Assignment 1 – power point presentation evaluation
Evaluate the presentation( PRESENTATION IS ATTACHED ) CHECK ATTACHEMENTS on the following criteria and add any other comments you may have:
Write a 2-page peer review in Word format. Apply current APA standards to your work.
Assignment 1 Grading Criteria
·
Evaluated a peer’s project on specified criteria and made recommendations for improvement.
· Applied current APA standards for editorial style, expression of ideas, citations, and references.
Assignment 2: Discussion—Employee Impact on the Plan
An organization can come up with the best strategy but in order to execute and be effective/successful it takes human capital to implement. Employees (management and staff alike) need to be bought into any strategy and its proposed results—this can make or break a plan. Understanding organizational behavior is an important part of plan execution.
Using the module readings, Argosy University online library resources, and the Internet, respond to the following for your own organization or an organization you know well:
Write your initial response in approximately 300 words. Apply APA standards to citation of sources.
Required Radings :
TOYOTA
Toyota a Multinational Company
Origins of Toyota
Toyota’s history of operation (in selected market).
How the company was formed and how it operates today
Origins of Toyota
Toyota originated and began operation in Japan (Toyota Motor Corporation, 2013). Forbes readers and editors knew Sakichi Toyoda, born in 1867 and died in 1930, as the 13th most influential businessman of all time (Forbes.com Staff, 2005). Why? Because he was one of the most influential and innovators of his time. He did not start in the automotive industry immediately, in fact, he was a weaver who invented a loom, which detected errors within the automatic production, thereby preventing the creation of defective goods (Forbes.com Staff, 2005). With the selling of his patent, the loom, he obtained about $150,000, which he used to help his son become the world’s second-biggest carmaker (Forbes.com Staff, 2005).
Toyota’s History of Operation
In the beginning Sakichi Toyoda established Toyoda Spinning and Weaving Co., Ltd. in 1918 and later in 1926 Toyoda Automatic Loom Works, Ltd. was established (Toyota Motor Corporation, 2013). After his patent was sold to the British he established an Automobile Department within Toyoda Automatic Loom Works, Ltd. in 1933(Toyota Motor Corporation, 2013). What’s impressive about this history, is that, “Toyoda’s innovation of instilling human judgment on machines, also known as automation or Jidoka, would be adopted to his son’s automobile enterprise—and then almost every industrial enterprise—cutting down on waste, improving customer relations, revealing problems and conserving resources (Forbes.com Staff, 2005).” By 1935 the first model G1 truck is completed, Toyota dealership Precepts is established, and the first Toyota dealership is established (Toyota Motor Corporation, 2013).
By 1937 Toyota Motor Co., Ltd. is established (Toyota Motor Corporation, 2013). By October of 1947 production of model SA passenger car begins Hotai Motor Col, Ltd. established in Taiwan; by 1950 Toyota Motor Sales Co., Ltd. is established as a separate, independent company; by 1955 Abdul Latif Jameel Import & Distribution Co., Ltd. established in Saudi Arabia; and it isn’t until 1956 that Toyota enters the industrial vehicle field with the LA forklift model (Toyota Motor Corporation, 2013). In 1957 the first made-in-Japan passenger car (Crown) is exported to the United States and by 1959 overseas production begins in Brazil (Toyota Motor Corporation, 2013). Akio Toyoda is currently the president of Toyota Motor Corporation.
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Toyota a Multinational Company
Toyota’s growth in the marketplace responding to the following:
Maintaining current markets
N. America/Europe/China/Middle East/Africa
Latin America/Asia/Oceania/Japan
Specific markets the company is targeting today
Specific markets the company is targeting today
Toyota Motor Corporation now operates in the following regions; North America, Europe, China, Middle East, Africa, Latin America, Asia, Oceania, and of course in Japan (Toyoda, 2011). Expectations to regions are; China–A driving force for future growth, technology base to support the huge market; Europe—contribute to Toyota’s competitiveness as global production center for small cars; Asia and Oceania—global center for product development and preparations for mass production of IMV/newly developed small cars; Middle East, Africa, and Latin America—vehicles that win the heart of customers and can be called “my car” with affection in every market; North America—greater self-reliance, collaboration with IT for the future of mobility; and finally, Japan—monozukuri based on advanced technology and kaizen (Toyoda, 2011).
Currently, sales performance in emerging markets is at 40% whereas sales performance in industrial nations is at 60% (Toyoda, 2011). It is more focused on balancing, however, Toyota Motor Corporations are seeking to achieve an equal balance in unit sales between these two markets (Toyoda, 2011). Part of the Corporation’s new business ventures include to, “participate in ‘smart communities’ worldwide where vehicles will manifest new kinds of value-added as part of integral linkages between vehicles, homes, and information networks through cooperation of IT companies (Toyoda, 2011).”
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Toyota a Multinational Company
Toyota’s growth in the marketplace responding to the following:
The reporting structure needed for operating in that marketplace, regulatory requirements, and so on
Federal Regulators/Regulatory Agencies
Safety Regulators such as NHTSA
The company’s major competitors
Ford/General Motors/Honda/Volkswagen
Discuss the company’s growth in the marketplace responding to the following:
The reporting structure needed for operating in that marketplace, regulatory requirements, and so on.
Toyota Motor Corporation has always had a long history of building reputable vehicles that commit to the highest level of consumer safety and satisfaction (Pressroom.toyota.com, n.d). All of Toyota’s vehicles are engineered to meet or exceed Federal regulators and provide information to investigating and regulatory agencies regarding vehicles involved in accidents as well as provide complete and accurate information to product safety regulators (Pressroom.toyota.com, n.d.). Toyota also adheres to the strict regulations regarding communications with consumers on safety recall, which is what Toyota did when they were addressing the cause and reduction of risk of pedal entrapment (Pressroom.toyota.com, n.d.). Which, by the way, was proven to be isolated incidents and therefore Toyota was not deemed to be liable in regards to the recalls, although Toyota did go further in assuring consumers and redesigning the plastic trim panel for additional safety measures so as not to have the pedal “stick” (Pressroom.toyota.com, n.d.).
National Highway Traffic Safety Administration NHTSA falls under the U.S. Department of Transportation which carries out the safety programs and carries out consumer programs, above all NHTSA is responsible for reducing deaths resulting from motor vehicle crashes via setting and enforcing safety performance standards for motor vehicles (NHTSA, 2013). Companies like Toyota must be able to abide by these safety performance standards and allow NHTSA to conduct investigations, just like the investigation on pedal entrapment (NHTSA, 2013).
The company’s major competitors
Toyota’s major competitors include the following:
Ford: An American company with its headquarters in Dearborn, Michigan (USA). Ford Fiesta, Ford Mustang, Ford Explorer and the Ford Modeo are in competition with Toyota (Rawal, n.d.).
General Motors: Also an American company with its headquarters in Detroit, Michigan (USA). Chevrolet, Holden and the Aveo Optra Commbador are in competition with Toyota (Rawal, n.d.).
Honda: A Japanese company with its headquarters in Minato, Tokyo (Japan). Civic Accord CRV is in competition with Toyota (Rawal, n.d.).
And Volkswagen: A German company with its headquarters in Wolfsburg, Germany. The Passat Jetta Taureg is in competition with Toyota (Rawal, n.d.).
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Toyota a Multinational Company
Toyota’s growth in the marketplace responding to the following:
The unique competitive advantage of the company
Improvement of quality/reduction of inventory cost
Improvement of efficiency
Customer service
Trade pact associated with the marketplace
Political Action Committee (PAC
Discuss the company’s growth in the marketplace responding to the following:
The unique competitive advantage of the company
The number of competitors in the world economy is increasing and with that it is creating a more complicated business environment because companies are finding it difficult to distinguish their core competencies and thereby obtaining a competitive advantage (Moran, Palmer, & Borstorff, 2007). Though there may be many market boundaries changing there are companies such as Toyota that are able to find opportunities in a world that is constantly changing in terms of the world economy (Moran, Palmer, & Borstorff, 2007).
For example, where companies lack the ability to improve quality, reduce inventory costs and improve efficiency, Toyota has taken the leading position in becoming the world’s largest car manufacturer because it has been able to provide low-cost, quality, style and customer service (Moran, Palmer, & Borstorff, 2007). Competencies that give Toyota its competitive advantage include; the kanban inventory system, quality teams and supplier management systems, and visible resources and capabilities (Moran, Palmer, & Borstorff, 2007).
Trade pact associated with the marketplace
Toyota formed a political action committee (PAC) which allows employees, acting together, to support candidates for Congress who share the company’s interests, this PAC contributes to lawmakers from both parties, foreign citizens and Americans working for the company (Landers, 2013). This came after CEO Akio Toyoda appeared before the House Committee and endured harsh questioning from U.S. lawmakers about the unintended acceleration by Toyota cars, something that would later come to resolution as U.S. government probe later found that driver error was to blame for most of the mishaps and of course had to absolve the vehicles’ throttle-control electronics (which most blamed as the problem of the issue (Landers, 2013).
Toyota has further interest in unfolding U.S. –Japan policy issues, such as the proposed Trans-Pacific Partnership trade negotiations, which cold lift the tariffs currently imposed by the U.S. on cars made in Japan (Landers, 2013). Interestingly enough and to say the least, a very strategic move on Toyota’s part, the company named former General Motors (one of it’s top competitors) executive Mark Hogan to its board, one of three outsiders on the board of Toyota, a sign that Toyota sees the importance of the U.S. market (Landers, 2013).
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International Market Entry Strategies
Companies such as Toyota are expanding into new markets, and are facing risks and challenges. Toyota Motor Corporation must not only be able to minimize these risks, but they must also ensure regulatory compliance, if they want to thrive in these markets. It is also imperative that research be conducted on political and economic challenges of market entry.
Toyota’s capitalization in the foreign market
Current capitalization
Operating Income/Marketing Activities & Cost Reduction
Increased sales of vehicles in North America & Asia
Reforming Manufacturing Technologies & Vehicle Development Processes
Opportunities to tap into new capital in the markets where it operates
Technologically Advanced, high-value-added products
Optimize Manufacturing Investments
Responding to Growth in Markets & Sales
Toyota’s capitalization
Current Capitalization
TMC (Toyota Motor Corporation) announced on its financial results for the fiscal year that ended March 31, 2013 at a conference in Toyota City, Japan on May 8, 2013 (Toyota Motor Corporation, 2013). The results? Net revenues totaled 22.0 trillion yen, which indicated an increase of 18.7% compared to the previous year (Toyota Motor Corporation, 2013). Operating income also increased from the previous fiscal year by 965.2 billion yen, leaving the operating income at a 1.32 trillion yen (Toyota Motor Corporation, 2013). Positive effects from marketing activities, cost reduction efforts have been major factors in offsetting the negative effects of related expenses, a favorable outcome.
TMC President Akio Toyoda highlights the increased sales of vehicles in North America and Asia, challenges that led to understanding their need to maintain sustainable growth, and TMC’s need to continue progress in reforming manufacturing technologies and vehicle development processes under the Toyota New Global Architecture (Toyota Motor Corporation, 2013). Overall, both vehicle sales and operating income increased in Japan, North America, Europe, Asia, Central and South America, and Oceania and Africa (Toyota Motor Corporation, 2013). Business is looking good for TMC and for the most part, success in numbers was recognized as the result of increased vehicle sales outside Japan, keeping in mind that the exchange rate is at 90 yen to the U.S. dollar and 120 yen to the euro (Toyota Motor Corporation, 2013).
Opportunities to tap into new capital in the markets where it operates
TMC’s focus on Japan’s supply strategy will continue to focus on technologically advanced, high-value-added products while in Europe and North America TMC will focus on optimizing manufacturing investments (Toyoda, 2011). In regards to emerging markets, TMC’s focus is on responding steadily to growth in markets and sales and considering expanding production capacity by targeting Changchun (with 100,000 units/year) and Brazil (with 70,000 units/year) (Toyoda, 2011).
At a worldwide focus of new business venture, in creating new values for automobiles, TMC’s focus will include participating in smart communities service by creating linkages between vehicles, homes and information networks through cooperation of IT companies (Toyoda, 2011).
In Toyota Motor Corporation: Annual Report 2012 [PDF] (Unknown, 2012), a special feature: Toyota’s Efforts in Emerging Markets, aims at developing new strategies through making ever-better cars. Their strategy is simple, “conduct business that is strongly rooted in the countries in which we operate by adapting to local needs and pushing for 100% localization (Unknown, 2012).” By strengthening their global supply system in emerging markets and increasing localization, with Asia as an important base, TMC can achieve 50% emerging-market sales ratio by 2015, or sooner, considering they reached 45% in 2011 (Unknown, 2012).
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International Market Entry Strategies
Major challenges Toyota is facing or can anticipate
Labor market
TMC’s 2011 Executive Structural Change
Competition
Future Efforts in Emerging Markets Calling for New Strategies
Legal Issues
Trade Pacts/Tariffs/Risks
Major challenges the company is facing or can anticipate
Labor Market
TMC’s 2011 Executive Structural Change was aimed:
“1. To swiftly communicate the voices of our customers and information from frontline operation level of each region, to our Executive Levels.
2. To enable prompt management decisions based on information from frontline operations.
3. To enable us to continuously check whether out management decisions are acceptable by society (Toyoda, 2011).”
Those aims were to provide an establishment of a structure for the Toyota Global Vision. The first change reduced the number of directors, from 27 members to 11; the second change reduced the decision-making layers which will allowed a swifter flow of information from Divisional General Managers to Executive Levels; the third change established Executive General Managers which partially replaced Managing Officers; the forth change built the Structure and System where each region could initiate decisions, close to their customers (Chief Officers with regional responsibilities were stationed in each corresponding region); and the fifth change established a mechanism to listen to outside opinion more closely and reflect those outside opinions in their management, which created a Global Advisory Board (Toyoda, 2011).
TMC’s plan to reduce the total number of Executives from 77 to 60 was certainly a good start, but how has the affected its labor force? In Toyota In The World 2012 [PDF] (Unknown, n.d), the numbers of employees were documented at 69,148 (total in affiliated companies: 325,905) as of March 31, 2012.
Competition
Future Efforts in emerging markets calls for new strategies for growing emerging markets and TMC has three focus points to do this. First, to establish a second home in Asia, which will be considered their second mother base (the first being Japan), which will allow them to continue their IMV Project by strengthening production and supply bases for compact vehicles in Asia and thereby establishing localized procurement and thus ensuring and enhancing cost competitiveness (Unknown, 2012). Second, TMC will develop a new Compact Vehicle Strategy that “emphasizes the compact vehicle lineup and seeks to meet the needs of consumers in emerging markets,” for example, launching 8 compact vehicle models specifically designed for emerging markets like the Etios in India (which was launched in December of 2012) (Unknown, 2012). Third, TMC’s ensuring of cost competitiveness, through localization, to create progress in intra- and extra- regional exports will also be a focus, but to do so will mean maximizing local Research and Development functions and achieve local/regional procurement rates of 100% (Unknown, 2012). Future efforts in emerging markets will focus on Africa, Russia, India, Asia, and Brazil (Unknown, 2012).
Legal Issues
Legal issues will be assessed through Research and Development in the following areas: Africa, Russia, India, Asia, and Brazil in regards to trade pacts with each country, tariffs TMC needs to consider or be aware of while operating in these countries, risks TMC may face and resources or avenues it can pursue if treated unfairly.
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International Market Exit Strategies
Multinational companies often research both entry and exit strategies, but most do not put much emphasis on the impact that their departure may have on surrounding communities, or worse, how to manage that impact (Collaborative for Development Action Inc, 2003). Corporations should look at both community needs and government capacity in order to avoid the following pitfalls; that of not sufficiently preparing communities for what to expect when the company leaves; that of depending on governments to take over to ensure sustainability of social programs; that of decreasing community relations budgets as the time for closure approaches, but the need in those services does not decline; and that of companies leaving behind infrastructure that is unsuited to community needs (Collaborative for Development Action Inc, 2003).
Some political and economic issues Toyota may face when exiting a specific market?
Tax Benefits/ Facility & Real Estate Incentives/ Financial Incentives –(Loss Of)
Decrease in Economic Status, Decreased Social Status & Decrease in Company Provided Services
How does the cost to move a company out of a country differ from the cost of continuing operations in that market? Example?
Taxation
Toyota Experiencing Taxation Issues Domestically
What are some of the political and economic issues a company may face when exiting a specific country? How does the cost to move a company out of a country differ from the cost of continuing operations in that market? Cite specific examples to support your points.
A company faces different issues when it needs to exit a market. There are many reasons as to why a company may choose to exit a market, for example, a manager may decide to move in a new direction. Once a company has made the decision to move out of a market they must be able to fulfill its legal responsibilities that include such things, such as, unemployment benefits, compensation for both employees and vendors, as well as payment of income taxes. What a company must remember is that once it leaves the market, they must pay back that of which they obtained through benefits they obtained through entry. For example, some entry benefits that a company might have obtained from the market includes: specific tax benefits, facility and real estate incentives, and financial incentives. It’s almost as if once the company exits these benefits are reversed.
Exit Strategies impact communities in three different ways: decrease in economic status, decrease in social status, and a decrease in company-provided services (Collaborative for Development Action Inc, 2003). Bottom line, legal and social aspects need to be considered by companies that wish to exit markets in order to avoid complications with stakeholders such as labor, local municipalities, vendors, and taxing authorities. Therefore, reviewing regulatory issues that multinational companies need to consider when exiting foreign markets, is imperative for everyone involved and not involved.
Taxation is also an important issue regarding the income/loss incurred with doing business in other countries or with doing business within its home country. For example, Toyota is experiencing taxation issues domestically with the government planning on raising the consumption tax rate from 5% to 8% in April of 2014 and then later in October of 2015 to 10% (Narabe, 2013). This affects Toyota in that company must create plans/strategies to cut back on the number of vehicles it manufactures annually at domestic plants and look to shift production overseas, particularly to countries that represent undeveloped markets, where entry incentives could help Toyota expand (Narabe, 2013). For now, Toyota will continue to out domestically at a constant 3 million cars, allowing Toyota to maintain its technical edge (Narabe, 2013).
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International Market Exit Strategies
At least 5 different local regulators a company would need to satisfy prior to exiting a country.
Legal Issues Raised at Home & Host Country laws/ Regional Regulations or Directives/ Bilateral & Multilateral Treaties/ International Standards/ Certifications
Example?
Some countries regulate exiting firms more than other countries. What can companies do to anticipate these regulations?
Exit Strategies/ Engaging Communities/ Soliciting a Range of Perspectives
Identify at least five different local regulators a company would need to satisfy prior to exiting a country. Discuss which of these regulators would hold more authority. Give reasons to support your choice.
Five different local regulators that a company would need to satisfy prior to exiting a country would include dealing with legal issues raised by home and host country laws, regional regulations or directives, bilateral and multilateral treaties, and international standards and certifications (ethical issues should be included as well) (Mayer & Jebe, 2010).
For example, MNCs based in the United States are more likely to not be allowed to engage in bribery because of antitrust, anti-bribery, and equal employment opportunity laws often apply to their operations abroad, however US companies often find that if they do business internationally, the host’s country laws are more lenient, especially in areas of environmental protection, human rights, and health and safety labor standards (Mayer & Jebe, 2010). Companies should focus on widely recognized standards of labor standards, environmental care, human rights, NGOs, ethical challenges and civil laws (Mayer & Jebe, 2010).
Why do some countries regulate exiting firms more than other countries? What can companies do to anticipate these regulations?
Perhaps understanding that Japanese MNCs have displayed an interesting business practices that as described by the following; “Japanese MNCs have strived to remain competitive by developing lower-cost capacity in facilities abroad. In doing so, corporate executives have played a role in “hollowing out” Japan’s economy and have broken with generations of tradition that put national interest above all else (Stopford, 1998).” Thereby understanding why some countries regulate exiting firms more than other countries.
Multinational companies should focus on including an exit strategy in the design of any new project, engaging communities in discussing impacts and planning closure, soliciting a range of perspectives and views in order to assist groups in appropriate ways, using care when choosing language and framing exit strategies, using tangible and visible short-term objectives that build toward goals for departure, consider potential sources of conflict, and finally, engaging with NGOs (Collaborative for Development Action Inc, 2003).
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Legal & Economic Risks of Expansion
Taxation issues
Inbound/Outbound
Distinguish U.S. GAAP versus IFRS
Generally Accepted Accounting Principles
International Financial Reporting Standards (IFRS)
Differences
Political
Laws & Governmental Regulations
Related to Vehicle Safety
Foreign exchange
Local Currencies & Foreign Currency Exposures
Taxation issues
There are two types of cross-border taxation, inbound and outbound, which one is used will depend on the type of transaction being analyzed (Mitchel, 2009). Inbound taxation refers to non-U.S. persons/entities with U.S. income and/or activities in the U.S. – much like Toyota, since Toyota has their headquarters in Japan. Thus, Toyota sells into the U.S., placing Toyota in the inbound category (Mitchel, 2009). The key factor being that the parent company is outside of the U.S. even if Toyota is doing business through subsidiaries in the U.S. (Mitchel, 2009). Some common cross border tax issues include: U.S. withholding taxes, transfer pricing, branch profits taxes, branch interest taxes, earnings stripping, income tax treaties (more are included but not mentioned) (Mitchel, 2009).
Outbound taxation refers to U.S. persons with NON-U.S. income and/or activities, for example, a U.S. headquartered corporation has income and/or activities in another country(ies). Some common cross boarder tax issues for this category include: foreign withholding taxes, transfer pricing, foreign tax credits and foreign tax credit limitations, subpart F income, Code § 956 inclusions (aka investments in U.S. property), income tax treaties and others not listed (Mitchel, 2009).
Distinguish U.S. GAAP versus IFRS
U.S. GAAP is an acronym for Generally Accepted Accounting Principles, it is guided rules that the United States uses when preparing, presenting and reporting financial statements. The Securities and Exchange Commission (SEC)’s goal is to switch from US GAAP to International Financial Reporting Standards (IFRS), especially after the Enron and WorldCom scandals.
IFRS are used only by profit-oriented entities (Collier, 2007). Each country has had it’s own set of accounting standards and with the help of International Accounting Standards Board (IASB) a harmonization of accounting standards has been the consequence of the globalization of capital markets, and thereby establishing the need for accounting rules that can be understood by international investors (Collier, 2007). IASB’s responsibility is to set accounting standards, it is also responsible for publishing IFRS (Collier, 2007). “IFRS set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general-purpose financial reports, although some standards refer to specific industries (Collier, 2007, p. 79)”
The difference between US GAAP and IFRS is that US GAAP is only used by the United States whereas IFRS is used internationally. Most companies in the US are not required to use IFRS, but because of factors such as size, industry, geography, M&A activity, and global expansion, many companies are adopting IFRS (PWC, 2013). IFRS has influenced US GAAP to adopt its principled-based structure rather than a ruled-based structure of accounting.
The significant differences between GAAP and IFRS are in the following of financial reporting: cash flow statements, earning per share, discontinued operations, fair value measures, foreign currency translation issues, impairment of long-lived assets, income taxes, interim reporting, inventory, property, plant and equipment and investment property, segment reporting, and subsequent events (McGladrey, 2012).
Political & Legal
The automotive industry is subject to various laws and governmental regulations such as environmental matters such as emission levels, fuel economy, noise, and pollution, as well as laws and regulations related to vehicle safety (Toyota Annual Report, 2011). Toyota is required to implement safety measures such as recalls that do not comply with safety standards of laws and governmental regulations (Toyota Annual Report, 2011). The government may also impose tariffs and other trade barriers, taxes and levies, or enact price or exchange controls, and that leaves Toyota expecting to incur significant costs when complying to those regulations (Toyota Annual Report, 2011). Toyota’s financial condition and results of operations will be adversely affected if it has to incur various costs due to safety measures or meeting laws and governmental regulations, especially with new legislation or changes in existing legislation and with free repairs due to recalls (Toyota Annual Report, 2011).
Toyota is subject to legal proceedings such as product liability and infringement of intellectual property as well as legal proceedings brought by its shareholders and governmental proceedings and investigations, all of which could adversely affect Toyota’s financial condition and results of operations (Toyota Annual Report, 2011).
Toyota is subject to many risks when conducting business worldwide, some of those risks include; “natural calamities; political and economic instability; fuel shortages; interruption in social infrastructure including energy supply, transportation systems, gas, water, or communication systems resulting from natural hazards or technological hazards; wars; terrorism; labor strikes and work stoppages (Toyota Annual Report, 2011).” All of these risks could result in disruptions and delays in the operations of Toyota and affect its financial conditions.
Foreign Exchange
Other than the local currencies in which Toyota operates, Toyota does have foreign currency exposures relating to buying, selling, and financing (Wikivest, 2013). “Toyota’s most significant currency exposures relate to the U.S. dollar and the euro (Wikivest, 2013).” To evaluate its exposure to changes in foreign currency exchange rates, Toyota uses VAR (value-at-risk analysis) (Wikivest 2013).
Toyota Motor Corporation is widening its global production footprint to limit exposure to currency risk, with plans to expand production in Europe since its luxury Lexus brand is produced entirely in Japan (Rosemain, 2013). Chief Regional Officer Didier Leroy of Toyota Motor Corp. said, “We want to have a business model that completely frees us from the exchange notion (Rosemain, 2013).” This is because the yen has depreciated 6% against the euro, the weakest since 2010, and its down by 7% against the dollar, giving more reason to his statement above (Rosemain, 2013). The yen is in the negative for Japanese carmakers and because they are more competitive this year, it doesn’t mean that they were more competitive in 2008 when the yen was 170 per euro (Rosemain, 2013). As for localized production it is a current logic to localize production and, “currency fluctuations are having a huge impact on where the automakers are choosing to put their production…More natural hedges are what automakers are trying to do rather than financial hedging. That’s where the emphasis will be going forward,” Anil Valsan, global lead analyst for automotive at Ernst & Young, said in an interview (Rosemain, 2013).
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Legal & Economic Risks of Expansion
Economic. The automotive industry continues to face a number of issues that threatens its growth potential, such as the earthquake and tsunami that hindered Japan’s supply chain, the ongoing debt crisis in the European Union that created massive production cuts and accelerated the need to right size operations, and of course the effects of Hurricane Sandy in the Us, which destroyed 250,000 vehicles (PWC, 2013).
From a regulatory standpoint, meeting global emission standards has become a daunting task for the automotive industry (PWC, 2013). The World Resources Institute claims that motor vehicles are responsible for 15% of global CO2 emissions, which gives reason as to why companies are investing into research and development of new innovations and development of next-gen technologies (PWC, 2013). The following interests will meet various global regulations; improvements in aerodynamics, the introduction of lightweight materials, low rolling resistance tires, various efficiency gains in internal combustion engines, advanced transmissions, and a broader rollout of various hybrid, plug-in, and pure electric applications (PWC, 2013). “By 2020 the development and production of EVs [electric vehicles] and supporting technologies will shift to more of a global collaboration model (PWC, 2013, p.3).”
Pricing
Product Regulations
Pricing
In regards to pricing EVs, about 46% of respondents (Source: Charging Forward: Electric Vehicle Survey 2012 as cited in PWC, 2013) felt that consumers would be willing to pay a premium price with consideration of gas prices increasing. However, the primary cost continues to be the battery systems and automakers understand that the cost of EVs remains a prohibitive factor for people (PWC, 2013). Significant subsidized leasing options are available to consumers in order to stimulate sales with the two main reasoning being; the subsidized lease price is affordable and mimic those lease prices for ICE vehicles; and consumers are not responsible for the upfront and replacement cost for the battery (PWC, 2013). It’s important to keep in mind that this method is not sustainable in the long-term, but it does get consumers familiar and comfortable with EVs, after all as companies continue to build according to regulations, consumers will have little choice in what products/vehicles are offered.
Product Regulations
International Electrotechnical Commision (IEC) has defined international standards for EVs with definitions of plugs ad sockets for charging EVs, which leads to addressing the diverse electricity infrastructures and regulations in different countries (IEC, 2011). The risk? –that incompatible solutions will be developed by separate businesses around the globe, which would be against the best interests of the worldwide vehicle manufacturing industry (IEC, 2011). However, “because of IEC’s well established process and international approach there is a high level of confidence that they will enable global interoperability, allowing vehicle manufactures’ products to operate across as wide a range of markets as possible (IEC, 2011).”
These standards will serve to match up with regulatory parameters resulting in allowing manufacturers to work to common standards within which they can meet the regulatory requirements across different markets! IEC standards are therefore setting a baseline for EV development and will ensure that EVs and the components needed to charge them can be used in different markets, bringing down the costs for manufacturers and increasing EV attractiveness to consumers (IEC, 2013).
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Legal & Economic Risks of Expansion
Corporate governance
Toyota Motor Corporation (TMC) believes in positioning itself in order to stabilize long-term growth of corporate value and TMC believes that by achieving this long-term and stable growth requires building positive relationships with the following: stakeholders, shareholders, customers, business partners, local communities and employees, and by supplying products that will satisfy their customers (Toyoda, 2013).
Organizational Structure
Policies
TNGA & International Advisory Board
Issues
Labor-Management Council/ Joint Labor-Management Round Table Conference/ Toyota Environment Committee / CSR Committee
Organizational Structure, Policies, and Issues
TMC’s organization structure and organizational operations consists of a company with 33 Directors and 14 Audit & Supervisory Board members (Toyoda, 2013). “Audit & Supervisory Board Members periodically receive reports from Independent Accountants on audit plans, methods and results of auditing at meetings of the Audit & Supervisory Board. They also hold meetings and exchange their opinions as they consider necessary concerning auditing in general. As for internal auditing, a specialized independent department evaluates the effectiveness of internal controls over financial reporting. Audit & Supervisory Board Members receive reports from the department on audit plans, methods, and results of auditing periodically or whenever necessary (Toyoda, 2013).”
In 2013 TMC made organizational changes with the goal of speeding up the decision-making process by dividing the automotive business into four units; Lexus International, Toyota #1 (N.America, Europe and Japan), Toyota #2 (China, Asia &Middle East, East Asia & Oceania, Africa, Latin America & Caribbean), and Unit Center (engine, transmission, and other “unit”-related operations) (Toyoda, 2013). Along with this division an Executive Vice President was put in charge of the operations of each unit (Toyoda, 2013).
Toyota’s top management established an organization to promote the implementation of the “Toyota New Global Architecture (TNGA)” through the TNG Planning Division in order to realize The Toyota Global Vision, which is to achieve sustainable growth through continuous development of even-better cars that exceed customer expectations around the world (Toyoda, 2013). TMC also established an International Advisory Board that consists of advisors from each region overseas, receiving advice on management issues from a global perspective (Toyoda, 2013). TMC also has a variety of conferences and committees such as the Labor-Management Council, the Joint Labor-Management Round Table Conference and the “Toyota Environment Committee,” which monitors management and corporate activities, for the sake of the stakeholders (Toyoda, 2013).
A CSR Committee has been developed to manage and implement activities that fulfill social responsibilities, which also goes hand in hand with Audit & Supervisory Board that reviews issues pertaining to corporate ethics, legal compliance, risk management and social contribution, and also to develop action plans concerning these issues (Toyoda, 2013).
For employees, TMC has created facilities to make inquiries concerning compliance matters such as the Compliance Hotline and the Toyota Code of Conduct is given to employees as a guidelines for behavior and conduct (Toyoda, 2013). TMC’s auditor system includes Audit & Supervisory Board Members (including four Outside Audit & Supervisory Board Members) and although there is no standard or policy on appointing Outside Audit & Supervisory Board (Toyoda, 2013).
“To enhance the system for internal audits, a specialized organization made independent of direct control by the management evaluates the effectiveness of the system to secure the appropriateness of documents regarding financial calculation and other information in accordance with Section 404 of the U.S. Sarbanes Oxley Act and Article 24-4-4 (1) of the Financial Instruments and Exchange Law of Japan. In order to enhance the reliability of the financial reporting of TMC, the three auditing functions — audit by Audit & Supervisory Board Members, internal audit, and accounting audit by Independent External Auditors — aid in conducting an effective and efficient audit through meetings held periodically and as necessary to share information and come to understandings through discussion on audit plans and results.”
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Risks of Unstable Economic Conditions
Issues operating locally. Toyota’s headquarters and domestic production plants are located in the Nagoya region, specifically in the city of Toyota (Japan-guide.com, 2013). Since the devastating earthquake and tsunami that disrupted the car industry output in Japan, Toyota has had to close down about 18 factories (Euronews, 2011). The cost of closing down these factories really negatively impacted Toyota, setting them back, but they were lucky enough to resume production of three hybrid cars, the Prius and two Lexus models (Euronews, 2011). In 2011 Toyota opened two factories, but they only functioned at half their normal capacity because the carmaker’s suppliers were still not operating (Euronews, 2011). This situation resulted in Toyota having to reduce the number of vehicles being made at North American plants because of the disruptions of the production of parts in Japan, due to the earthquake and tsunami, but the worst, was knowing that the total estimated lost production by all manufacturers worldwide was 6000,000 vehicles, an estimate made by Industry analysts at IHS Automotive (Euronews, 2011).
Customers
Legal & Economic
Capital
Customers
Customers were affected in respect to the U.S. State Department travel alerts urging them not to travel to Japan, but in terms of Toyota, customers were made aware of the difficulties that Toyota would endure as a direct result of the earthquakes and Tsunami (Kaizen Factor, 2011). The launching of the 3rd-generation Toyota Yaris/Vitz for North America, the Middle East and the Japanese Domestic Market would definitely be impacted in a negative manner, as well as other subsidiary plants, such as those for small car production sold in the Japanese Domestic Market and the rest of the world (Kaizen Factor, 2011). As for production, many facilities were being closed down such as brake and suspension component suppliers, seating suppliers, mega-supplier, and facilities that manufacture batteries for hybrid cars (Kaizen Factor, 2011).
Legal & Economic
Many companies (about 1,356) declared special losses due to the earthquake and this earthquake disrupted Japan’s $5 trillion economy, the third largest in the world, causing the Japanese stock market to fall and reverberate globally (Hays, 2012). The Bank of Japan (BOJ) acted quick by putting $183.8 billion back into the economy to save the country’s economy and plunging financial markets and the US along with other major industrial nations of the Group of Seven (G-7) joined in to stabilize the value of the yen by intervening in currency markets after the yen rose to a postwar record of 76.25 yen to the dollar (Hay, 2012). Japanese ports and airports were closed, causing delays in shipping goods and therefore causing the prices of products and components to rise, a rippling effect that was relatively modest and short lived (Hay, 2012).
Capital
Although Toyota stopped production, it was also quick to get the plants back online and on track to produce and dealerships in the US remained in good standing in terms of inventories (Toyota USA Newsroom, 2011). The earthquake did not affect the two plants that were located in central Japan, but the Prius and two Lexus models were the only inventories that were negatively impacted (Toyota USA Newsroom, 2011). Quarterly profits slid 18.5 percent to 80.4 billion yen on plunging sales due to parts shortage (Kageyama, 2011). Vehicle sales declined in the markets of Japan and North America, yet Asia, India and Indonesia were pulling strongly in their sales, a repercussion of the earthquake that was expected (Kageyama, 2011).
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Risks of Unstable Economic Conditions
Issues operating in multinational marketplaces
Governmental Regulations From Home Country
Japan has three pillars of interest when it comes to major corporations such as Toyota; lifetime employment, seniority-based pay and promotion, and company trade unions in order to improve the firm’s systems and performance (Aoki, Delbridge, & Endo, 2011).
Sourcing products
Import export restrictions
Capital
Issues operating in multinational marketplaces
Governmental regulation from home country
“Part of the story of Toyota’s success has been its ability to successfully transfer production overseas. Since it entered into a joint venture with General Motors to form NUMMI and turned around the fortunes of a brownfield site in California in the 1980s, Toyota has established manufacturing operations across the world (NUMMI is New United Motor Manufacturing Inc., which became Tesla last October). In the process, it also transferred the essence of its lean production system – efficiency, quality and teamwork. This has been vital in allowing the company to continue to grow despite the contraction of its home market (Aoki, Delbridge, & Endo, 2011).”
Furthermore,
“The advocacy of a fundamental change from the established corporate employment system to a market-based approach can be clearly seen in the actions of the Liberal Democratic Party government in Japan up to 2009. The government had actively promoted the relaxation of regulations on employment and compensation systems in order to realize the vision provided by the Japan Federation of Employers’ Associations. With regard to employment specifically, while recognizing the importance of the country’s lifetime employment system, the government promoted a combination of the continuation of the long-term system for a decreasing number of core employees and the adoption of more flexible forms of employment system for the rest of the workforce. This proposed a three-way segmentation of employees between core long-term employment, fixed-term specialists and flexible short-term contract labour, with further implications for the pay-and-promotion systems to be followed in each case. The government advocated the necessity of revising seniority-based payment systems such as periodic salary increases, the need to implement an evaluation of occupational ability and job performance, and to relate the annual salary system to qualification. To these ends, there were a series of legislative changes since the burst of the bubble economy that relaxed employment regulation and promoted a more flexible, market-based approach (Aoki, Delbridge, & Endo, 2011).”
Sourcing products
Since the affects of the earthquake and the tsunami, Toyota has created a plan that will dramatically lower its supply chain risk, which means Toyota will be looking a more dual sourcing of parts (SupplyChainDigest, 2012).
Import export restrictions
The Reagan administration along with Japanese carmakers agreed to put a limit on exports of passenger cars to the US, under VER programs (Voluntary export restraint), allowing only 1.68 million cars a year (Benjamin, 1999). Consequences of VER were that any Japanese cars produced in the US were excluded from the limits, which means that Japanese makers were more likely to invest in US production facilities (Benjamin, 1999). However the program was terminated in 1994. Looking back this program actually affected Japan in that export restraints raised the prices of Japanese cars. In the second half of the 20th century however, Japan achieved multilateral trade liberalization that was a direct result of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) (Web Japan, n.d.). The trend in recent years has been to negotiate free trade agreements (FTA), the rate of exports decreased in Japan as automobile manufactures started to establish overseas manufacturing facilities by Japan companies such as Toyota (Web Japan, n.d.). Imports items include raw fibers, hydrocarbon fuels and metal ore, and mineral fuels (Web Japan, n.d.).
Capital
Toyota continues to expand into other markets and establishing manufacturing facilities all over the globe. The Economy will become a great deciding factor in the progress of the automobile business as the amount of loans from banks will determine the amount of sales of cars, yet cars will also be tailored towards specific markets as a direct result of the opening of Research & Development divisions in more countries.
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Current Financial Status and Future Growth
The automotive market environment is highly competitive and volatile with many factors affecting it, such as social, political and general economic conditions and of course the introduction of new vehicles and technologies as well as costs incurred by customers to purchase and operate vehicles (Annual Report, 2008). Based on vehicle unit sales Toyota’s primary markets for fiscal 2012 were: Japan (28%), North America (25%), Europe (11%), and Asia (18%), but during fiscal 2011unit sales decreased due to market conditions in Japan deteriorating (Annual Report, 2012). However in 2012 unit sales in Japan increased, mostly because of the introduction of new products and sales efforts of domestic dealers (Annual Report, 2012).
Comparable Financial Statements (balance sheet and income statements)
Versus Competitors
Last three years
Noticeable trends
Comparable financial statements (balance sheet and income statement)
Versus competitors
Toyota’s competitors include Ford Motor Company, General Motors Company, and Honda Motor Co., Ltd (Hoovers, 2012). General Motors Company and Subsidiaries Corporate total net sales and revenue in 2010 went from 134$ (millions) to 61$ million in 2011 and further declined in 2012 to 40$ million (GM, 2012). Ford Motor company went from 119,280 million (2010) to an increase of 128,168 million (2011) and decreased back to 126,567 (2012) (Ford, 2012). Honda’s unit sales in 2012 decreased 10.75 from 2011 with all regions recording sharp sales declines, which were effected by the supply chain disruption from Japan’s Earthquakes and floods in Thailand that directly affected local production facilities (Honda, 2012). Net sales and other operating revenue in 2010 went from 8,579,174 yen (millions) increased to 8,936,867 yen (millions) in 2011 but decreased in 2012 to 7,948,095 yen (millions).
Toyota is ahead of the competition despite recall issues, pension costs and health care benefits, and of course the earthquake and tsunami, all of which have had a negative impact on Toyota’s financial statements. Many would attribute Toyota’s continued success/lead in it’s global grasp of the automobile industry.
Last three years
Over the last three years Japan has gone from 7,314,813 yen (millions) (2010) decreased to 6,966,929 yen (millions) (2011) and to an increase of 7,293,804 yen (millions) (2012) (Annual Report, 2012). North America went from 5,583,228 million (2010) to a slight decrease of 5,327,809 million (2011) and further decreased to 4,644,348 million (2012) (Annual Report, 2012). Europe went from 2,082,671 million (2010) to a decrease of 1,920,416 million (2011) and further decreased to 1,9,17,408 million (2012) (Annual Report, 2012). Asia went from 2,431,648 million (2010) to an increase of 3,138,112 million (2011) and a slight decrease of 3,116,849 million (2012) (Annual Report, 2012).
Noticeable trends
The recession continues to affect automakers as they see that the economic recovery turnaround time is slow (Banks, 2010). Price of raw materials and the declining dollar as well as other countries waging a currency war, to prevent their currencies from dropping are factors that are affecting the automakers (Banks, 2010). With the increase in rigorous legislative mandates on emissions, safety and quality, intense pressure to scale, especially for emerging markets, new or evolving joint-venture business models due to mergers and acquisitions and the narrowing of product portfolios, its not wonder that automakers are gearing up for the next-generation industry transformation (Banks, 2012). There is also a trend in focused marketing on specific markets and a broader perspective and corporate culture based long-term vision of consumer-driven product excellence (Banks, 2012). “Automakers will be pressured to develop a global platform upon which vehicles are designed, engineered and produced, to leverage the most capital-intensive equipment and resources initially, and then customize and accessorize later for regional preferences (Banks, 2012).
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Current Financial Status and Future Growth
Investments in The Specific Country or Regional Area
Past
Recall Issues
Present
Targeting New Emerging Markets
Future
Technological Advances
Investments in the specific country or regional area
Past
Toyota originated and began operation in Japan (Toyota Motor Corporation, 2013). Sakichi Toyoda, was known as the 13th most influential businessman of all time (Forbes.com Staff, 2005). Because he was one of the most influential and innovators of his time who did not start in the automotive industry, but rather was a weaver who invented a loom. That loom, which detected errors within the automatic production, thereby preventing the creation of defective goods would come to not only be obtained for $150,000, which he used to help his son become the world’s second-biggest carmaker, but would come to be known as “Toyoda’s innovation of instilling human judgment on machines, also known as automation or Jidoka…. cutting down on waste, improving customer relations, revealing problems and conserving resources (Forbes.com Staff, 2005).”
Yet, Toyota has faced many recall issues over the past few years. Focus on legal settlements was the main focus of the company and of the consumers. In 2010 Toyota settled for $10 million involving a 2007 Lexus ES that killed four people (Bensinger, 2013). In November, Toyota paid $25.5 million to settle a class action suit filed by investors (Bensinger, 2013). The automaker will continue to face about 300 personal injury and death suits in both state and federal courts (Bensinger, 2013).
Present
Toyota is currently targeting new emerging markets as well as maintaining existing markets, all of which includes; Europe, China, Japan, North America, Japan, Asia and Oceania, and Middle East, Africa, and Latin America (Toyota-Global, 2012).
Toyota has also been a pioneer in hybrid vehicles/ electric vehicles (EV) and continues to create focus on developing these technologies further and staying ahead of regulations and standards. These standards will serve to match up with regulatory parameters resulting in allowing manufacturers to work to common standards within which they can meet the regulatory requirements across different markets. For example, International Electrotechnical Commision (IEC) standards are therefore setting a baseline for EV development and will ensure that EVs and the components needed to charge them can be used in different markets, bringing down the costs for manufacturers and increasing EV attractiveness to consumers (IEC, 2013).
Future
Toyota will tackle technological advances that will spawn next-generation mobility by preserving environmental quality, creating infrastructure for safer mobility, producing amenable, low carbon mobility and introducing new lifestyle technologies (Toyota Global, 2012). They will contribute to economic and social vitality in each region by building mutually beneficial business relationships with dealers/suppliers and stabilizing employment all while nurturing human resources and enhancing the culture lives of their host communities (Toyota Global, 2012). Toyota’s 2015 goals include fostering demand in emerging markets with locally produced core models, including the Innovative International Multipurpose Vehicle models and newly developed subcompact models as well as deploy hybrid models extensively in markets worldwide (Toyota Global, 2012).
16
Current Financial Status and Future Growth
Recommendations and insights on the company
Toyota must be able to understand several cultures, be able to design a new goal-oriented corporate culture strategy depending on global environmental changes in order to create competitive advantage (Moran, Palmer, & Borstorff, 2007).
Recommendations and insights on the company
Toyota is placing more emphasis on safety, and that’s mostly due to the recalls and stricter regulations being placed at an international level. Interest in the development of more facilities to hold research and development divisions will take Toyota towards higher standards of quality. This will also have a huge impact on safety and the advanced development of products.
Recommendations for Toyota include settlements of all recalls and suits in both state and federal courts, as well as developing strategies that will align to the stricter regulations via Research and Development Facilities. Advancements in Electric Vehicles is also recommended and the establishment of new production facilities in new emerging markets are also recommended. Being able to provide security through the brand must also be a factor in order to get consumers to become reassured that Toyota is in fact providing vehicles that are safe and reliable.
Overall Recommendations and insights on Toyota include:
Through their operations Toyota will increase their operations map, increase Research & Development facilities and Engineering & Manufacturing plants, put more emphasis in their design and provide more financial services according to economies (Toyota, 2013). Toyota will also focus on their impact on the environment by focusing resources on future transportation, eco-efficient operations, green building, strengthening communities, and focus on environmental activities. Environmental activities such as, research and development, manufacturing, logistics and sales, describing relationships with suppliers and dealerships, and of course describing how Toyota will support environmental stewardship and education initiatives in the United States, Canada, and Mexico (2012 North American Environmental Report, 2013). There will be five focus areas to include environment, education, safety, community and guidelines/applications and their diversity focus will be on the Diversity Advisory Board, workforce, dealers, suppliers, customers, and community (Toyota, 2013).
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· Dobni, B., Dobni, D., & Luffman, G. (2001). Behavioral approaches to marketing strategy implementation. Marketing Intelligence & Planning, 19(6/7), 400–408. (ProQuest Document ID: 213126690)
http://search.proquest.com.libproxy.edmc.edu/docview/213126690?accountid=34899
introduction
Modern-day management gurus have attempted to reveal sources of sustainable competitive advantage by studying organizations who are top performers. For example, in the book called The Winning Streak, Goldsmith and Clutterbuck (1984) undertook extensive analysis of 23 top producing UK companies. By 1996, only two of these 23 companies, Marks & Spencer and Sainsbury, remained in the top ten of their respective industries, 40 per cent of the sample were experiencing major difficulties, and another 30 per cent had been the subject of takeovers. Many of the companies studied by Peters and Waterman (1982) in In Search of Excellence have similarly fallen victim to competitive forces, relegating them to the status of “weakened” or “troubled”. In Pascale’s (1990) Managing on the Edge, five years after publication, two-thirds of the “excellent” companies had lost this billing. As academics and practitioners alike search for root causes, the one thing that we can conclude is that many have experienced difficulty navigating the strategy continuum, particularly converting plans into action on a sustained basis (Mintzberg, 1994). Our interest in this article is to address these issues by defining behavioral structures for strategy implementation, particularly as it concerns service applications.
This article highlights the outcomes of two recent studies done by the authors that involved over 600 organizations. In it, we discuss the derivation and sustainment of context-specific behaviors to support strategy implementation. These investigations were based on our desire to define structures for the implementation of strategy that focus on the relationships between marketing actions, employee behaviors, and the competitive environment.
Traditional strategic planning is no longer a panacea
It is important to understand why organizations have failed in attempts to develop sustainable implementation contexts. For decades, managers have spent much of their time figuring out how to position product and service offerings within an industry. Invariably, most attempt to differentiate offerings through advertising and promotion, pricing, or being first in the marketplace with a new or improved offering, to name a few. These traditional and tangible strategy positioning strategies are effective, but have yet to provide organizations with sustainable competitive advantages.
To reconcile our dissatisfaction with traditional implementation approaches, we concern ourselves with the causes of failure first. As we see it, there are three primary reasons why traditional approaches are the Achilles’ heel for many organizations. First, marketing strategies supporting a product or service focus similar to those identified above are no longer the differentiators they used to be. In fact, they have become so generic and easily copied that many of these actions have been relegated to hygiene status. Second, brilliant strategies do not always succeed, often succumbing to not so brilliant implementation processes, processes which still reinforce traditional organizational boundaries and the calamitous communication practices they foster. Third, there is often a failure to recognize the contributions that employees can have on strategy implementation. Many organizations have not provided a context for employee behavior; therefore they are simply not prepared to perform to their potential. This is especially the case in service organizations where the quality of service produced is directly related to the behavior of its employees.
The reality is that traditional implementation approaches have failed to provide a sufficient operational interface between the environment and the organization. These approaches have not adequately focused on intangibles such as the people and processes necessary to develop ongoing and sustainable implementation contexts. Very simply, the organization lacks implementation harmony. This, we believe, can be traced back to something to which we refer as cerebral strategizing, which we define as the inability to move strategy out of the boardroom and into the playing-field. These impediments invariably have two quite contrasting outcomes: great intentions outlined in an eloquently written strategic plan supported by a poor, fragmented or sometimes non-existent implementation plan. This almost always relegates organizations to default to the status of reactors, preventing them from progressing to levels of performance that harmonious organizations are capable of reaching. As a result, traditional implementation contexts should be reconsidered, if not abandoned altogether.
These are not new revelations. Many influential authors (Hamel and Prahalad, 1994; Day, 1990, 1994; Narver and Slater, 1990; Jaworski and Kohli, 1993) have addressed their dissatisfaction with traditional strategy approaches, and have offered some prescriptive advice such as aligning organizational strategies with the organization’s infrastructure and emerging technologies, building cross-functional taskforces, and reshaping culture, to name a few. In fact, in a recent edition of Business Strategy Review, Day (1998) highlighted the importance of what it meant for an organization to be market-oriented and market-driven. His conclusions crowned six years of what can be considered third generation study supporting the re-emergence of strategy. Almost without exception, this “what to do” advice falls short in the “how to do” department and many managers are still left with the feeling of “so what?”
Other new age strategists offer solutions. In fact, the re-emergence of strategy as the primary catalyst for corporate growth has been very much fueled by its redesign (Business Week, 1996). Terms such as value migration, co-evolution, white space opportunity, strategic intent, stretch goals, opportunity share, and business ecosystems are being defined and practiced by some of the industry’s greatest, such as Jack Welsch of General Electric, Lewis E. Platt, Chairman of Hewlett-Packard, Jorma Ollila, CEO of Nokia, Bill Catucci (CEO, AT&T Canada) and consultants Gary Hamel (Strategos Inc.), Adrian Slywotsky (Corporate Decisions) and James Moore (Geopartners Research). This group of innovative CEOs and high profile consultants are suggesting that organizations move away from the mechanistic, traditional and internal approaches to more revolutionary experiential approaches. We cannot agree more! We suggest that the answer to how to best compete now and in the future lies in managing a company’s behavioral profile.
Behavior is culture, culture is strategy
Culture, briefly defined, is the taken-forgranted, out of conscious pattern of shared values and beliefs that help employees understand organizational functioning and thus provide them with norms for behavior in the organization. As a result, organizational strategy and, subsequently, performance cannot be understood without an understanding of the culture of an organization. The marketing culture or collective behaviors of employees drive marketing strategy in an organization. In this sense, behavior is culture and culture is strategy; therefore, one needs to manage culture to manage strategy. The reality is that people make a difference; therefore management has to create an environment that connects employees to the organization’s mission, and motivates their creativity, commitment and passion. This reality is easily understood – the challenge of how to do it is not. For some time now, we have been interested in addressing this challenge, and we are now suggesting that culture should no longer be taken for granted.
Although culture has been defined as a panacea for organization success, it has not been conceptualized to the point where it has benefits for managers. For example, there has been little elaboration concerning how, why and under what circumstances it affects performance. Specifically, to use culture effectively, managers must understand what behaviors they are trying to develop and reinforce with respect to the goals of the organization and the competitive realities. All too often, managers lack this understanding. What is new is that, through our investigative work, we have put culture and the environment into context.
The theory of “culture coalignment” has already been identified by Walker and Ruekert (1987), Ruekert et al. (1985), McKee et al. (1989), and McDaniel and Kolari (1987). Further, coalignment research has provided strong evidence to support the view that successful organizations are those that most efficiently interact with their environments, and that the actions adopted by organizations are related to several factors including the values, vision, objectives and resources held (Venkatraman and Prescott, 1990).
The investigative research
Study one: behavioral repertoires
Behavioral repertoires are specific combinations of high impact behaviors that comprise employee roles, and are designed to focus on the relevant, non-trivial behavior modes that are pivotal to job performance and organizational success.
The first study involved 415 respondents representing 95 service organizations in western Canada (Dobni, 1996), and focused on behavioral contexts at a macro-organization or industry level. This investigation identified the existence of four behavioral repertoires that might be used as conceptual models for reinforcing behaviors necessary to remain nimble in specific industries. Table I describes each repertoire and the situation in which it is most appropriate in efforts to maximize performance.
The repertoire chosen is highly dependent upon the competitive landscape and service application. As an example, organizations seeking to maximize growth and performance in high technology industries such as software development, biotechnology, or other emerging industries will want to adopt an entrepreneurial repertoire. The behavioral characteristics inherent in this repertoire include a high degree of creative and innovative work behavior, high tolerance for unpredictability, a high degree of risk taking, an onus to initiate work improvements, and a propensity to get things done. Alternatively, in service applications requiring consistency and conformity such as banking, legal, medical, aircraft manufacturing and other professional services, an industrial or ultrareliable repertoire might be the proper focus.
The premise is that the behaviors of all organizational members, regardless of their position, are responsible for the design and implementation of operational strategies to support the goals of the organization. The gamut of outcomes includes everything from how employees deal with customers, with one another, and how they react to changes in the internal and external environments. For managers, these repertoires are powerful determinants of the conduct and outcome of quality, and the customers’ perceptions that follow. This is especially the case in service organizations.
Behavioral repertoires can be applied at any level of the organization, and are relevant to both front-line and back-room employees alike. In using the repertoire, the intention is to match the stock of behaviors needed from employees with the goals of the organization and the requirements of the competitive environment. In a more specific sense, the repertoire is a tool for diagnosing, identifying and communicating these behaviors. More generally, it can be viewed as a linchpin that links organizational aspirations with employee performance.
Behavioral repertoires not only give employees critical guidelines on how to behave, but also provide a yardstick for defining and measuring how well they have performed. Similarly, they can be used very effectively as learning devices, especially for training new employees. They can also be used to transmit desired work behaviors, and the discussion and rehearsal of the repertoire content is an ideal method for personnel to learn and remember how these behaviors can be operationalized. This contextual approach also works to reduce role ambiguity often suffered by employees, ambiguities which affect employees’ health, effectiveness and wellbeing.
In most cases, only the highest impact behaviors need to be targeted. The repertoire has to consider the product/service quality standards set by the organization, the needs of the target customer group, and the positional advantages being sought by the organization. It should also be kept in mind that success in using behavioral repertoires will depend not only on the identification of appropriate behaviors, but also on the extent to which organizational members accept and are committed to this concept.
Study two: market-orientation profiling
A market orientation is essentially a behavioral culture that dictates how an organization’s members think and act. It has been defined as:
… the organization-wide generation of market intelligence pertaining to current and future needs of the customers, dissemination of intelligence horizontally and vertically within the organization, and organizationwide action or responsiveness to it (Jaworski and Kohli, 1993, p. 54).
The second study focused on specific marketoriented employee behaviors and their relationship to the marketing practices of the organization. This micro-level study involved 234 respondents from the US telecommunications industry (Dobni, 1998). This industry was chosen because of its diversity in competitive environments resulting from sustained deregulation, yet it provided a single industry context on which to base this investigation. From this analysis we concluded that an organization’s marketoriented behavior can be profiled, and that there are ideal behavioral profiles depending on the competitive landscape in which an organization must compete. This investigation identified seven marketoriented factors that collectively represented 61 employee behaviors related to the design and implementation of strategy, and then measured these factors relative to performance in different competitive environments. The underlying items supporting the factors were highly reliable. The behavioral factors and brief descriptions are outlined in Table II.
To facilitate this investigation, competitive contexts were derived and each organization was assigned to one of the three distinct contexts. The contexts were characterized by levels of competitive intensity, technological dynamics, and products/services dynamics. Within each context, high performers were separated from average and low performers using relative return on investment as the benchmark. Behaviors of the two groups in each context were then profiled and compared. Only those behaviors that were significantly different from a statistical viewpoint were considered in the ideal profile.
The results are interesting. For example, in an environment of competitive intensity, characterized by extreme price competition, new competitors, and abundant advertising and promotion, behaviors underlying formal intelligence generation, response design and implementation, and customer orientation were significantly related to performance. Alternatively, in a context where products/ services obsolescence is high, where a high degree of research and development is ongoing, and the introduction rate of new products and services is brisk, a customer orientation takes on less significance, while response design and implementation and formal intelligence generation become even more pivotal in determining performance. Without exception, the results indicated that there are ideal market orientation profiles corresponding to distinct competitive contexts. Equally compelling is the realization that deviations from ideal behaviors will almost always lead to less than optimal business performance.
Across the three contexts explored it was also interesting to discover behavioral factors of lesser significance. For example, neither informal intelligence generation nor long-term planning (beyond five years) figured as significant behavioral factors in consideration of performance. It might not come as a surprise that formalized long-term business planning is sacrificed for other factors, given the ever increasing complexity of business environments and the need to take advantage of emergent opportunities. However, this factor should not be confused with strategic intent or, alternatively, the competitive positioning that the organization hopes to build over the coming decade.
This investigation also revealed important relationships between market orientation and marketing strategy. On this point, organizations that displayed high market orientations had significant positive relationships with the marketing strategies of being first in with new products/services and technologies, being at the leading edge of industry developments, market segmentation, and product/service customization, undertaking research and development, advertising, promotion and image management, emphasizing company brand name/reputation, penetrating new markets with existing products/services, prestige pricing, and market sensing/ research. In a sense, they could be considered to be preoccupied with anticipating and meeting the needs of the customer, and intently focused on promoting and managing their image. These cultures understood the environment in which they operate, and made efforts to connect to the customer, through market segmentation, more than likely at the expense of internal efficiency. The return on investment for these efforts comes in the form of market share, market retention, loyal customers, and the ability to charge higher prices.
Conversely, those organizations whose employees displayed low levels of marketoriented behavior displayed positive correlations with penetrating new markets with existing products/services, charging lower prices than competitors, and discounting prices. In contrast, these organizations were negatively correlated with market sensing/research, being first in with new products/services and technologies, providing high levels of customer service, market segmentation, product/service customization, and developing new products/services for existing markets. These organizations were generally unable to sustain concerted marketing efforts. This culture is less likely to provide the ongoing efforts required to differentiate themselves from the competition, for example, by providing ongoing customer service or supporting efforts with market research. As a result, their performance was consistently below average.
How to leverage behaviors — an agenda for management
Before considering the prudence of these approaches to managing strategy, it is significant to note that deliberate engendering of behavioral profiles is possible, and in some cases even necessary. There are two considerations here. First, managers can attempt to change their culture to suit the context, if indeed there is a perceived gap between actual and desired orientations – this can be achieved through profiling. Alternatively, it may be possible to engage competitive contexts or industries that suit the organization’s current behavioral orientation. The presumption here is that they (the manager/strategist) are aware of the fit between behavior and the competitive environment, and that they have a pulse on their organizational culture. Consider an organization that possesses a culture that supports proficient segmentation of the marketplace, and customizing products or services for these segments, strategies which are supported by diligent market sensing behaviors. Such organizations, when considering growth alternatives, might pursue markets, acquisitions or alliances in competitive contexts where such an orientation has proven to be successful, even though it might be unrelated to their principally served market segments. Accordingly, the ability to profile market orientation will reduce some of the risk associated with this type of strategic maneuvering. Finally being aware of ideal profiles may prevent managers from making unfocused or unnecessary changes to current organizational cultures.
For a start, managers have to appreciate three things. First, behaviors and processes are closely entwined, and it is the collective behavior of employees that makes possible the activities which allow a business process to be carried out. The requirement for organizational processes merely provides a context to affect behavior. Flushing out these behaviors is no easy task, and the degree of success in these efforts will be tied to the desire of management to use these approaches. Second, this appreciation must be combined with a solid understanding of both the industry and the competitive environment in which the organization resides. Third, managers must begin to think strategically. Thinking strategically involves developing an appreciation of what is possible in your own organization in an integrative and collective sense. It also requires management to form strategic intentions based on this appreciation combined with their understanding of the present and their foresight for the future (Drucker, 1992).
With this understanding we suggest the following prescriptive steps:
1 Management sensitization sessions involving exposure to organizational issues and processes. It is important to identify prevailing cultural issues and related road-blocks, and then conclude with a prescriptive plan of action and commitment to proceed.
2 Profile the industry, competitive and customer context and ascertain key success factors. This can be accomplished through established investigative methods.
3 Identify desired behaviors that underlie key success factors necessary to meet your performance expectations. These behaviors should fall out of the analysis on the industry, competition and customers. While clearly the behaviors must reflect the expectations of the competitive context, including the customers, they should also be based on ideas canvassed from the employees themselves. When asked (our own research revealed that employees are seldom asked), most employees can suggest what new sets of behaviors would be more effective for achieving higher performance. After all, they are often closer to the customer and realities of competition. Also, involving them in the process will give them a clear idea of what is expected of them and help them buy into any changes that may be required.
4 Measure the actual behavior or culture of your organization or, where applicable, the strategic business unit. This can be achieved through a culture/values survey, if the organization is quite large, or through personal and focus group interviews, if the organization is smaller. We suggest a combination of both. What is important here is that the process is as inclusive as possible – given the time and resources available to conduct it. This will produce the organization’s actual behavioral profile.
5 Determine the behavioral profile that is appropriate for your organization with respect to the existing values, objectives, and competitive and customer realities. Conceptualize ideal profiles. This conceptualization has to balance preservation of core ideologies, allow for operational autonomy, yet stimulate progress in the organization.
6 Identify gaps between ideal/desired and actual behaviors. This involves a comparison of survey results with conceptualized patterns.
7 Determine/design roles in terms of specific sets of behaviors to be performed by employees in pursuit of behavioral repertoires.
8 Communicate roles to employees, so that they have a realistic perception of how they are expected to behave. This will involve orientation and training sessions to identify, support and reinforce the patterns of behavior chosen amongst existing employees. Appraisal and compensation systems may have to be altered.
9 Select, train and motivate new employees, so that they can confidently, competently and enthusiastically adopt desired behavior profiles.
10 Take steps to manage and refreeze the newly established behavior patterns. Managers must understand that behavioral expectations are conveyed to employees in a variety of implicit and explicit ways, including formal training programs, on-the-job training, mentorships, organizational manuals, and performance evaluation systems. It is important that these mechanisms communicate consistent and appropriate messages. Behaviors must also be reinforced through human resources, leadership, the values system, and by example.
11 Provision of feedback, so that employees know how well they are performing relative to the expectations that have been set for them. This can be accomplished through legitimate two-way communication that focuses on getting the employees the information and reinforcement they need to keep their efforts on track.
Managerial considerations
Why should managers undertake the effort, costs and risks associated with such transformations, and will it work? We feel that, if organizations are truly bent on developing sustainable competitive advantages through the linking of behaviors to the requirements of the competitive landscape, then the behavioral approach is their only option. These profiles become their primary point of differentiation.
We also believe that these models have application for the following reasons. First, the conclusions from these investigations fundamentally contributes to the redefinition of strategy implementation not only as we know it, but also how it should be practiced. Second, it is possible to empirically derive profiles of behaviors in consideration of performance and the competitive environment. Third, we now know that, as the competitive environment changes, so do the behaviors that are significantly related to performance. Specifically, those who are better performers place an emphasis on different behaviors, and in fact possess ideal profiles. In an era where the only thing that is constant is change, being nimble is advantageous. Fourth, the best way to facilitate a change in strategic orientation is through a change in culture. Last, a strong market-oriented culture acts as a good surrogate for poor or transitional leadership, or a lack of supporting values or vision, variants of which seem to be the norm as opposed to the exception in this day and age.
Managing operational level marketing behaviors is critical to the success of organizations, and the linkages provided in these findings will help managers guide and control appropriate enactments. Unquestionably, the ability to profile market orientation opens up a number of possibilities for managers. For example, it allows managers to identify and categorize marketing related behaviors, and reinforce behaviors that manifest desired strategy. Where identifiable gaps exist between desired and actual behaviors, efforts can be made to customize employee training and development programs or realign the compensation and reward system to reinforce desired behaviors and cull those that are not. Also, these models could be used to reduce strategy ambiguity suffered by many operational level employees. This dysfunction exists when employees are uncertain about what managers or supervisors expect from them and how to satisfy those expectations (Naylor et al., 1980). Managing enactments will work to define further expected behaviors of employees, effectively and covertly directing strategy initiatives.
Clearly, there are optimal behavioral contexts. The context pursued by an organization will be tempered by competitive dynamics, managerial values and goals, and organizational resources. Because of this, it may not be possible for all organizations to attain desired or ideal enactments. Accordingly, managers need to think long and hard about the levels they should pursue, and to understand the engagements that can be most impacting for them.
Managers must also quickly realize that progress or decline is dictated by the unpredictability of the environment and their ability to respond to it. Preserving the core, while stimulating progress at the edges, is achieved through the development of an adaptive behavior-focused system. Managing behaviors of employees is critical to the success of firms, and the context that we have provided is offered as a linchpin for developing, guiding and controlling enactments that will lead to a sustainable competitive advantage which exceeds all others. Whether you are AT&T, General Motors, a business school, or a non-profit organization, the development of behavioral approaches will be the gateway to transforming your implementation focus. This transition is crucial for survival in future economies.
Clearly, leadership for the initiation of this process falls squarely in the lap of management. In fact, managers of the future will be differentiated on their ability to affect and sustain contextual-specific cultures. Assuming that there are top management support and emphasis for these approaches, the organization can move ahead; however, if corporate verbiage is the sole base, then efforts to move in this direction will undoubtedly fail.
Conclusion
The difference between average and outstanding organizations lies in the ability of the latter to provide superior customer value, and to exceed the expectations of other stakeholders on a continual basis. Value differentiation and superior performance today and in the future will be defined and sustained through distinctive capabilities possessed by employees. The organization’s culture will be the interface between the employees and the environment that will foster the internal behaviors necessary to develop a continuous cycle of innovation, and the external relationships necessary to build sustainable customer loyalty and commitment.
These two studies reinforce the one thing that traditional strategy paradigms often overlook – that the aggregate behaviors of the organization’s employees are responsible for the implementation of corporate intentions. However, they go one step further by providing a context to profile and proactively manage behaviors. These approaches to strategy implementation foster a competitive position by leveraging on the distinctive skills and capabilities of employees and then selectively directing these competencies as a basis to compete in the marketplace. This is sustainable in that, when given a level playing-field, employee behaviors are much harder for the competition to understand and duplicate than generic marketing actions, a piece of equipment, location of a plant, or access to a distribution channel.
References
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AuthorAffiliation
Brooke DOW
College of Commerce, University of Saskatchewan, Saskatoon, Saskatchewan, Canada
Dawn Dobni
College of Commerce, University of Saskatchewan, Saskatoon, Saskatchewan, Canada
George Luffman
Bradford University School of Management, Bradford, UK
Copyright MCB UP Limited (MCB) 2001
· Gagnon, M. A., Jansen, K. J., & Michael, J. H. (2008). Employee alignment with strategic change: A study of strategy-supportive behavior among blue-collar employees. Journal of Managerial Issues, 20(4), 425–443. (EBSCO AN:
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JOURNAL OF MANAGERIAL ISSUES
Vol. XX Number 4 Winter 2008: 425-443
Employee Alignment with Strategic Change: A Study of Strategy-supportive Behavior among Blue-collar Employees
Mark A. Gagnon
Director of Business Development
Bay Tree Technologies
Karen J. Jansen
Assistant Professor of Management
University of Virginia
Judd H. Michael
Associate Professor of Sustainable Enterprises
The Pennsylvania State University
It may not be surprising that poor organizational strategies often fail, but research in strategy implementation demonstrates that even good strategies fail during implementation (Bonoma, 1984; Huff and Reger, 1987; Wooldridge and Floyd, 1989). Failure of a new strategy or a strategic innovation is often due to the inability or resistance of individual employees to commit to a strategy and adopt the necessary behaviors for accomplishment of strategic objectives (e.g., Heracleous and Barrett, 2001). Failures in this process of strategic commitment lead to strategic misalignment, or individuals failing to engage in behavior that supports the organi-zation’s strategic goals (Boswell and
Boudreau, 2001). Because strategy implementation is predominantly goal-directed (Barney, 1998) and teleological in nature (Van de Ven and Poole, 1995), strategic misalignment reflects the absence of goal-directed behavior.
The problem of strategic misalign-ment has a considerable history in the management discipline and has been described under numerous labels such as the problem of achieving coordinated action, goal incongruence and non-alignment (Barnard, 1938; Boswell et al., 2006; Labovitz and Ro-sansky, 1997; March and Simon, 1958). This body of research has provided considerable insight into the challenges that impede collective
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)alignment with strategies. However, little is understood about the mechanisms by which individuals come to be aligned with strategies.
The purpose of this study is to understand the antecedents of alignment by examining the role an indi-vidual’s strategic knowledge and commitment play in subsequent engagement in strategy-supportive behavior. Strategic knowledge represents an individual’s global understanding of a strategy being pursued by his or her organization; individuals who agree with statements such as “I understand what strategy X is all about”are demonstrating strategic knowledge as we define it. We propose that strategic knowledge and several individual characteristics influence strategic commitment, which we define as an individual’s willingness to support a strategy. Three questions guided our research: (1) how does individual knowledge of the organization’s strategy influence commitment to the strategy, (2) what additional antecedents contribute to strategic commitment, and (3) does strategic commitment predict strategy-supportive behavior? For this research we adopt a definition of strategy that reflects what many multi-unit manufacturing firms would call an operating strategy. For example, this definition would include strategic initiatives that are somewhat narrow in scope and yet help to guide the operating units within an organization.
We believe our research contributes to management scholarship in several ways. First, we explore a subcomponent of generalized commitment, namely commitment to a particular strategic initiative (cf. Jansen, 2004; Neubert and Cady, 2001). Such a focus seems especially relevant today, given the increasingly short-term
bonds between individuals and organizations (Rousseau, 1997). Second, the framework proposed broadens the strategic perspective to include individual actors rather than focus on the organizational level and associated outcomes. Similar strategy-individual linkages have led to breakthroughs in strategic human resource management (Barney and Wright, 1998; Schuler and Jackson, 1987; Wright and Snell, 1998) and the upper echelons perspective (Finkelstein and Hambrick, 1996; Hambrick and Mason, 1984). Third, we test the theory in a lean transformation setting, providing greater contextual insight into how commitment to a strategy may be facilitated and its ability to predict strategy-specific behavior. We chose to study an organization that was adopting a strategy built on lean manufacturing in large part because a successful lean strategy necessitates both understanding and involvement from production employees (e.g., Mehta and Shah, 2005). Finally, results provide important managerial implications regarding design, training and communication issues associated with strategic change processes.
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)Achieving Strategic Alignment
Individuals are strategically aligned when their behaviors correspond with their organization’s strategy. For example, an organization may require its members to support an intensive customer service strategy by engaging in what we term “strategic supportive behaviors.”In this instance, an employee who is strategically aligned will engage in behaviors that proactively reach out to customers (e.g., courtesy calling, promptly responding to requests, detecting/
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preventing future problems). Similar to management by objective (Drucker, 1954), strategic alignment requires individuals within an organization to behave in a contributory manner in order to support the strategic goals of the organization.
The term strategic alignment has recently been used to describe individual strategic contributory behavior in both academic (e.g., Wooldridge and Floyd, 1989; Boswell and Boudreau, 2001) and practitioner (Labovitz and Rosansky, 1997) contexts. However, the problem of individuals being misaligned with organizational strategies (i.e., not behaving to support a strategy or objective) has an extensive history in management science. Barnard (1938) highlighted the need for organizational member contribution to higher-order organizational goals. In their classic text Organizations, March and Simon (1958) discuss the need for employees to contribute to the goals of the firm. Drucker (1954) augmented these works by developing management by objective. Management by objective established a hierarchy of objectives for employees within an organization with the ultimate purpose being the strategic goals of the organization. The balanced scorecard approach (Kaplan and Norton, 1992) is perhaps the most recent conceptualization of management by objective and involves more metrics. A common theme to all these approaches is the need for employees to behaviorally contribute in order to support organizational strategies. Overall, these works highlight the challenge of ensuring that employees engage in strategically supportive behaviors.
Commitment within Organizations
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)Commitment research provides insight into the challenge of aligning people with organizational strategies. The commitment literature offers an extensive inventory of studies that demonstrate relationships between organizational commitment, work attitudes and behavioral outcomes (Meyer et al., 2002). Mowday, Porter and Steers (1982) define organizational commitment as an individual’s attachment and willingness to support his or her organization. Although the concept of organizational commitment has demonstrated its utility for explaining organizational phenomena, several researchers have unpacked the concept of commitment to include additional dimensions such as intensity and focus.
O’Reilly and Chatman (1986) drew upon Kelman’s (1958) work to explain the varying levels of commitment intensity within individuals. Becker and colleagues advanced the argument by asserting that unpacking commitment involves two major dimensions, the basis of commitment and the foci of commitment. Basis represented the individual intensity of affiliation and foci represented the object to which individuals commit (Becker, 1992; Becker and Billings, 1993). Our review is limited to foci of commitment since our work focuses on application of the commitment to organizational strategy. However, we see a need for future research that investigates the intensity to which individuals commit to various objects.
Several authors have argued that individuals within an organizational context suffer from competing commitments, which has implications for overall organizational commitment
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)(Becker, 1992; Reichers, 1985). For example, if organizational commitment is a multifaceted phenomena, then facets (e.g., peer group commitment, role commitment) that compose organizational commitment could interact in certain ways to alter overall organizational commitment depending on certain contexts. A considerable number of commitment types based on varying foci have been identified in the organizational literature (Becker and Billings, 1993; Bridges and Harrison, 2003; Neubert and Cady, 2001; Reichers, 1985).
Exploring more specific forms of commitment such as goal and program commitment provides additional understanding into the problem of strategic misalignment. Locke, Latham and Erez (1988) defined goal commitment as an individual’s at-tachment and determination to reach a goal. Goal commitment research in organizations has been conducted primarily on work group and unit level goals (Locke and Latham, 1990). Goal commitment has been identified as a necessary component of goal achievement (Locke et al., 1988), which presumes goal supportive behavior. Since strategy is primarily goal directed, it is likely that the concept of goal commitment can be extended to encompass strategic goals.
A concept similar to goal commitment is program commitment. Program commitment is an individual’s attachment to an organizational program (Neubert and Cady, 2001). Program commitment is focused on the specific scope for an organizational program that may, or may not, be strategic in nature. For example, a program could be non-strategic such as a “keep your work area clean”pro-gram or strategic such as meeting ISO
9000 quality standards. Program commitment has been linked to program supportive behavior and attitudes (Neubert and Cady, 2001). Drawing from the logics of goal and program commitment, one can argue that the focus of commitment can be applied to an organizational strategy.
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)Wooldridge and Floyd (1989) and Noble and Mokwa (1999) have introduced the concept of strategic commitment. Wooldridge and Floyd (1989) mention the need for managers to be strategically committed, but go no further than highlighting the need for strategic commitment. Noble and Mokwa (1999) operation-alized the concept of strategic commitment by examining middle managers’ commitment to a marketing strategy and found that managers’ self-reported commitment to their or-ganization’s marketing strategies was correlated with role performance. Noble and Mokwa’s (1999) work is indeed helpful, as it appears to be the first work to empirically examine employee commitment to a strategy and associated outcomes. In summary, the studies above reveal opportunities to focus the concept of commitment on strategic phenomena and evaluate the impact of potential antecedents and outcomes in additional contexts.
Knowledge within Organizations
Numerous definitions have been offered for conceptualizing knowledge within an organizational context. However, a widely agreed upon understanding of knowledge within organizational settings is problematic (Nonaka and Takeuchi, 1995). The challenge is exacerbated when one seeks to define individual knowledge of organizational strategy. We have
GAGNON, JANSEN AND MICHAEL 429
chosen to view strategic knowledge as individuals’ global understanding of their organization’s strategy. Our knowledge definition contains both explicit and tacit aspects. The explicit aspect of strategic knowledge is certain facts that are easily transferable to organizational members (Polanyi, 1967). Examples of explicit strategic knowledge include production targets and documented work procedures. The tacit aspect of knowledge requires the individual to personalize knowledge (Polanyi, 1967), meaning that individuals form their own linkages based on what they know and have experienced. Tacit knowledge is described as being difficult to explain or separate from context (Nonaka and Takeuchi, 1995; Polanyi, 1967) and plays a key role in decision-making processes in top management teams (Brockman and Anthony, 1998). Both these aspects of strategic knowledge allow individuals to make sense of their social context and frame their behavior to interact with the environment.
Generally, the strategic implementation process requires establishing a common body of strategic knowledge. This has been termed by some as sensemaking (Weick, 1995), sen-segiving (Gioia and Chittipeddi, 1991) and line-of-sight (Boswell and Boudreau, 2001). We argue that strategic knowledge is a necessary precondition for effectively committing to the organization’s strategic goals. Individuals must possess a global understanding of their organization’s strategy that is similar to those who created the strategy. An organization high in aggregate individual strategic knowledge will have a shared interpretation among its members as to the nature of the strategy, its goals,
and how each member can contribute to accomplishing the goals.
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)Labovitz and Rosansky (1997) and Wooldridge and Floyd (1989) appear to be the first to mention the role of strategic knowledge for supporting employee strategic alignment. Labovitz and Rosansky (1997) offer a series of practitioner accounts of how firms such as Fed-Ex have achieved strategic alignment with employees and have reaped the rewards of high performance. Wooldridge and Floyd (1989) argue that the role of the manager is to facilitate strategic understanding in order to help reinforce employee commitment. Further, they extend the idea that strategic knowledge needs to be explored at lower levels within the organization. However, neither of these works empirically examines how individual strategic knowledge contributes to strategic alignment within organizations.
More recently, Boswell and Boudreau (2001) introduced the concept of line-of-sight, a combination of employees’ strategic understanding and knowing how to behaviorally contribute to their organization’s strategy. In a hospital setting with clerical workers, they found that individual knowledge of the organization’s strategy was related to strategically congruent behavior (i.e., behaviors supportive of the strategy). Another recent exploratory study in a health maintenance organization examined the role of a communication program for developing individual knowledge of strategic goals (Enriquez et al., 2001). The study found a relationship between high personal involvement in achieving strategic goals and high knowledge of the organization’s goals. In addition, respondents demonstrated better strategic knowledge
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)after a strategic goal communication program. However, this work did not examine subsequent employee attitudes and behavior. Finally, Pappas and colleagues (2004) studied middle-manager strategic knowledge and social network characteristics. They found that both middle-manager strategic knowledge and network position characteristics were important factors determining strategically congruent behavior (e.g., championing, facilitating, synthesizing and implementing).
A Commitment-based Framework for Strategic Alignment
Combined, the studies reviewed indicate that further evaluation of the concept of commitment to organizational strategy is likely to provide new insight. Initial evidence suggests that strategic commitment can be developed within organizations and has the potential to contribute to strategic alignment. In our study, we examine the popular initiative of transforming to lean manufacturing. In addition, we build on past commitment research by further exploring the process by which knowledge of a strategy influences commitment to the strategy. Our proposed model is illustrated in
Figure I
and explicated in greater detail below.
Strategic Knowledge —~ Strategic Commitment
Strategic knowledge works as the raw material for individuals’ judgments about their organization’s strategy. Cognitive theory indicates that knowledge serves as the medium for the formation and maintenance of schemas. Schemas are cognitive structures that individuals create and
use to make order of the world. Increased knowledge helps make sche-mas more content rich (Fiske and Taylor, 1991; Lord and Foti, 1986). The more knowledge individuals possess about a strategy the better the quality of their schemas about the strategy.
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)This is especially the case with a lean manufacturing initiative, which mandates that employees have a clear understanding of its benefits and core principles, are empowered with more decision-making abilities, and are engaged in cross-training (Mehta and Shah, 2005; Womack and Jones, 1996). We refer to this type of strategic knowledge as requisite knowledge, where employees have access to the widest variety of strategy-supportive information relevant to the initiative (Nonaka and Takeuchi, 1995). There are several types of strategic initiatives that require such requisite knowledge, including six sigma, total quality management, and balanced scorecard (e.g., Buch and Tolentino, 2006; Choo et al., 2007; Kaplan and Norton, 1992).
We recognize that not all knowledge gained about a strategy will uni-laterally lead to commitment. In fact, there are likely to be circumstances where increased knowledge about a strategic initiative leads to a decrease in commitment, such as when that knowledge is perceived to have negative implications for the company or its employees. We therefore bound our prediction about the relationship with knowledge and commitment to requisite knowledge, such as that described above. Thus, knowledge becomes the means by which individuals gain a greater understanding of the strategic initiative. We therefore predict that individuals who possess
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Figure I
A Model of Strategic Commitment Predicting Strategically-aligned Behavior
(
Strategic Knowledge
) (
H1: +
)
(
Openness To
Experience
) (
H2a: +
H2b: +
) (
Strategic
Commitment
) (
Perceived
Company
Trust
) (
H3: +
)Alignment: Strategic Supportive Behavior
(
H2c: +
) (
Company Tenure
)
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)more strategic knowledge are more likely to commit to a strategy.
Hypothesis 1: Requisite knowledge about a strategic change initiative will positively predict strategic commitment.
In keeping with the more traditional commitment literature, we ex-pect that certain individual characteristics will influence the likelihood of becoming committed to a particular strategic initiative. After reviewing recent research on commitment and strategic change, we focus on three such antecedents in the present study: openness to experience, perceived organizational trust, and or-
ganizational tenure. First, individual openness to experience is argued to be positively related to strategic commitment. Individuals who are open to experience tend to be broadminded, curious, learning-oriented and willing to face new challenges (Barrick and Mount, 1991). Lepine, Colquitt and Erez (2000) found that individuals who were open to experience were better able to deal with changing rules in a decision-making simulation. Therefore, we argue that individuals high in openness to experience will be better able to commit to a strategic change since most
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)strategies involve setting new objectives and learning new means to accomplish the objectives.
Hypothesis 2a: Openness to experience will be positively related to strategic commitment.
Employee trust in their leaders and organizations has been shown to have a positive relationship with organizational commitment and desired work attitudes (Dirks and Ferrin, 2001; Costigan et al., 1998). Trust is defined as an individual’s willingness to be vulnerable to another in exchange for a mutually beneficial outcome (Dirks and Ferrin, 2002). Trust has the ability to increase over time as a result of past successful trust-based investments. If employees have experienced success with past strategic initiatives, it has likely facilitated higher trust in the leaders responsible for those initiatives. Subsequently, new initiatives are likely to garner commitment due to those prior experiences.
The importance of trust would seem to be especially relevant for hourly employees faced with a new strategy. Blue-collar workers are known to be different from white collar employees on a number of facets (e.g., Tierney and Farmer, 2002), not the least of which is their education level related to business topics. Whereas white-collar professionals may have had education or training that allows them to use their own judgment with regards to a strategic initiative, blue-collar workers in a typical manufacturing environment are likely to have had neither. These persons have a more limited set of information sources upon which to rely when forming their attitudes about a given strategy. Therefore, trust in the organization’s leaders becomes a
proxy for supporting the strategic initiative and building commitment.
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)Hypothesis 2b: Perceived organizational trust will be positively related to strategic commitment.
Tenure represents a structural aspect of individuals’ involvement with their organization, capturing the degree of embeddedness an individual has within an organization’s structure. Mitchell and colleagues (2001) found that individual embeddedness within an organization was positively related to organizational commitment. However, strategic commitment differs from organizational commitment in that it has more to do with supporting change. Highly tenured individuals are likely to embody the very rituals and routines that help define the structure of the organization. We argue this to be especially true given a union context where additional incentives are provided to tenured employees. As a result, we propose that organizational tenure will be negatively related to strategic commitment since individuals who have been in the organization longer are likely to be more committed to the status quo.
Hypothesis 2c: Organizational tenure will be negatively related to strategic commitment.
Strategic Commitment —~ Strategic Alignment
As mentioned earlier, several studies within the organizational commitment literature have demonstrated associated behavioral outcomes with commitment (Meyer et al., 2002; Mowday et al., 1982). Following the same logic used with other commitment-behavior relationships, we predict that individuals who are committed to a strategy will be more likely to
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)behave in a strategically supportive manner (i.e., have alignment with the lean strategy).
The theoretical underpinnings of the relationship between commitment and commitment-congruent behavior are likely to be a combination of affect and cognition. Affective events theory (Weiss and Cropan-zano, 1996) provides support for the emotive linkages between commitment and commitment-congruent behavior. Affective events theory asserts that a precipitating work event will trigger emotional and cognitive processing within individuals; this processing is termed an affective reaction. The individual’s affective reaction is an induced state (usually viewed as positive or negative) that acts to frame attitudes and behavior. We theorize that during a strategic change, individual affective reactions influence strategic commitment, which ultimately impacts individual engagement in strategy-supportive behaviors.
Examining the cognitive aspect of the relationship between commitment and commitment-congruent behavior, cognitive consistency theory indicates that individuals will reinforce their existing beliefs with congruent behavior (Fiske and Taylor, 1991). A specific example is that of cognitive dissonance theory. Cognitive dissonance theory asserts that in-dividuals will behave in a manner that supports their attitudes and beliefs to avoid the dissonance (negative stimulation) that is caused by an inconsistency between opposed beliefs and behavior (Festinger, 1957). Therefore, both affective and cognitive theories suggest that individuals who commit to a strategy are likely to be predisposed to behaviorally support their commitment. We thus opera-
tionalize an individual’s alignment by measuring the degree to which their behavior supports the lean strategy.
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)Hypothesis 3: Strategic commitment will be positively related to engagement in strategy-supportive behavior.
METHODS
Sample and Organizational Context
Longitudinal survey data were collected at two points in time approximately one year apart from production employees in three plants of a manufacturing organization in the mid-Atlantic region of the United States. The organization was a relatively large, unionized manufacturer of semi-custom kitchen cabinets. Two of the manufacturing facilities were located in a rural industrial park, while the other was located several hours away at the outskirts of a large urban area. The operations were structured such that the primary raw material (e.g., rough lumber) would receive primary processing in one plant, which would then transfer the semi-finished goods for further processing, finishing, and assembly at the other locations.
The organization chosen was ideal for evaluating employee knowledge and commitment to an organizational strategy since the manufacturer had recently begun the implementation of an organizational-wide lean manufacturing strategy. Lean manufacturing is a strategy requiring significant employee involvement to change from traditional mass manufacturing to just-in-time manufacturing, and requires employees to adopt a series of lean-congruent behaviors. Specifically, employees must change their behavior and thinking to successfully contribute to a lean system. Examples of lean-congruent behav-
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)iors are reducing waste at workstations and taking proactive actions to improve quality and workflow (Allen et al., 2001; Hunter et al., 2004; Ohno, 1988; Womack and Jones, 1996). Management and union leaders had established urgency (Kotter, 1996) by communicating to hourly workers the necessity of this strategy in order to reduce costs and lead-time, increase quality, and remain competitive with overseas manufacturers. Thus, the lean manufacturing strategy was highly relevant to the workers, an important element for generating buy-in and facilitating behavior change.
Data Collection
The employee questionnaire was reviewed by an expert panel and pretested at a similar manufacturing organization. The first employee questionnaire (Time 1) was administered at one plant, with 162 out of 167 production employees responding (97%). The second survey (Time 2) was administered one year later at three plants within the organization, with 692 of 723 employees responding (95.7%). A year was chosen be-tween data collections to allow for sufficient achievement of strategic transformation goals and to better suit our client’s production cycle. In both cases, employees completed the surveys during their work shift in groups of approximately 50 employees. The surveys were administered in lunch or break rooms with no supervisory or management personnel present. The researchers took great care to reassure respondents of confidentiality and promptly removed completed surveys from the premises.
To match the data across time periods, employees were asked to provide either their name or employee
number on a tear-away sheet. They were assured that all identifying information would be separated from their responses and eliminated from the data once matching was complete. To reduce single-source bias, tenure information was obtained from the company’s human resource database and strategic supportive be-havior was rated by the immediate supervisor at Time 2. Because the Time
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)1 data were limited to one plant, the matched sample across Times 1 and
2 was 99 employees (60.7% of total Time 1 respondents) used to test Hypotheses 1 and 2. Fifty-five percent of the matched sample was female and 79.2% had completed high school. The mean company tenure was 5.6 years and the average employee age was 40.8 years. The larger Time 2 sample was matched with supervisor data to test Hypothesis 3, resulting in 555 employees (80% of total Time 2 respondents). Fifty-six percent of this sample was female and 78.8% had completed high school. The mean company tenure was 6.5 years and the average employee age was 41.6 years.
Measures
Dependent Variables. The engagement in strategy-supportive behavior scale was built in line with Boswell and Boudreau’s (2001) line-of-sight action scale, but modified using input from upper- and plant-level management at the company to highlight behaviors specifically relevant to supporting a lean initiative. This variable was measured at Time 2 by asking immediate supervisors to rate subordinates using four items on a five-point agreement scale (a = 0.83). Supervisor ratings were used to reduce single-source bias and to help mitigate social desirability. Sample items from
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)the scale include, “This employee continues to look for new ways to improve the effectiveness of his or her work.”and “This employee encourages others to try new and more effective ways of doing their jobs.”The four items used in this scale were developed from interviews with com-pany management and were based on their opinions of behaviors the hourly workers should engage in to support the lean strategy. The items were also reviewed with a sample of production supervisors prior to inclusion in the survey.
Strategic commitment served as both a dependent variable for the 99 employees who completed both Time 1 and Time 2 surveys, and as an independent variable predicting behaviors of the 555 employees who were rated by their supervisors. This variable was measured at Time 2 using a modified version of Neubert and Cady’s (2001) six-item program commitment scale (a = 0.86). Item wording was changed to describe commitment to the lean manufacturing strategy rather than general program commitment. A sample item is “I am convinced that we need the lean
transformation here at company Y.”Items were measured on a five-point
agreement scale.
Independent Variables. Four independent measures were collected at Time 1. Strategic knowledge measures an individual’s knowledge about his or her organization’s strategy by asking factual questions about the strategy. This scale was modeled from the line-of-sight knowledge scale developed by Boswell and Boudreau (2001) using input from interviews with plant managers and company documents to develop strategy-specific items. Strategic knowledge was measured with six items on a seven-
point agreement scale (a = 0.74). A sample item from the scale is “Lean manufacturing is about reducing sev-
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)eral forms of waste.”Openness to experience was meas-
ured using a standardized scale (International Personality Item Pool, 2001) of ten items on a five-point agreement scale (a = 0.77). Perceived organizational trust was measured using a four-item measure adapted from Robinson (1996) on a seven-point agreement scale (a = 0.89). Company tenure was collected from the participating company’s human resource database.
RESULTS
A summary of descriptive statistics and correlations among the variables in our study are provided in Table 1. We examined the relationships between strategic commitment, its antecedents, and the outcome of strategic supportive behavior using AMOS 5.0 structural equation modeling software (Arbuckle, 2003).
The aggregate evaluation of model fit statistics indicates that the model is indeed a plausible representation of the proposed relationships. First, the model chi-square is low (x2 = 36.8, df = 10). Acceptable models will have a chi-square statistic that is close to zero and non-significant (Maruy-ama, 1997). However, most structural equation models will have significant chi-squares, especially if the models have a large sample size. In addition, the confirmatory fit index (CFI = 0.99) and the normative fit index (NFI = 0.99) demonstrated acceptable fit values that were above 0.95 (Bentler, 1990). The CFI and NFI indices are more suitable for larger size samples and are not affected by sample size as much as the chi-square sta-
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)Figure II
Structural Equation Modeling Results of Strategic Alignment Frameworka
(
Company Tenure
) (
Strategic Knowledge
) (
H1:
R
= 0.51*
) (
R
2
= 0.02*
) (
Alignment:
Strategic Supportive Behavior
) (
Openness To
Experience
) (
R
= 0.05
) (
H2a:
) (
R
2
= 0.29*
) (
H2b:
) (
Strategic
Commitment
) (
R
= 0.15*
) (
Perceived
Company
Trust
) (
H2c:
R
= 0.01
) (
Time 1 and 2 N = 99
) (
H3:
R
= 0.12*
) (
Time 2
) (
N = 555
)aUnsupported relationships are depicted in lighter font. *Significant at p < 0.05.
tistic. Finally, the root mean square error of approximation (RMSEA = 0.07) indicated that the model also demonstrated acceptable fit (Steiger, 1998). In summary, the model fit results indicated a sufficient match be-tween the proposed relationships and
the observed relationships within the data.
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)The strategic alignment framework with standardized path coefficients is presented in Figure II. Beginning at the far left, strategic knowledge positively contributes to strategic commit
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437
) (
3.50 0.69 .13* —
) (
3.53 0.56 .16 .22* .32* —
) (
3.23
0.76
—
) (
11.72 12.04 -.11 -.04 -.03 -.32* .03 —
) (
5. 1 2
0.87
.25*
.53*
—
) (
4.63
1.11
.09
.33*
.29*
.04
—
) (
a
N
= 99 for Time 1 antecedents, N = 555 for Time 2.
b
Items
were measured on a five-point scale unless noted otherwise.
*p < 0.05.
) (
Table 1
Descriptive Statistics and
Correlations
a
) (
Variable
Mean
s.d
. 1 2 3 4 5 6
) (
1 .
Engagement in Lean
Behaviors
b
(Time 2, supervisor-rated)
) (
6. Organizational Tenure
(Time 1, in years)
) (
Strategic Knowledge (Time 1, seven-point scale)
) (
5. Perceived Organizational Trust
(Time 1, seven-point scale)
) (
2. Strategic Commitment (Time 2)
) (
Openness to Experience (Time 1)
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)
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)ment, supporting Hypothesis 1. We found mixed results for Hypothesis 2. Openness to experience and company tenure were not significantly related to strategic commitment. However, perceived trust was significant and positively related to strategic commitment as hypothesized. Thus, Hypothesis 2b was supported and 2a and 2c were not. Finally, the relationship between strategic commitment and engagement in strategic supportive behavior was positive and significant, supporting Hypothesis 3.
DISCUSSION
This study has added to the literature on strategy implementation in several ways. While past works have investigated commitment and implementation in middle-management (Noble and Mokwa, 1999) and upper-echelons contexts such as strategic decision-making teams (Dooley and Fryxell, 1999) and “strategic consen-sus”(Lindman et al., 2001), we have applied some of the same issues to the bottom of the organizational pyramid. Our results reinforce that strategic knowledge is indeed important (Boswell et al., 2006), and emphasize the role it plays in fostering individual strategic commitment. Our findings also demonstrate that the concept of strategic commitment has utility for addressing the problem of strategic misalignment. The results suggest that strategically committed individuals are predisposed to engage in strategic-supportive behavior, and that development of individual commitment to strategic initiatives is likely to assist the enactment of strategic transformation. Finally, our research follows in the footsteps of strategic human resources research (e.g., Wright and Snell, 1998) and of the
upper-echelons perspective (e.g., Hambrick and Mason, 1984) by spanning micro-level individual behavior and macro-level strategy.
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)Our results provide evidence that individual trust for the organization positively influences strategic commitment. Leadership research suggests that supervisors are a central contributor to positive employee work attitudes (Dirks and Ferrin, 2002). However, more investigation is needed to determine whether trust in organizational leaders only acts as a proxy when knowledge is lacking or if it is necessary for commitment. Similarly, it is possible that strategic knowledge mediates the relationship between individual characteristics (e.g., openness to experience) and commitment. We were not able to test this causal link in our structural model given the survey timing. Future research examining the temporal links between knowledge, trust, and commitment may offer further insight into the dynamics of strategic commitment formation.
Openness to experience and tenure were not significant predictors of strategic commitment in this study, perhaps due to the small matched sample. However, the small negative correlation between tenure and strategic commitment lends preliminary support for Hypothesis 2c. In the context studied we knew that long-term employees were less than enthused about the lean changes because they thought it would disrupt the status quo to which they had become accustomed. Other individual differences such as positive affectivity or agreeableness may have an impact on strategic commitment. Future research in this vein can address the question of whether certain individual characteristics are more strategically neces-
GAGNON, JANSEN AND MICHAEL 439
sary than others for fostering strategic alignment.
Another potential limitation to our study is that in working with blue-collar employees, we may have introduced threats to validity, such as appropriate comprehension of survey items and social desirability responses. We were careful to pretest items with a similar group of workers, and we were careful to provide a nonthreatening setting for employees. However, it is possible that blue-collar samples differ from white-collar samples in either measurement or substantive ways. We were careful to bound our theory development around the change context we were exploring, but additional research is needed to determine the extent to which trust and knowledge are strategy- or sample-specific.
Implications for Practice
Practitioners are likely to benefit by developing strategic knowledge and commitment with their employees. Our research suggests that managers seeking to improve employee strategic alignment should increase levels of both strategic knowledge and trust within the workforce. As mentioned earlier, it is likely that other antecedents will also influence strategic commitment; the role of leadership for facilitating employee trust is one obvious source (Costigan et al., 2004; Dirks and Ferrin, 2002). Managers can also improve employee strategic commitment by providing employees with strategic knowledge via both oral (e.g., team meetings) and written forms. In this organization and for this strategy, there was substantial effort made to communicate in both
forms (e.g., bi-weekly newsletters, team meetings).
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)Managers would be well advised to consider the critical role of human capital during strategic change program design and implementation (e.g., Hitt et al., 2007). During the strategy design stage training programs and communication plans should be established to facilitate knowledge and commitment. A training program providing knowledge about the strategy can develop positive employee attitudes such as strategic commitment. In tandem with training is the implementation of a sound change communication program that deals with employee misperceptions and opens a dialogue between management and employees. Open communication with employees during a strategic change is likely to develop trust and commitment that will lead to strategically aligned behavior.
Examining the behavioral linkage with strategic commitment demonstrates promise for improving individual alignment with strategy. In aggregate, improved individual strategic alignment is likely to lead to improved strategic implementation. Overall, if conditions can be influenced to improve individual commitment and facilitate strategically congruent behavior, great progress can be made to mitigate the problem of strategic misalignment. In summary, managers and organizational scientists will benefit from facilitating and investigating the linkages between individual psychology and organizational strategy. By juxtaposing these concepts, a critical element will be brought forth to address the problem of strategic failure—the individual.
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