•
•
Representativeness
Dimension
Degree of priority
Past reports
Location
Contractual power
123-
Business Organization
Research and Development
Options for development of new technologies and new business
 Licenses;








Acquisitions;
Educational acquisitions;
Venture capital;
Internal venture;
Joint-venture;
Strategic alliances;
Research consortia;
Internal development
Business Organization
Research and Development
The advantages of self-development
The strategic of technology developed may suggest to not share their know-how.
If the efforts of an organization have produced technological knowledge hardly imitated in
short, the development extends autonomy in the position of competitive advantage over
competitors and other businesses, including goods and services.
The autonomous development also allows control over the trajectory of technological
development to give that, then may be to support the competitiveness of business in relation
to the market, resources, skills and expertise.
There are also companies that aren’t culturally inclined relational opening, and have skills and
knowledge that are difficult to share in developments of partnerships with other companies.
Even if it is more costly and difficult the selfdevelopment, infact, capitalize and maintain the
wealth of knowledge and skills of corporate researchers, sometimes keeping the company
competitive in terms of distinctive competencies.
Sometimes companies believed to have sufficient skills, capabilities and resources to pursue
autonomously the development of a complex project.
Can happen that is not a suitable partner to support a possible deficiency, and enterprise
finds itself forced to fill internally the gap capacity and / or skills necessary for the
125
development project.
Business Organization
Research and Development
Choice of Innovation Projects
To evaluate a technology innovation project the
management offers a wide variety of methods, informal
instruments with sophisticated techniques based on
qualitative data or
based on assumptions strictly
quantitative.
In most cases, use a combination of methods in order to
provide more adequate assessment of the opportunities
and risks of an innovative project.
126
Business Organization
Research and Development
The development budget
Most companies have limited resources and capital
constraints and they are therefore forced to select only
some of the appropriate projects. Many companies adopt
the methods of 'rationing' capital, which initially set a
budget for R&D activities and then establish a ranking of
projects to choose those that could be financed.
Budget is sometimes set in terms of share of turnover
determined in the prior year.
This percentage is based on sector parameters (industry
benchmark) or historical indicators reported by corporate
performance (historical benchmark).
127
Business Organization
Research and Development
Choice methods
Quantitative methods
•Discount Cash Flow
•Real options
Qualitative methods
•Questions filter
•Q-Sort
•PortfolioR&D
Mixed Methods
•Conjoint Analysis
128
Business Organization
Research and Development
Choice methods
The most popular methods for the quantitative assessment of innovative projects are
based on techniques discount cash flow and on analysis of real options.
Techniques discounting cash flows
(DCF = discounted cash flow)
NPV = the expected cash flows are discounted incoming and compared with the
present value of cash flows in output
VAN = ∑ Ft/(1+r)t
t = 0 …. N
F Net cash flow a year t
N economic life
r discount rate (capital cost)
Internal rate of return = is the discount rate that makes the net present value of zero.
129
Business Organization
Research and Development
Choice methods
The real options methods
It is a valuation technique that applies the model of option rights (stock options) on
shares in an investment project
The call option allows the investor to reserve the right to purchase future by a certain
date (maturity) at a set price (strike price).
If in future the value of the action exceeds the strike price the holder may exercise its
right and purchase the action (if the surplus value of absorbing the cost of the buyer
earns).
Otherwise may withdraw losing the value of option, or he can buy the same if the
value exceeds the strike price, but doesn’t cover everything (action + stock option).
In the case of a program of r&d:
The cost of R&D program can be considered the price of an option to buy (call
option).
The cost of the investment future to support and fund the program is the operating
cost (strike price).
The return on the investment in terms of present value of expected cash flows from
the r&d project correspond to the value of an acquired with right of option.
130
Business Organization
Research and Development
Choice methods
The most important factors in choosing the projects are very difficult
to evaluate in quantitative terms.
For this reason, almost all companies using qualitative methods.
Applications filter, for example, are used to investigate and
evaluate the main dimensions that influence the choice, such as:
• The customers role (market, product use, compatibility and
ease of use, distribution and pricing strategies)
•The skills and organizational skills role (ability and skills
possessed and future, ability of competitors)
•Project times and costs
131
Business Organization
Research and Development
Choice methods
Q – Sort is a simple technique for the classification of ideas
or objects based on a variety of parameters.
•ideas or variations of the project are described in a paper
•for each of the selected parameters, the cards are sorted according
to the response capacity of each project
•a series of confrontation rounds between the different
classifications, accompanied by a discussion among the participants,
should allow to lead to an assessment shared
132
Business Organization
Research and Development
Choice methods
The management can use a map where to place development
projects (Portafolio map R&D), distinguished for example needs
financial resources and skills to be used.
The basic research or experimental projects: arise along the frontier of
technological innovation and test prototypes that don’t offer an immediate commercial
application.
The breakthrough project: provide for the development of products that
incorporate technology product and revolutionary process.
The draft platform: are profound improvements in cost, quality or performance
technology than previous generations of product.
Projects derivatives: provide only incremental changes of products or processes,
sometimes simply extending the range of varieties.
133
Business Organization
Research and Development
Choice methods
Portafolio map R&D
134
Business Organization
Research and Development
Choice methods
Quantitative methods and qualitative methods provide valid
information to management in the selection of development
projects, especially when the techniques are used in
combination. Sometimes it is useful to convert qualitative
information in quantitative variables.
For example, the conjoint analysis estimates the value that a
customer attaches to certain factors of choice and importance
on product attributes, so as to enable the management to
take decisions on the final configuration of the project.
135
Business Organization
Research and Development
Team work
Many companies constitute team to lead and manage the develop project of a new
product. The composition and working methods of the team depend on the strategies
of firms and nature of projects.
Team dimension
The team may be composed of a very small core or by hundreds of members. The
large size is not always an advantage, because it can lead to increased operating
costs and communication problems.
With the increase of dimension tend to increase the risk of social inertia (social
loafing), associated with the phenomenon that brings the components of the team to
not receive the just recognition for its contribution.
Team composition
To promote coordination and cooperation between organizational units, many
businesses entrust the development of new products to team composed of experts
with complementary skills and from different functional areas
136
Business Organization
Research and Development
The organizational structures of internal R & D
2. Project manager “leggero”
1. Struttura funzionale
Manager
funzionale
(Fm)
D1
D2
D3
MFG
MKT
D1
Livello operativo
Project manager
(PM)
3. Project manager “pesante”
D2
D3
MFG
MKT
D3
MFG
MKT
Collegamento (L)
Area di forte influenza del PM
4. Gruppo autonomo di progetto
Mercato
D1
Concetto
D1
D2
D2
D3
MFG
MKT
Mercato
Concetto
PM
PM
137-