28/09/2017

Principles of Management

MGMT-142

MUJEEB RASHID

INTRODUCTION

The External Environments

Organizations are Open Systems

Receive Financial, Human, Material & Information Resources from the

Environment and transform them in to Products & Services to send back in
to the environment

Managers must keep abreast of external developments and react

effectively. They can also influence some components of the external
environment both on the input and output sides

The Competitive Landscape

Competitive
environment is
specific to the
Organization

Macroeconomic
environment is
the same for all
Competitors

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Macro environment - Economy

—  How does Macro environment influence Strategic Choices

—  Interest, Cost of Capital, GDP growth, Inflation, Energy, Forex
Unemployment rates , Fiscal Policies & changes in Stock Market
—  What is the impact of Technology
—  Automation, Labor intensity, MIS, Communications and Networking
through Internet- Meetings without having to travel
—  What is the impact of Laws and Regulations
—  Protecting Public/Consumer interests, Restricting malpractices &
Creating a Level Playing field
—  Why managers must consider Demographics for HR strategies
—  Age/Gender dynamics and Education levels for employment, Influence of
Immigration on availability certain skills eg IT
—  How does a Company’s response to social issues affects its
reputation in the marketplace.
—  Gender Equality, Facilitation for Maternity, Health Insurance
—  Why is protecting the Natural Environment so important
—  Gaining public goodwill, Attracting Talent & Conformance to Laws,

The Competitive Environment

The Competitive Environment

—  What is driving competition among rival firms ?

—  It is the changing dynamics of Consumer Behavior that shapes the forces
that cause competition among rivals, e.g.
¡  Shifting of consumption from in home to out of home
¡  From fizzy drinks to Water, Coffee and Healthy drinks
¡  You compete within existing categories as well as the ever expanding horizon of new
products to satisfy diverse tastes and preferences
—  How do companies compete
—  Price reduction, New product introductions, Advertising campaigns,
Promotions:- (gaining top of mind awareness through media advertising
and occupying more shelf space through brand promotions)
—  What are barriers to entry?
—  Why is threat to established companies much less?
—  Strong brand image, Distribution Channels and Dominating shelf space
—  Capital cost, Technology (R & D), Patents and Regulatory

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The Competitive Environment

—  What are Substitutes and Complements?

—  Can you give examples of companies introducing their own

Substitutes and Complements?

—  Why do companies create and introduce their own

Substitutes and Complements?
—  To cater to psychographic differences in consumer preferences
—  Sometimes to pre-empt competition
—  Can you give examples of substitutes and complements?
—  (Pepsi and Tropicana are substitutes)
—  (Quaker Oats and Tropicana are Complements)
—  What is the role of new entrants?
—  Me too, in a fast growing market, Better performance (innovation)

The Competitive Environment

—  Why are Suppliers crucial to an organization?

—  What are Switching Costs?

—  The fixed costs buyers face when changing a supplier
—  What are the goals of Supply Chain Management?
—  Right product in right quantity, available at the right place and at the
right time
—  What is the advantage in the concept of JIT?
—  Less inventory and lesser costs of obsolesce
—  Why has close relationship with suppliers become
important?
—  Why did Mr. Behrens of Boeing want to help suppliers
develop their abilities?
—  So that they may grow from supplying just parts to supplying sub-
assemblies

The Competitive Environment

—  Why are Customers important to a company?

—  They are the principal source of revenue and profit. The

—  What are the different kinds of customers?

—  Final Consumer, Intermediate customer also known as B2B

—  What is the concept of customer’s bargaining power in B2B?

—  How does the Final Consumer exercise his influence in the

development of new products?

—  What are the forces driving Consumer Choice?

—  Affordability, Perceived Quality, Need fulfillment and Availability

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The Competitive Environment

—  After identifying and analyzing competitive forces

managers must formulate a strategy that minimizes
the power external forces have over the
organization

—  “Successful managers do more than just react to

their rivals. They act in ways that actually shape
and change the Organization’s business boundaries”
-Michael Porter

Environmental Analysis

—  Why is there a need for environmental analysis?

—  to determine where the organization stands with respect to
competition-SWOT
—  To address issues related to Environmental Uncertainty

—  What is the process of analysis?

—  Environmental Scanning
—  Scenario development
—  Forecasting
—  Benchmarking

Environmental Analysis

—  How do organizations respond to uncertainty?

—  In devising proactive strategies to change their environment

—  What is strategic maneuvering?

—  Changing the boundaries of competitive environment through domain
selection – entering a new market/industry with existing expertise

—  What are benefits of Cooperative strategies?

—  Increase the size of Cake to be shared among competition
—  Joint action to reduce costs and common risks

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Organization Culture

—  What is Organization Culture?

—  A set of important assumptions about the organization and its goals
and practices that members of the company share among themselves

—  What is Vision

—  What is Mission

—  What are Values

Organization Culture