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E16BusinessManagement

Strategy
ApatternorplanthatintegratesanOrganizationsmajorgoalspolicies&actionsequences intoacoherentwhole (Quim) Mintzbergdistinguishb/wastrategyas 5Ps: Plan:Forwardlooking/Purposivedeliberate Ploy:PlanDesignedtodeceive/confuse Pattern:Consistenciesofbehaviorwhetherintendedornot Position:Inthemarket;relativetotheCompetition Perspective:ValuesattitudesCulturesofManagers

DimensionsofStrategy
Process
Analysis Choice Implementation

Content
Environmentinwhichthe Organizationexists&cope with PESTEL 5forces LifeCycleModel KsFs/CsFsmodel CompetitionAnalysis

Content
Whatstrategicdecisions shouldbemadebythe organization Missions Objectives Stakeholders wheretocompete? howtocompete? Means&methods Contentisaboutthedecision theorganizationmakeswith itscontext

All3interactwithoneanother

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E16BusinessManagement

StrategyProcess
CentraltoStrategyispositioning 3ProcessesofStrategyare: Analysis Choice Implementation IntheRealworldallthestagesarenotsequentialandarenoteasilydistinguishedfromone another. Threetypesofstrategicmanagementmethods: 1. Rational/StructuredApproachormodel 2. Incrementalism 3. EmergentStrategy

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E16BusinessManagement Rational/TraditionalortheStructuredApproachtoStrategy:

Purposes
Visions&Mission StrategicIntent Goals&objectives

InternalAnalysisor Appraisalstrength& weaknesses LeveragingResources FunctionalAnalysis ValueChainAnalysis Benchmarking

Isourexistingpositionagoodone,is External Analysis or Appraisal Itunderthreat,canitbeimproved. opportunities&threats

Positioninganalysisor AuditdegreeofStrategic Fitormatch

PESTEL 5forces Lifecycleanalysis Ks/Fs.

Strategicchoice
Stages/Dimensions Whereto Howtocompete? compete? Options Ansoffs Porter/sgeneric product strategymix Marketmatrix & Evaluation and thepositioning& Vector creationofvaluechain Choice
Strategicmonitoring,reviewandcontrol

Meansandmethods Themixofownershipand controlwiththetestof strategy: Feasibility(F) Suitability(S) Acceptability(A)

Strategyimplementation Structureculture+functionalstrategiesmanagementofchange

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E16BusinessManagement
StrategicAnalysis: Mission,Objectives,Power Opportunityandthreats Strengthandweakness, Forastrongsenseofmissiontherehastobeafitbetween: Purpose:WhytheBusinessExists Values:WhatBusinessBelievesIn Behavior:StandardsPoliciesandActions Strategy:CompetitivePositioning. TheOtherModels: EMERGENTSTRATEGY: Mintzbergbelievedanddescribestherationalplanningapproachasatopdownapproach. Hebelievesittobeunrealisticandtoosystematicforittoberealandthuspresentedtheidea thatstrategiesevolveovertime(emerge). e.g.,HondasentryintotheUSA. Freewheelingopportunitiesisanexampleofitwherethereislittleapparentcoherenceor forethoughtinthestrategy. HIGHRISKAPPROACH INCREMENTALISM: Smallscaleadjustmentstocurrentpoliciesandstrategyasthisarealessriskyapproach. Averylogicalconceptwhichfallsinbetweenemergentandrationalapproach Suitetosmaller,entrepreneurialtypeofbusiness. Purpose environment resources&Capabilities

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E16BusinessManagement
Aswedonothaveorpossiblycannotevaluateallpossibleoptions,thereforewecreatealoose tightstructurewithamendmentsandadditionswiththechangesinenvironment. AlsotermedasRepositioning DescribebyLindblomasSmallscaleextensionstopastpractices. Allthemodelsdescribedhavetheirrespectiveprosandcons(advantagesanddisadvantages) Note: Fromexampointofviewyoushouldbeabletodistinguish,describeandexplainallthreewith examples. ExternalAnalysis

Pestel/Slept

5Forces

Market life cycle

Market competition

Market Ksfs/Csfs

Industry life cycle

Industry competition

Industry Ksfs/Csfs

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E16BusinessManagement PESTELCorporateStrategy:
PPolitical:ideology,stability,policiesetc. EEconomical: Economy (market: macro) Size, Growth, Inflation, Unemployment,Entrants, IndustryCompetitors,monetaryandfiscalpolicies.

S:Social:Demographics,Familypatterns,cultureandvaluesetc T:Technological:Sophistication,substituteproduct E:Environmental:Ecologicalenvironmentandthedamagestoit. L:Legal:Statute,legalenvironmentandfititsapplicability.

5Forces:(forbusinessstrategy)(IndustryAttractivenessFramework)
Portertermsitascompetitivestrategy: Allabouthowtodealwithcompetitioninanindustry Assessestheindustryattractiveness Identifieskeysuccessfactors(Ksfs) Identifiesthepositionofthebusinessintheindustry Forecasthowtheposition/industryislikelytochange

1.ThreatsofNewEntrants:
Criticalfactors: Industryattractiveness(profitabilitygrowthetc) Barrierstoentry(capital,technology,legal,etc) 2.ThreatsofSubstitutes: Arisingfromoutsidetheindustrybutperformthesamefunctionandincreasecompetition. PowerofSupplierandCustomers: Themoretheyhavepowerthelessattractivetheindustry. Dependableon: Relativesizeofthefirmstothatoftheindustry Relativeimportanceoftheindustry

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E16BusinessManagement
Availabilityandpriceperformanceofsubstitutes Switchingcosts

Industrycompetitors:(extentofcompetitiverivalry)
No.ofcompetitors. Relativemarketshare. Strategiespersuade. Growthofindustryandstagesinlifecycle. Fixedtovariablecostratiowhichonimpactsonpricing.

Competitoranalysis:
Hamel and Prahalad use the success of Japanese businesses to understand competition assumptions,actions,intentions,andcapabilities. Western firms misread strategic intent and underestimate their resourcefulness and thus Losttheirpositionswithinindustries.

Identifythecurrentstrategy
Nocrisescontinuityofstrategyovertime.

Identifystrategicintent Theirobjectivesandpriorities Identifytheirassumptions

Howdotheyseethemselves?

Analyzetheircapabilities
Nojusttheirresourcesbuttheirresourcefulnessinusinglimitedresources.

Internalanalysis:
Understandingtheresourcesandskillsofthebusinessandhowaretheybeingused. Simplestframeworkisthefunctionalanalysis. Theneedforbenchmarkingmeasuringbusinessperformance,makingsystematic comparison.

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E16BusinessManagement FunctionalAnalysis
R&D&EngineeringOperational MarketingandsalesFinancial HRM IT

ValueChainAnalysis
Valueisdefinedintermsofwhatcustomersarepreparedtopayfortheproductsandservices.

Aim:createvaluegreaterthanthecostofdoingso.

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E16BusinessManagement

SWOTAnalysis:
InternaltotheCoy EXISTINDEPENDENTLYOF THECOMPANY

Strength M ACONVERSION T C H Opportunities I N G

Weakness

Threats

Purposes:
Assessthecapabilityoftheorganizationtoreachitchosenobjectives. Tohighlightcriticalstrategicissuesfacingthefirm. Identifythefirmscompetitiveadvantage. Aspartofreviewandcontrolprocess,assessthecurrentstrategiesandhighlightthe needforremedialaction. Strengthshowstheleverage(methodofapplyingresources)ofthecoy. WeaknessshowstheCompanysvulnerability.

Benchmarking:
MeetingtheindustrystandardsandnormsbutnotvaluableasasourceofinnovationStepsof benchmarking: Whatarewegoingtobenchmark? Whoarewegoingtobenchmarkagainst? Howwillwegettheinformation? Howwillweanalysistheinformation? Howwillweusetheinformation?

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E16BusinessManagement

Typesofbenchmarking:
Internalbenchmarking:asinthecaseofXerox. Functional benchmarking: internal function compared with the best external practitioners of thosefunctions. Competitive:informationgatheredaboutdirectcompetition. Strategic benchmarking: type of competitive benchmarking aimed at strategic action and organizationalchange.

Stakeholders:
Identification of stakeholder expectations and power for the management to priorities them anddealwiththemappropriately. 2StepProcess: 1. Howinterestedtheyaretoimpresstheirexpectationsontheorganizationschoiceof strategies. 2. Towhatextenttheyhavepowertoimposetheirwants.

Mendelowproposedamatrixtohelpanalyzethem:
LEVELOFINTEREST Low Power High Alternative model provided by Scholes in 1998 of direction, educate/communicate, interventionandparticipation.
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LowHigh BoxA BoxB Minimaleffort Keepinformed Direction Educate/communicate BoxC BoxD Keep satisfied Keyplayers intervention participation

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E16BusinessManagement

Organizationalculture:
Milesandsnowidentifies4typesofstrategiccultureaffectingfirmsattitudetotheirbusiness andmarkets. (a)Defenders: (b)Prospectors: narrowproductmarketdomains Continual search for market opportunities littleinnovationalconcern Createchangeanduncertainty formalizeddecisionmaking Decentralizeandresultsvalued. preference for tired and tested means (c)Analyzers: (d)Reactors: Followersinthemarket Muddlethrough Balanceriskandprofit Nostrategicorientation Use core product to fund innovativeproduct Set of values, guiding beliefs, understanding and ways of thinking, shared by its members. Unwrittenfeelingpartoftheorganization. LikethatofBenandJerry.

Cultureisinfluencedby:
Theorganizationfounder. Theorganizationshistory:Thewayitworksandhowtheyhavebeendoingwork. Leadershipandmanagementstyle Structureandsystemsaffectcultureandstrategy.

STRATEGICCHOICE:
Ansoffsproductmarketmatrix:
Existingmarket NewMarket Existingproduct Newproduct

Market consolidation penetration Marketdevelopment

or Productdevelopment Completediversification

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E16BusinessManagement MarketPenetration:
Increasemarketshare Improvedqualityproductivity Increasedmarketingactivity.

MarketDevelopment:
Triedandtestedproductstonewmarkets. Securitypresentproductsplusextrarevenuefromnewmarketareas.

ProductDevelopment:
Alternativetothepresentproduct Buildsuponpresentknowledgeandskills. e.g.,marsicecream

Diversification

Related

Unrelated

Backward

Forward

Horizontal

Internal developme

External acquisition

Joint development

Howtocomplete:
Portersgenericstrategies:
2sourcesofcompetitiveadvantages CostBased Broad Overallcostleadership Narrow Costfocus Differentiation Differentiation Differentiationfocus

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E16BusinessManagement
Broadly:acrossthewholeindustry. Narrowly:focusingonpartoftheindustryormarket.(NICHE)

Characteristicsofboth(distinctivefeatures):
Costbased Highrelativemarketshare Economiesofscale Efficientplantoperation Standardization Lowcostlocation Lowcostsuppliers Pricesensitivecustomers Differentiation Highlevelofservices Innovation Brandimage Flexibility Prestigelocation Lowcostsupplies Customerspreparedto paymore

MeansandMethods
Mixofownershipandcontrol.

Organicgrowth:
Relativelyslow Notfeasiblewithdiversificationbasedstrategy. Asthereislittlebasetogrowfrom. Mayhavelegalissues. AvoidsmostoftheproblemsofacquisitionandJVs.

Acquisition:
Dividedinto: Horizontalintegration Verticalintegration Otherformsofrelateddiversification Unrelateddiversification Asyoumoveddownthelisttherisksincreasemanagementfamiliaritiesdeclinesand potentialforsynergydeclines.

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E16BusinessManagement

JointVentures:
Often2competitorscreateajointlyownedsubsidiarytoexploit: Aparticulartechnology Ormarket. Advantageisofreducedcostsandrisksthroughsharingbutpossiblethatonepartnermay benefitmorethanothers.

Franchising:
Lowcostgrowthoption. Sellingofrightbyfranchiserstothefranchiseetousethebrandname. Franchiseeprovidesinvestmentinthefranchiseandalsomanagesit.

Licensing:
Similartothefranchisingarrangementexceptfor,thatitprovidesatechnologyrather thanabrandname. Bothlicensingandfranchisingarelongtermcontracts.

Outsourcing:
Externalizingvaluechainactivitiestospecialistproviders. Allowsbusinesstoconcentrateoncoreactivities. Butthereisalostofcontrol,synergyandprofitmargins.

Testsofstrategy:
JohnsonandSchools

Feasibility
Skills&resourcesrequiredbytheorganization. Simplyhavewegotwhatittakes

Suitability:
Appropriateuseofresourcesandskills.

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E16BusinessManagement
Somethingfeasibledoesnotmakeitsuitable. Simplyisthisagooduseofresources.

Acceptability:
Interest,powerandsupportofthestakeholders Willourstakeholdersgoalongwiththestrategy?

Strategyimplementation:
Dangerofthetopdownstrategyisthatimplementationseenasalowerlevelissue. Problemsattributedtoimplementationfailureratherthanthestrategyitself.

Reasonsforimplementationdifficultiesare:
Strategyformulatedmaynothavebeenrealistic Oppositionfrompowerfulshareholders Lackoftopmanagementbacking Failureoftopmanagementtoalignfunctionalwithbusinessstrategies. Failuretoadjusttounforeseencircumstances. Failuretoresourcethestrategyadequately. Failuretomodifythestructureandculture. Failuretomonitorandreviewimplementation.

Possiblesolution:
Implementationshouldformpartofformulationofstrategy. Suchseparationsinhibitlearningandflexibility.

Thisimplies:
Assessingandconsideringtheimplementationaspectsatthechoicestagethe feasibilitytest. Involvingthoseatlowerlevel. Involvingthosewhoformulatedthestrategy.

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E16BusinessManagement

TheBCGMatrix
Assumptions:
ThecompanyholdsaportfolioofSBUs Somegenerateandsomeusecash Profitabilityisconnectedtorelativemarketshare Marketfollowsapatternofgrowth,maturityanddecline

High

STAR Cashneutralorcash user COW

MarketGrowth Low

? Heavycashuserbut potentiallyacash generator DOG Cashuserandlikely evertobeacash generator Low

Cashgenerator

High

RelativeMarketShare

Strategiesforthem:
Star:
Cashneutraloruser Becauseofthecostsof maintaininghighmarket shareinahighgrowth market Cow:(cashgenerator)
Milk Butprotectmarketshare

Dog:
Divestifanyonebuysit Harvestshorttermprofits close

QuestionMark:
Potentialgeneratorofcash Eitherinvesttobuildmarket shareorDivest

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E16BusinessManagement

EthicsandSocialResponsibility
EthicalProblemsfacingmanagers Maximizationofshareholderswealthandgenerationofprofitsaffectsthewaybusiness iscarriedout. Distinctions: Extortion:Threatstoclosecompaniesifpaymentnotmade Bribery:(Bakhshish)Paymentsforservicescompanyisnotentitledto GreaseMoney:Cashpaymentstoreceivelegallyentitledservices Gifts:Ethicallydubious SocialResponsibilities: Towards Employees Society Environment CustomersandSuppliers Externalities: ACompanysecologicaldamagemayeffectsomeoneelseshealth Thisgivesrisetoexternalcost Generallypaidoutofgeneraltaxation Advocatessocialresponsibilitysaysthatthesecostsshouldbepaidbythecountries themselves. CORPORATEGOVERNANCE Systemsbywhichthecompaniesaredirectedandcontrolled CadburyReport CorporategovernanceResponsibilities Directors: Responsibleforrunningthecountry

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E16BusinessManagement
Shareholders: Auditors: linkedtodirectorsviafinancedReportingSystems Provideshareholderwithacheckondirectorsabilities

OtherConcernedUsers:Particularlyemployees GreenburyReport: PrinciplesfordeterminingDirectorspayanddetailingdisclosureinAnnual Report Remunerationcommitteetobeformedtodeterminedirectorspay

HampelReport: Accountsshouldcontainastatementofhowthecompaniesappliesthe corporategovernanceprinciples Accountsshouldexplaintheirpolicies

CombinedCode
LSEissuedthecombinedcodederivedfromCadbury,GreenburyandHampelReports.

ProvisionsoftheCombinedCode:
TheBoard:meetregularly,cleardivisionofresponsibilitybetweentheCEOand chairman NEDstomakeuphalftheboard Directortohaveelection TheAGM:SeparateResolutionsoneachSeparateissues AccountabilityandAudit:GoingConcernanddirectorstoexplaintheir responsibilities Remuneration:Remunerationcommittee(NED,s)tosetdirectorspay InternalControl:Directorstoreviewtheeffectivenessofinternalcontrol systemsat leastannually. AuditCommittee:Boardtohaveanauditcommittee

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E16BusinessManagement
AuditorsResponsibilities: StatementofResponsibilities:AuditorstohaveastatementofResponsibilities

HumanResourceManagement
AprocessofevaluatinganorganizationsHRneeds,findingpeopletofillthoseneeds,getting thebestworkandproductivityfromeachemployeebyprovidingtherightincentivesandjob environment. OverallAim:Achieveorganizationsgoals

ImportanceofHR
ToincreaseProductivity Toenhancegroupleasingviamultiskilledteam Toreducestaffturnover Toencourageinitiative

TheProcessHRPlanning:

1. StrategicAnalysis
Ofenvironment Organizationmanpower, strengthandweaknesses, opportunitiesandthreats Organizationsuseofemployees Organizationsobjectives

2.Forecasting OfInternalDemandandSupply ExternalSupply Constraints

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E16BusinessManagement

StagesinHRPlanning
Recruitment andSelection Training Management& Development Redeployment Redundancies HRmanagement ActionPlan SupplyForecast HR Plan DemandForecast

Reconciliationofsupplyanddemand
Recruitmentisconcernedwithfindingapplicationsgoingoutinthelabormarket Selection(FilteringProcess):Procedurestochooseasuccessfulcandidatefromthose availablebyrecruitmenteffort Applicationforms Interviews TestingofCandidates Biodata AssessmentCenters References Negotiation

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E16BusinessManagement

Inductions:
Trainingsessionsfornewcandidates oncerecruitedandselectedthenmotivationandperformancefollows: TheoryX&YbyDonglesMcGregor

TheoryX Peopledislikeworksotheymustbe coerced,controlledanddirected.

TheoryY Expenditureofphysicalandmental effectisasnaturalasplayandrest. Peopleshouldbeunderstoodand managerstoactdemocratically.

MotivationTheory:
MaslowsHierarchyofneeds FulfillmentofpersonalPotential

Selfactualization EsteemNeeds Love/SocialNeeds Safetyneeds Physiologicalneeds

Independence,recognition,status,Respect Relationship,belongingness,affection, Security,freedomfromthreatfoodand

Food&Shelter.

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E16BusinessManagement

McClelandsthreeneedsofIndividuals

Affiliation:Peopleneedasenseofbelonging,membershipofagroup. Power:ThosewhoseekpowerseekaLeadershippositiontoinfluenceandcontrol. Achievement:Peoplehaveastrongdesiretosuccessandfearoffailure. Moneycanbeamotivatorandareasonforjobsatisfaction.

IncentiveSchemes:
Types: PerformancerelatedPay BonusSchemes(ESOPs) ProfitSharing Allaretodowithgoalcongruenceandachievementoforganizationsobjectives.

WorkingArrangements
AttitudesandValues Multiskillinggivesrisetolearningandmaycreateinterest Flexibility:Abletorespondandadaptquicklytocustomerdemands. Empowerment:Givingemployeesthefreedomtotakeresponsibility

FlexibleWorkingArrangement
Workingfromhome. Compressedweek:40hoursworkedinlesserno.ofdays.

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E16BusinessManagement
JobSharing Parttime/reducedhours

Development:
Growthorrealizationofpersonsabilitiesandpotentialthroughtheprovisionsoflearningand educationalexperiences

Training:
Plannedandsystematicmodificationofbehaviorthroughleasingevents,programsand instructions

DevelopmentActivities
Training,bothonandoffthejob Careerplanning JobRotation Otherlearningopportunities

FormalTraining
Internalcoursesrunbytheorganizationstrainingdepartment ExternalCourses(eitheronoroffsite)

MethodUsedonCourses
Lectures Discussions Exercises Roleplays(Actingoutpracticallyinarole) CaseStudies

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E16BusinessManagement EvaluatingTraining
Comparingtheactualcostsoftheschemewiththebenefitsobtained

MethodsUsedare:
TraineesReactiontoexperience ChangeinJobbehaviorfollowingLearning Organizationalchangeasaresultoftraining Impactoftrainingontheachievementoforganizationalgoals. Appraisalisthesystematicreviewandassessmentofanemployeesperformance,potential andtrainingneeds.

Appraisalscanbe:
Upwardappraisal:employeesratetheirsuperiors Customerappraisal:feedbackfromcustomers 360Appraisal:collectingfeedbackfromallsources. Manager,peersandcoworkers,customersetc Managementisfirstlyeducated,andthentrainedskillswiseandtheprocessarecontinually repeatedtoachievedevelopment. Successfulcompanieshavekindofleadershiprequiredtoinfluencepeopletostrivewillingly andactivelyforgroupobjectives. Managementisaboutcopingwithcomplexitywhereasleadershipisaboutcopingwithchange. Managementisexercisedoverresources,activitiesandprojects.

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E16BusinessManagement
Leadershipisexercisedoverpeopleandaimstosecurewillingness,enthusiasmand commitment.

LeadershipStyle:
TransactionalLeaders: Seetherelationshipwiththeirfollowersintermsoftrade. TransformationalLeaders:Seetheirroleasinspiringandmotivatingothers.

LeadershipSkills:
IdealizedInfluence:identifiedwithcharisma,puttingtheneedsofothersbefore personalinterest. InspirationalMotivation:Articulationofthechallengeandarouses,teamspirit IntellectualStimulation: Leaderencouragesfreethinking Rationalproblemsolving ManagementStyles(identifiedbyAshridgemanagementcollege):

Styles:
Tells(Autocratic) Sells(Persuasive)convincing Consults(managersconferwithSubordinates) Joins:Democratic,decisionsmadeonthebasisofconsensus.

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E16BusinessManagement Groups
Acollectionofpeoplewhoperceivesthemselvestobeagroup Thegroupnormallyhas: Asenseofidentity Loyaltytothegroup Purposeandleadership Sometimestherecanbeconflictswithgroups. Theseconflictscanbeconstructive(enhancinginnovation,devisingsolutionsandencourage creativity)butcanalsobedestructive(distractingattention,polarizeviews,encouraging defensiveorspoilingbehavior)

ResponsestoConflicts:
Denial Supervision/accommodation Dominance Compromise:bargainingandnegotiating Disciplineisawaytopromoteorderandgoodbehavior,enforcingacceptablestandardsof conduct.

DisciplinerActions:
Written,Specific Nondiscriminatory Statingthelevelofmanagementinvolved hearingouttheemployee Noemployeedismissedforthefirstbreach Requiresmanagementtoinvestigatefully Allowemployeestoappeal

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E16BusinessManagement

StrategiesforCriticalPeriods
AttimesorganizationsgointoDeclineandcontract:

Causes:
EnvironmentalEntropy(Organizationsenvironmentmaynolongerbesupportive). Vulnerability Organizationsmayfailtoprosperwithinitsenvironment. Notpursuetherightstrategyortherightbusiness. OrganizationalAtrophy(Toobureaucraticmanagercomplacent,andunableto adapt.

TwoTypesofDecline
ProductRevitalization:TemporaryandGenuinerecessioninconsumerdemand Endgame:SubstantiallyLowerdemandpermanently

PossibleCausesofDecline
Poormanagement Poorfinancialcontrols Highcoststructure Poormarketing Competitiveweakness BigProjects/acquisitionsgobadandhighpremiumspaid(thereforeshortageof cash)

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E16BusinessManagement StrategyAdoptedwere:
Turnaround:Approachesare Contractionandcostcutting Reinvestmentandfundputthroughtoenhancecapabilityandefficiency. Rebuildingwithaconcentrationoninnovation

Change:
3Stagesapproach:(Levin/Schein) UnfreezeChange/Move Existingbehavior Refreeze newbehavior

attitude,Behaviour

TypesofStrategicChange:
Incremental Speedof

ExtentofChangeSeriesofSteps Transformational Realignment

Evolution
Proactive,Slow

Adaptation
Realignthewayofoperation

change
BigBang

Resolution
Simultaneousinitiativeson manyfronts

Reconstruction
Realignthewayinwhich organizationoperates

Forced,Reactive

Oftenforcedandreactive.

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E16BusinessManagement

ResistancetoChange:
SourceofResistance:
Attitudesorbeliefs Loyaltytoagroup Habitsorpastnorms Policiesetc. ForcefieldAnalysis:(KurtLwein) Drivingforce(forchange) Canbebothinternalandexternalissues Factorstoconsiderinresistancetochange: 1) ThepaceofChange 2) ThemannerofChange 3) ScopeofChange CorporateCultureisdifficulttochangeasitisgluedtoitsparadigm. Itbecomescomplicatedandcanbeachievedusingforecasting,Reporting,communicatingand coordination. RestrainingForce

Cultureconsistsof
beliefs, attitudes,

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E16BusinessManagement
practicesandcustomstowhichpeopleareexposedduringtheirinteractionwith theorganization.

Marketing
MarketingInformation:
Providesbasisonwhichtomakemarketingdecisionsandtoevaluatemarketing effectiveness

SimpleClassification:
1. InternalInformation Salesanalysis Customerloyalty LostCustomers Complaints Salesforcesurveys Storeloyaltycards,althoughareaboutsalespromotionbutmayprovidevalueinformation aboutcustomerbehavior. 2. ExternalInformation: Socialandeconomictrends Marketcomposition Characteristicsandtrendsofthemarket

Techniques
a. SecondaryData:
Govt.publications Journals TradepublicationandNewspapers Startingpointforresearch

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E16BusinessManagement
Sincetheinformationischeapandreadilyavailable.

PrimaryResearch:
Costlyasitinvolvesgatheringnewdata. Experimente.g.Useoftestmarketing Observatione.g.retailaudits Surveys:questionnaires,telephone,personalinterview Totest,marketssamplesaretaken. Randomsamplinginwhichrandomnumbertablesareusedandarethepurestofthemallbut costly. Questionnairedependson qualityofquestionnairedesign Cheap Large Low

interviewdependsoncompetence

ofinterviewers. Costly Small NotsoLow complex

Cost Samplesize

ResponseRate

Simple

natureofQuestionsandAnswers

TestMarkets:
Testingoutofthemarketingmixinasamplemarketormarketspriortoanationallaunch

Benefits
Reducesriskoflaunchfailure Providesabasisforsalesforecast Enablethemarketingmixtobeimproved.

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E16BusinessManagement

Disadvantages
Onlypossiblewithfmcgs Costlysincetheentiremarketingmixhastobereproducedoveranextendedtime period. Difficultyinfindingarepresentativemarket. Forewarecompetitorsofthemarketingstrategy.

Bytheway:
Marketingisthemanagementprocesswhich: Identifies Anticipates Supplies

Customerrequirementsefficientlyandprofitably

(Instituteofmarketing)

Customersdonotbuyproducts;theybuywhattheproductwilldoforthem.
(Levitt)

MarkingStrategy
MarketingObjectives Targetmarketing MarketSegmentation MarketingMix 4Ps

Marketing Strategy

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E16BusinessManagement

CustomerRelationship
Marketing:
Involvesinvestingselectivelyinretainingexistingcustomers 1. Identifytheprofitabilityofdifferenttypesofcustomers(complexexercise) 2. Treatcustomersasstreamsoffuturediscountedcashflows 3. Estimatehowmuchisitworthinvestinginretainingthemoreprofitablecustomers 4. Identifytheunprofitableonesandmakethemmoreprofitablebyreducingthelevelof servicesofferedorsellingthemmoreprofitableproducts. 5. Increaseprofitabilitybyupsellorcosssell 6. Interactandcreateastrongrelationwiththemostvaluedcustomers However such strategies have their limitation for e.g. in the airline industry not focusing on backpackersmayloosecriticalmasstocompetition.Astodaysbackpackersaretomorrows businesspeople.Suchfactorsaredifficulttoquantify.

GeneralMarketingObjectives:
Marketshareandgrowth Salesvalue,volume,mixandgrowth Customersatisfactionandretention Appropriatemarketingmix

MarketSegmentation:
Divisionofmarketsintodifferentgroupsofcustomerswithdistinctiveneedsand preferences Differentvariablescanbeusedtodivideupmarketsfore.g.geographic,demographic etc.

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E16BusinessManagement

Industrialmarketsegmentation:
Customersize Customerprofitabilityandindustry Geographiclocation Ownership(Publicorprivate) Themorevariablesusedthesmallerbutmoresimilarthemarketbecomesandmoreprecisely itcanbetargeted.

MarketingMix:
Thedecisionvariablesthatthebusinesscanusetoinfluenceitstargetmarkets(Kotler) Price,product,placeandpromotion. ForeachPthereisacustomerC. MarketChallenger: Immediaterunnersupinthe market Challengethedominanceofthe leader

KotleronMarketingStrategies:
MarketLeader:

Normallyeveryindustryhas1 Objectiveistoremaindominant

PossibleStrategies: Theyexpandthetotalmarketby

Strategies: Directattackontheleader Backdoorstrategywhere opportunityisexploited, overlookedbytheleader.

frequentuseandprotectmarketshare byacquiringcompetitors MarketFollower: Runnersupacceptthemarket shareandpositionofleaderand startfollowinginleaders footsteps. Avoidsinnovationandprice wars.

MarketNicher: Appropriateforsmallerfirms Survivebyexploitingsegment overlookedbythemajors

Essenceofthestrategyishighlevel Ofspecialization.

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E16BusinessManagement
Afirmmayuseacombinationofstrategies.

Product:
Anythingthatsatisfiescustomerneeds ProductlifeCycle. Sales

Intro

growth

maturity Decline

Time

Characteristics
Intro:
Slowsalesgrowth,lowEOSandlittlecompetition Basicproduct,promotionalemphasisonproductawarenessandtrial

Growth:
Rapidsalesgrowth,competitorsenter,IncreasedEOS Productimprovementsandoptions Promotionalemphasisonbrandpreference

Maturity:
Saleslevelstatic,increasedcompetition Promotionalemphasisonbrandloyaltyandbrandswitching.

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E16BusinessManagement Decline:
Salesfallduetoproductobsolescence Technologicalchange Weakcompetitorsexit Salesandcontributioninsufficienttosupportlargescalepromotion.

Price:
FourInfluences: 1. 2. 3. 4. differentiation. LowPrice NoProfit NoDemand HighPrice Costoftheproduct Customersreadinesstopurchase Competitionfromcompetingandsubstituteproducts Choiceofbusinessstrategyi.e.genericstrategiescostbasedor

Productcosts Priceschangedby value max Whichtypically thecompetition

Consumerperceptionof

whichtypicallylimitsthe

Limittheminimumprice CostBased: Competitorbased Pricing GoingRate

Price.

BuyerBasedPricing Perceived value

a. Costplus b. Breakeven c. Targetprofit

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E16BusinessManagement
PricewillbeheavilyaffectedbythestageoftheproductlifeCycle GenerallypricesfallastheproductmovesthroughtheproductLifeCycle LowpriceStrategiesonlysustainableifbusinessenjoyslowestcosts.

Promotion:
Itisaboutcommunicationwithcustomer.TheStrategywouldinvolve (1) Identifyingthetargetaudience: Thetargetaudiencewillbeheavilyinfluencedby Whatwillbesaid,howitwillbesaid,whenitwillbesaid,whereitwillbesaidandwho willsayit. (2) DecidingontheResponseRequired: TheBuyersReadinessState 4Stages: Awareness,Interest,Desire,Action(AIDA)

(3) Selectinganddesigningthemessage: Whatappealorthemetouse,rational,emotionalormoral(The3mainCategories). (4) Choosingthemix: Mainmodelingtoolareadvertising,Salespromotion,personalselling&publicrelations. However of key importance is word of mouth, which is not directly controlled by the business. (5) MeasuringResponse: Collecting and interpreting feedback, the impact of the communication on awareness (did they see it, remember, like it, associate it with the product) and the impact on behavior(didtheybuyitasaresult).

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E16BusinessManagement Advertising:
AnypaidformofnonpersonalpresentationandpromotionbyanidentifiedSponsor.(Kotler) Media:Print,Mailshot,TV,Radio,Billboard

SalesPromotion:
PointofSaleincentivestoencouragepurchase "Wincompetitions Freegifts Savemoneyoff. Salepromotionhassomeadvantagesoveradvertising: Lowcost POSimpact Promotiononthepacket

PublicRelations:
AsponsoredattempttocreateafavorableimageoftheOrganization (Kotler) Influencingmedia Sponsorship Lobbying VisitorCenters

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E16BusinessManagement PersonalSelling:
Personaloralpresentationtoprospectivecustomer Doortodoor Telemarketing Salesreps

Place:
Concerned with the selection of distribution channel used to deliver goods to the consumer DistributionChannel Institution through which goods are transferred from producers to consumers

FunctionsInclude:
Transport

TypesofDistributors:
Retailers Wholesalers Distributorsanddealers Agents Franchises Multiplestoresi.e.Supermarkets DirectSelling(mailorder,telephone selling&doortodoor

Stockholdingandstorage LocalKnowledge PromotionalCampaigns Display(presentationoftheproduct)

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E16BusinessManagement

GLOBALIZATION
AbsoluteAdvantage:
Intheproductionofagood,acountrycanproducemoreofthegoodswithagivenamountof resourcesthantheothercountry.

ComparativeAdvantage:
Twocountriescangainfromtradewheneachspecializesintheindustryinwhichithasthe lowestpossiblecosts.Butcountriesavoidspecializationdueto: Technologicalchangeandinstability Diversificationprotectsagainstexcessiverelianceononeproduct Forexample:agricultureissubjecttouncertaintiesofclimate Governmentsmaywishtodevelopselfsufficiency. Protectionismisthediscouragingofimportsbygovt.action.

Methodused:
(a) Tarifforcustomduty (b) Nontariffbarriers ImportQuotas Minimumpriceandantidumpingactions Embargoes Subsidiesforlocalproducers

(c) Exchangecontrolsandexchangeratepolicy.

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E16BusinessManagement

THECOMPARATIVEADVANTAGESOFNATIONS
Portersuggeststhatsomenationsindustriesaremoreinternationallycompetitivethanothers.

RelatedandSupporting industries FactorConditions DemandConditions FirmStrategy,Structure andRivalry

FactorConditions:
HR PhysicalResources Knowledge Capital Infrastructure

DemandCondition:
Thehomemarketdecideshow firmsperceive,interpretand respondtobuyerneeds. Sophisticatedandelevating buyerssetstandards`

RelatedandSupportingIndustries Theexistenceandsupportof localsuppliersandtheir development

FirmStrategy,StructureandRivalry Germenmanagerstendtobe benttowardsengineering Bestatproductsdemanding carefuldevelopmentand complexmanufacturingprocess.

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E16BusinessManagement

5StagesintheEvolutionofGlobalBusinessOperation
Exporting Overseasbranching Overseasproduction Theglobalcompany

5ReasonswhyCompaniesaremovingtowardstheglobalStage
Customer Company Competition Currency Country

StandardizationorAdaptation
HRIssues:
ExpatriatesorLocal HRM 1) RecruitmentandSelection 2) Training 3) AppraisalSchemes 4) Communication I. II. EmailandSatelliteLinkages Majorconferences

PoliticalRisksandBlockedFunds
Itistheriskthatpoliticalactionwillaffectthepositionandvalueofacompany.

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E16BusinessManagement

ActionsusuallytakenbyGovt.:
ImportQuotas Importtariffs LegalStandardsofSafetyandQuality Exchangecontrolregulation Restricttheabilityofforeigncompaniestobuydomesticcompanies Nationalizeforeignownedcompanies Govt.couldinsistonminimumshareholding.

WaysofDealingwithhostgovt.
Negotiationwithhostgovt. Insurance(UKExportCreditGuaranteeDepartment) ProductionStrategies Localborrowingasitmayhaveaneffectonlocalinstitutionsifforeigncompanysassets takenbythegovt. ManagementStructure,LocalVenturesandprofitsharingarrangements

Treasurership
Functionconcernedwiththeprovisionanduseoffinanceitcovers: ProvisionofCapital Shorttermborrowing ForeignCurrencymanagement Banking Moneymarketinvestments

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E16BusinessManagement Roleoftreasurer
CorporatefinancialObjectives Financialaimsandobjectives Financialandtreasurypolicies FinancialandtreasurySystems LiquidityManagement WorkingCapitalManagement Bankingrelationshipandarrangements Moneymanagement FundingManagement FundingPoliciesandProcedures Sourcesoffunds TypesofFunds CurrencyManagement ExposurePoliciesandProcedures ExchangedealingsincludingRiskmanagementtools CorporateFinance EquityCapitalmanagement BusinessacquisitionandSales ProjectfinanceandJVs OtherIssues CorporateDomesticandforeigntax Riskmanagementandinsurance Pensionfundinvestmentmanagement

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E16BusinessManagement

CentralizedorDecentralizedCashManagement
Centralizedbeingcontrolledanddirectedbytheheadoffice. o AdvantagesInclude
LowerbankChangesduetointergroupborrowingandlending Largeamountsavailabletoinvestthereforehighinterestaccounts. Bulkborrowingofferslowerinterestcharges ForeignCurrencyriskmanagementimproveswiththeuseofnettingoffand matching. ExpectknowledgeinvariousRiskmanagementareas Transferpricecanbesetcentrallythusloweringtheglobaltaxburdens.

o AdvantagesofDecentralization
Decentralizedisameanofhavingalocalofficeoftreasuryatthesubsidiarylevel. Diversifiedsourceoffinanceandmatchlocalassets GreaterAutonomy Moreresponsivetoindividualoperations

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E16BusinessManagement

ProfitCentreorCostCentre
Costcentre
Themanagershavetokeepthecostofthedepartmentwithinspecifiedtargets Itslikeprovidingaservicetootherdepartments Inaprofitcentresignificantresourcescanbeearnedwiththehelpofspecialiststaffandrisk undertaken. Forprofitcentreapproachesfollowingneedsareconsidered: CompetenceofStaff Controls(topreventcostlyerrors) Completeuptodatemarketinformation AttitudestoriskoftreasuryteamandtheBoard Internalchargesfortheservicesofthedepartmenttootherdepartments

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