MANAGEMENT

MANAGEMENT -It is the co-ordination of all resources through the process of planning, organizing, directing and controlling organization activities to attain stated objectives. -It is the process of getting things done through people. The Need for and Nature of Business Activity -Business is a major economic activity. It can be defined as the production of goods and services needed by people in this world to meet their basic needs. -The basic human needs can be classified as: (a) Social -entertainment (b) Physical -food, warmth, shelter (c) Status -sense of achievement, good job, large house etc (d) Security -privacy, steady job, secure homes etc -In all these aspects businesses have grown out of specialization to meet each need e.g. to restaurants, security companies, construction companies, insurance companies etc. -Specialization has brought about a high standard of living. -Business enterprises are established where entrepreneurs combine productive resources (factors of production) to produce an output. The four factors of production are: 1 .Land -natural resources-minerals, soil, forests, water supplies etc 2 Labor -human resources 3 Capital -financial and technological inputs such as money, machinery, buildings, vehicles etc 4 Enterprise -this is the active factor, the entrepreneur. An entrepreneur is an originator of a new business venture or a manager who uses a number of ways to achieve new things. The first 3 factors of production are useless without the fourth. Entrepreneurship is all about risk taking yet it can be rewarded with economic, physical and psychological benefits if the goal is achieved. The major objective of many businesses is making profit. Profit plays a key role in: (1) –motivating the entrepreneur (2) –encouraging innovation (3) –encouraging efficiency (4) –providing finance for expansion (5) –for performance measurement Qualities of an Entrepreneur (1) –hardworking (2) –higher achiever (3) –like to be in control (4) –firm and decisive (5) –ambitious (6) –independent (7) –opportunist (8) –have marketing, financial and human skills (9) –able to cope up with stress-healthy Levels of Business Activity -There are 3 basic levels of economic activity in a country: 1 Primary -Is the first stage of production which involves extraction/production of raw materials e.g. agriculture (most important in Zimbabwe), mining, forestry and fishing. It is usually done on-site. 2 Secondary -Involves converting raw materials into something wanted by the consumer e.g. timber into furniture, wheat into bread. It includes all work done in factories, assembly plants, bakeries etc. The Ministry of Industry and Commerce in Zimbabwe is the responsible authority for encouraging trade. 3 Tertiary -Involves the provision of services to facilitate primary and secondary activities or to enable goods to reach the ultimate consumer, e.g. banking, legal advisors, teaching, nursing, transportation etc. -Thus the business system is characterized by the 4Ms of Management which are Money, Materials, Manpower and Machinery Sectors of the Economy -There are basically 2 sectors in the economy; 1 Private Sector -This is the sector which is made up of individuals and firms not under government control. Examples are sole traders, partnerships, private and public companies, co-operatives and MNCs. 2 Public Sector -Consists of companies or firms owned by the government. These are called parastatals e.g. NRZ, GMB, ZESA, ZRP etc. Legal Structure of Business 1 Sole proprietor/trader -Is a business owned by one person. However he/she may employ other people. In some cases, family members make up the owners of the business. Examples are hair salons, bus operators, grocery stores etc. Advantages 1 –easy to form (less capital and legal requirements) 2 –owner has direct control of the business (makes decisions that best suit his/her conditions 3 –all profits go to the owner 4 –enjoys major exemptions from Government legislation 5 –no double taxation 6 –has personal contact with both customers and employees 7 –easy to terminate Disadvantages 1 –unlimited liability 2 –limited initial capital 3 –limited management expertise 4 –unstable business life 5 –difficulty in attracting qualified employees 6 –limited life 2 Partnerships -a business owned by at least two but not more than twenty people. To enter into a partnership, partners can have a verbal agreement or otherwise write a Partnership Deed/Agreement which is a document setting out the following details: a) amount of capital contributed by each member b) salaries/wages to be paid to each member c) rights and obligations of the partners d) procedure for partnership dissolution) profit/loss sharing ratio Advantages 1 –easy to form (same as sole proprietor) 2 –more capital available 3 –diversity of skills and expertise 4 –continuity 5 –personal contact with employees and clients 6 –risk is spread over a number of people 7 –relative freedom from government control Disadvantages 1 –unlimited liability 2 –disagreements may easily lead to winding of the business 3 –all partners responsible for the acts of each other 4 –limited life 5 –profit/loss sharing ratio not necessarily equal 3 Private Ltd and Public Ltd Companies -any 2 or more people can form a private or public limited company General Features 1 –separate legal entity 2 –shareholders have limited liability 3 –owners are called shareholders (buy shares) 4 –shareholders receive dividends as payments 5 –the Board of Directors manages the affairs of the company 6 –the company is governed by Memorandum and Articles of Association 7 –shareholders hold Annual General Meetings (AGMs) a) Private Limited Companies -have two but not more than fifty shareholders -the right to transfer shares is limited -should submit financial statements and auditors reports to the Registrar of Companies -cannot sell shares to the public Advantages 1 –shareholders have limited liabilities 2 –more capital can be raised 3 –unlimited life 4 –easy to transform into public limited companies 5 –do not have to publish annual accounts in the press 6 –control of ownership is more effective Disadvantages 1 –not easy to form (up to six months) 2 –has to fill complex tax forms 3 –cannot raise capital through the stock exchange b) Public limited companies -have at least two shareholders. No maximum limit -shares are freely transferable -the public can be invited to subscribe to shares and debentures -can only start business after complying with all the requirements of the Companies Act -annual accounting reports (financial statements) are supposed to be published in the press -must keep a register of investors and directors shareholding Advantages 1 –easy to raise capital through floating shares on ZSE 2 –can operate on a large scale 3 –unlimited life 4 –employees can become shareholders-increases loyalty 5 –managers and directors have room to work independently therefore prove their expertise in their areas of specialization Disadvantages 1 –difficult to form 2 –files always open for inspection by members of the pubic 3 –decisions take time to make due to large size of the company 4 –no personal touch between employees and customers 5 –conflict of interest-shareholders are usually interested in expanding the business 4 State Owned/Public Enterprises -established by an Act of Parliament -are corporate bodies with a separate legal entity -they are managed by a Board appointed by the Minister -the Minister can be questioned by parliament over activities of the corporation Advantages 1 –stability of existence 2 –relative ease of additional capital 3 –ease of transferability of ownership Disadvantages 1 –more government restrictions 2 –cost of complexity of formation 3 –double taxation of profits 5 Co-operatives -members join together to purchase or sell goods that they cannot afford individually. Main features 1 –formed by people who want to work together 2 –is voluntary 2 –members make equitable contributions 4 –risks and benefits are shared equally 5 –are democratically controlled Divorce of Ownership and Control -The act of incorporation (registration of a new company) creates a new legal entity distinct from the shareholders who own the company. The important implication is separation of business affairs from those of the owners. Companies can make contracts, can sue or be sued. The legal position of a company is completely unaffected by the death/retirement of one of the shareholders. -Shareholders enjoy the privilege of limited liability, i.e., they are liable to meet the debts of the business only to the extent that they have invested in the business. It is essential in overcoming the reluctance of people to purchase shares in a business. Business and Economic Structure The Economic System -there are 3 groups which make up an economic system, and these are: individuals, business organizations and the state. 1 Free economy/capitalization/market economy -all resources could be owned by individuals who organize them to produce what people want. There is no government intervention -what is produced and the price charged is determined by market forces, that is, supply and demand. Advantages 1 –consumers determine demand and therefore what is produced 2 –increased competition will keep prices down and improve efficiency and standards 3 –all members of the community are free to run their businesses for profit Disadvantages 1 –monopolistic tendencies by large firms 2 –pollution could increase as it may be difficult to control 3 –competition between businesses can lead to duplication of products and resources 2 Planned/Controlled/Command/Communist Economy -all resources are owned and organized by the state -decisions on what to produce are taken collectively by the government on behalf of its people e.g. Cuba, Bulgaria Advantages 1 –resources are used economically-eliminates wasteful competition 2 –more equal distribution of income and wealth 3 –prevents large firms controlling markets and putting up prices Disadvantages 1 –lack of competition may reduce efficiency, enterprise and innovation 2 –central control may make it difficult to respond quickly to changes in needs and conditions 3 –individuals loose their freedom of choice 3 Mixed/Socialist Economies -ownership of wealth and resources is divided between the public (government) and the private sector. -questions of what, how much and for whom to produce are decided partially by the free market and partially by the central government authority. Certain goods are provided by the government e.g. health, education and defense and the rest of the business activities are left to individuals in the economy -most countries in the world are under this type International Business -International trade is the first step towards international business. It involves the export and import of goods from one country to another. International business embraces more to include setting up of branches or subsidiaries in foreign countries and export not only of goods but also capital, personnel, skills and technology. Globalization is one of the most important changes to the external environment of most businesses. Globalization refers to the unprecedented scope, shape, number and complexity of business relationships conducted across international boundaries. How Companies go International A company which conducts business through branches/subsidiaries in a number of foreign countries is known as a multinational company (MNC). More commonly, an organization proceeds through several stages of internationalization to become an MNC as described below: STAGE 1. Firm begins to export and import from a foreign source via an agent. STAGE 2. When the turnover of business is big enough, a foreign branch or subsidiary is established and the agent is incorporated. STAGE 3. As the firm grows it sets up more subsidiaries. The home office becomes the co-coordinator of activities of subsidiaries. STAGE 4. As the activities of subsidiaries become more complex, a certain amount of regional autonomy is given. -The following are some of the ways in which companies go international: 1 Exporting -the selling of domestically produced goods in foreign markets. 2 Licensing -the selling of rights to market brand-name products or to use patented processes or copyrighted materials. 3 Franchise -a type of licensing arrangement in which a company sells a package containing a trademark, equipment, materials and managerial guidelines. 4 Joint venture -business undertaking in which foreign and domestic companies share the costs of building production or research facilities in foreign countries. Why Companies go International 1. Market related factors –competition to find an established end-user market or an untapped market and new opportunities. 2. Production-related factors –proximity to raw materials, availability of resources and advanced technology. 3. Personnel related factors -availability of cheap labor or otherwise skilled and unskilled labor. 4. To spread risk -investing in 2 or more countries reduces risk; “not putting all your eggs in one basket”. 5. Costs -sometimes it is cheaper to manufacture goods in a foreign country than exporting them to it. 6. Host-Government related factors –incentives by host governments like tax concessions and grants, tariffs aim to bring in capital, technical know-how, create jobs and diversify industrial base. 7. Rising standards of living in developing countries have resulted in a demand for luxury goods such as cosmetics, soft drinks and electrical appliances. Characteristics of MNCs 1. Each geographical region has a senior operating executive in charge, reporting to the Managing Director who is responsible for overall co-ordination. 2. Senior staff set and control policy in their respective functional areas. 3. Each region operates as a profit centre within the MNC and the home office is an international profit centre. 4. Finished products and components are often transferred between regions on an inter-company basis. 5. The home office furnishes the other regional companies with technology, information and communication systems. 6. There is co-ordination so that duplication of functions does not occur. Benefits of MNCs 1. Employment –create direct and indirect employment for the local people 2. Export markets –MNCs are able to export more effectively than local firms and thus bring in foreign currency. 3. Balance of Payments (BOP) –the direct foreign investments create a favorable BOP for the host country. 4. Training –since they are involved more in staff training they help improve the quality of skills within the business community. 5. Areas of Government Priority –MNCs are usually more able to take advantage of priority areas in the development of a country’s economy than local firms. 6. Technology Transfer –MNCs introduce new technology to the host countries. Factors influencing Foreign Direct Investment (FDI) There are about four factors that MNCs consider before investing in a country and these are: 1. The level of infrastructure -communications -supporting industries 2. Profitability -availability of raw materials -availability of low cost skilled labor 3. Government policies -tax laws -controls on entry and operations of foreign businesses -restrictions on the repatriation of profits 4. General economic, social and political conditions -political stability -cultural biases -stability of the value of the currency Privatization/Deregulation -This is the process of converting state-owned/public corporations into registered public limited companies. By removing (Gvt) controls and restrictions on the provision of services, the assumption is that they are open to tender from profit making companies and therefore services will improve. -In Zimbabwe, the Privatization Agency of Zimbabwe (PAZ) was established in 1999 to lead, advise and manage the state of Government shareholding in over 40 institutions in line with Government’s policy of Public Enterprise Reform. To date, Government has divested in Rainbow, Tourism Group (RTG), Jewel Bank, Cotton Company of Zimbabwe, Dairiboard Zimbabwe, and CAPS Holdings, among others. Arguments for Privatization 1. The profit motive creates the drive to increase efficiency by improving services and reducing costs. 2. Government can earn revenue from tax. 3. Increased competition will lead to improved standards of customer service. 4. The transfer of ownership from the state to private individuals results in a larger proportion of the population holding shares and so gives them a greater interest in the way business operates. 5. Privatized businesses have a wider range of capital sources which can lead to higher levels of investment. Arguments against Privatization 1. Consumers are worse off because they will be made to bear the costs of competition and also may have to pay higher prices for the services. 2. They bring major job loses in order to increase efficiency in industries often regarded as being heavily overmanned. 3. Privatization means selling the state’s assets and placing them in the hands of the minority of people who can afford to purchase shares in them. Why small firms survive the activities of MNCs 1. Provision of professional and specialist services/products 2. Sub-contracting –many small firms produce goods for other larger firms 3. Personal services -e.g. hair dressing, plumbing etc can be more easily supplied by small firms 4. Limited markets –e.g. “corner shops” provide local services 5. “Being one’s own boss” –some entrepreneurs may accept smaller profits in order to enjoy the satisfaction of working for themselves 6. Government assistance –or advice is offered to prospective and established small businesses on a wide range of problems Significance of Small Businesses 1. The small firm is able to cater more precisely to its customers’ requirements and offer personalized service. 2. They provide care and attention as well as privacy and confidentiality which large firms may fail to do so e.g. doctors, lawyers etc 3. Sometimes markets are small and highly specialized and can only be tapped economically by the small firm (market niche). 4. As the market demand changes, a small firm has the flexibility to react to these changes more easily than the large organization. Business Strategy -Business organizations are established for the purpose of achieving specific objectives and it is against these objectives that the success or failure of the organization is judged. -Objectives state what the organization is trying to achieve, how this can be done, when it must be done and how it will know that it has succeeded. Objectives should be: S –pecific M –easurable A –ttainable R –ealistic T –imebound Why Objectives are needed Objectives can be seen as more specific and quantifiable aims, designed to assist in the achievements of the goals identified in the mission statement. -They are needed because; 1. They clarify for everyone what the business is working to achieve. 2. They aid in decision-making and choice of alternative strategies. 3. They enable checks on progress and corrective action. 4. They provide means by which performance can be measured. 5. They provide a focus for individual roles in the organization. 6. They can be broken down to provide targets for each part of the organization. 7. They motivate employees. 8. They facilitate prioritization and the resolution of conflict between departments. 9. They provide shareholders with a clear idea of the business in which they have invested. The hierarchy of Objectives Mission Statement -This is a broad goal based on managers’ assumptions about the organization’s purpose, competencies and reason for existence. It is a permanent part of an organization’s identity and can do much to unify and motivate members of the organization. It is a driving force for strategic and operational goals for the organization. In essence, a mission statement should contain: 1. –a statement of the fundamental purpose of the organization 2. –a vision of what the organization wants to be 3. –boundaries for the organization 4. –guidance for decision-making 5. –a statement of values to guide individual behavior 6. –a statement of the characteristics of the organization and the customers it seeks to serve Corporate Objectives/Strategic Objectives -These relate to products, finance, markets and production. Such objectives are usually covered in a period of 3-5 years, depending on the organization. They cover the following areas; 1. Market -the market the company wishes to be in, its desired market share and reputation in the market place. 2. Innovation -the development of new products to meet marketing objectives 3. Productivity -targeted levels of production efficiency 4. Physical and financial resources 5. Managerial performance 6. Worker performance and attitudes 7. Corporate social responsibility 8. Profitability Tactical Objectives These are short-term departmental performance targets, usually covering a period of up to 6 months. The target has to be achieved if the organization is to satisfy its strategic objectives. Operational Objectives These are statements addressed to small groups and individuals about the day-to-day running of the business. Other Objectives of Organizations 1. The profit objective 2. Survival and growth 3. Product/Service objective (that satisfy consumer needs) 4. Market share Management By Objectives (MBO) It is a concept introduced in 1954 by Peter Drucker. In MBO managers and their staff work together to set common goals. Workers’ major areas of responsibility are clearly defined in terms of measurable results (objectives). These objectives are used by workers to plan their work and by managers to measure the progress of their staff. Periodic appraisals of performance are made to see if progress towards the objectives is made. Characteristics of MBO Programs 1. Total commitment to the program from top management to the worker 2. Clearly defined goals and planning by top management 3. Objectives set by individual managers and their staff and related to the organization’s goals; participative style of management 4. Employee participation in setting goals 5. Regular reviews to appraise progress towards the objectives Strengths of MBO 1. It lets individuals know what is expected of them 2. It aids planning by making managers establish goals 3. Improved communication between managers and staff 4. Everyone becomes more aware of organizational goals 5. Evaluation become fairer due to specified targets set Weaknesses of MBO 1. Much time and effort is needed to implement MBO effectively 2. Involves too much paper work 3. Some managers pursue goals at any cost 4. Goals not properly set can demotivate staff Business in its Environment There are 2 parts of the business environment, the external and the internal environment. The external environment of business refers to the external forces that play a part in influencing the direction that the firm takes. The five basic elements of the external environment are social, legal-political, economic, material and technological. -The internal environment refers to those elements that have a direct influence on the daily operations of the firm e.g. employees, suppliers, customers and creditors. The External Environment of Business Legal-Political The legal element is concerned with the framework of rules laid down by the Government of Zimbabwe within which business must operate. In Zimbabwe, the laws passed cover various aspects of business activity which include: i) Formation of business –The Partnership Act, the Companies Act (Ch 24:03) ii) Labor -The Labor Relations Act (Ch 28:01); The Factories and Workers Act (Ch 14:08). These laws protect the rights of workers by providing for contracts of employment, compulsory insurance, recognition of trade unions, compulsory provident funds and industrial arbitration. iii) Finance and Property –The Patents Act protects a company’s rights to use its inventions. The Copyright Bill protects authors of original literary, dramatic, musical and artistic works against plagiarism and piracy. iv) -Pollution – In the pursuit of the profit objective, some businesses may carry out harmful activities like degrading the environment, producing dangerous products that deplete the ozone layer and pollution in general. The government therefore sets antipollution regulations in order to put in check business activities. This is also achieved through the action of environmental lobby groups like WWF, Friends of The Earth etc. The political environment concerns the activities of the state and trends in politics. The state performs a numbers of roles within the economy. Zimbabwe is a mixed economy. There is a mixture of privately owned and government owned enterprises. The central government provides services such as health, education, defense, housing and social welfare. -The state acts to regulate, encourage and guide the private sector of the economy. Since 1994, the Government of Zimbabwe has embarked on deregulation/privatization of the economy. -Many private sector firms rely heavily on public sector contracts. Technological Environment The technical environment in which business operates is subject to change and the successful organization is the one that is willing and able to adapt to these environmental changes. Technical breakthroughs have a powerful effect on business. It is the combination of the right technology and marketing that leads to the communicational success of products. -Technical changes can also cause changes in demand for a firm’s products. For example, the introduction of CTVs resulted in low demand for black and white TVs. -Changing technology also results in changes in the processes of production and in the size and type of workforce required e.g. computerization of the office reduces the number of workers required but places government emphasis on skills and quality of staff. In factories, automation has reduced the skill element in the work. -The technological element allows the manager to access more accurate date that enables him to plan better. -The technical changes in transport have helped to lower the costs of moving goals and opening new markets. Until recently, it was not possible to move perishables from areas of production to areas of consumption without deep freezing. According to Phillip Kotler, technology affects business in the following ways: 1) The accelerating pace of technical changes is bringing about fundamental changes in working life and shorter product life cycles. 2) Opportunities for innovation appear limitless. This entails new products, new Processes and new ways of working. 3) Increasing expenditure on R& D is not an option but is essential for modern business organizations. 4) The impact of technology can be very harmful to the society (global warming, nuclear power, toxic substance etc) thus there is need for greater regulation. 5) Continuous product improvement is essential, though minor and less risky changes are Preferred. Social Environment -Businesses operate within society. It is of utmost importance that the manager is aware of the characteristics of the social element of the environment. The size and age distribution of the population, its standard of living, facilities for training and education, availability of housing and health care all affect business operations. -A growing population is beneficial to firms in increasing the size of the potential market. -Trends in the birth rate can affect business especially those in the health sector and early childhood education. -Age composition of the population can assist businesses in niche marketing, that is, concentrating on a particular age group of the market. -Lifestyles, values and benefits, and religious backgrounds are significant to businesses because of their impact on labor and the purchasing behavior of people in the society. -Increasing affluence has led to a more health-conscious society. This has led manufacturers of foods to face the challenge of producing more nutrition health foods. -The population is also affected by migration. The negative impact of this has been brain drain as professionals like doctors; nurses etc are leaving the country for greener pastures in neighboring countries and overseas. -Generally, the social environment of business is characterized by the following: 1) –the increase in time available for leisure 2) –the increasing role of women in society and at work 3) –concern over healthy living 4) –single person households 5) –government’s concern over the environment 6) –the desire for government’s convenience 7) –the limitation of family size Economic Environment -Involves the impact of economic variables on the supply of resources and the demand from customers. These variables include rate of growth of output and income, the level of (un)employment, the rate of inflation, the exchange rate and BOP. -Another important consideration is the impact of government policy on business organizations. This involves policies relating to interest rates and circulation of money (monetary policies), taxation and government expenditure (fiscal policies), trade policy, indigenization, land policy, pricing policy etc. These policies have had a tremendous impact on business in Zimbabwe. Material Environment -This is the physical environment. It is concerned with the use and supply of land and raw materials, the danger from pollutants and residues and the availability of energy resources. -Abuse of the material environment will mean that firms have to pay more for scarce resources and face health hazards from pollution. -The availability of resources affects the location of industries. Most MNCs locate in countries with rich deposits of mineral resources e.g. African countries. These countries also have pools of cheap labor. -The organization’s responsibilities to the material environment are: 1) –to forecast accurately its resource requirements especially when they are becoming scarce 2) –to use energy more efficiently 3) –to reduce the levels of air, water and noise pollution 4) –to recycle water and other materials where possible The Impact of Business on the External Environment Decisions made by business organizations affect customers, central government, supply firms, competition and society at large. The impact which business organizations have is both positive and negative. Impact on the Economic Environment Positive effects 1) Job creation 2) Boost to the local economy –development of infrastructure e.g. roads, water, sewerage, communications, buildings etc 3) Increased tax income for the government 4) Increased income for the local people 5) Attraction of other firms into the area 6) Greater social cohesion Negative effects 1) Expansion at the expense of rivals – unfair competition 2) There will be pressure on resources which may push up costs e.g. rent, rates, wages etc 3) Increase in external costs e.g. congestion, pollution and noise -The closure of businesses can also cause such problems as: a) rising unemployment b) reduced opportunities – (career development) c) reduced local spending d) fall in tax yield e) social tension Impact on Social Environment Positive effects 1) Improvement in standard of living 2) Greater social cohesion 3) More job opportunities 4) Greater freedom 5) Less dependence Negative effects 1) Pollution 2) Increase in crime 3) Individualism 4) More income has contributed to more leisurely activities, leading to immoral/anti social behavior Impact on the Physical Environment Environmental disasters such as: 1) Acid rain caused by industrial pollution – affects human health, agriculture, fishing, forests and buildings 2) Deforestation 3) Desertification 4) Global warming 5) Ozone depletion – release of CFC Corporate Social Responsibility Corporate social responsibility focuses on what an organization does that affects the society in which it exists. It also involves business and ethics, that is, the moral rules that people apply in decision making that give rise to rights and duties in relationships among people. -A socially responsible firm that operates in an ethical way has concern for the environment and undertakes philanthropic activity on behalf of the disadvantaged in the society. -According to Andrew Carnegie, the doctrine of social responsibility is based on the Charity Principle and the Stewardship Principle. 1. The Charity Principle requires that more fortunate members of the society should assist the less fortunate members who include the unemployed, the handicapped, the sick and the elderly. 2. The Stewardship Principle is derived from the Bible and it requires business and Wealthy individuals to view themselves as stewards or caretakers and thus hold their money ‘in trust’ for the rest of the society and use it for any purpose that the society deems legitimate. Arguments for Social Responsibility 1. The creation of a better social environment benefits both society and business. 2. Power should be used responsibly. 3. Social involvement creates a favorable image for the company. 4. Businesses have the resources to help solve social problems. 5. Businesses and society are interdependent. 6. Social involvement discourages additional government intervention. Arguments against Social Responsibility 1. The primary task of business is to maximize profit by concentrating on commercial activities. 2. Social involvement results in higher prices to customers. 3. Company directors have a duty to shareholders. 4. Businesses lack the social skills to deal with the problems of society. Corporate Culture Organizational Culture is defined as the set of important undertakings, such as norms, values, attitudes and beliefs shared by organizational members. Although some aspects of organizational culture are readily apparent, many other aspects are less visible. The open aspects include the formally expressed organizational goals, technology, structure, policies and procedures and the hidden aspects include the informal aspects of organizational life like shared perceptions, attitudes and feelings and the nature of human relationships. -Culture is how and organization has learnt to deal with its environment. Organizations can develop a culture of service, a culture of safety, a culture of innovation etc. Three Basic Elements of Culture 1. Artifacts –these are things one sees, hears and feels when one enters an organization e.g. its products, services and even behavior of group members. Artifacts have also to do with the dressing one will find in an organization. 2. Espoused Values –values are things worth doing or reasons for what we do. Most organizational cultures can trace their espoused values back to the founders of the culture. 3. Basic assumptions –these are the beliefs that organization members take for granted. Culture prescribes “the right way to do things” at an organization, often through unspoken assumptions e.g. many cosmetic companies have assumed that the appropriate marketing strategy focuses on advertising and promotions about how their products enhance beauty. 0rganisational culture is a framework that guides day-to-day behavior and decision making for employees and directs their actions towards completion of organizational goals. Culture must be aligned with the other parts of organizational actions such as planning, organizing, leading and controlling. Strategic Issues -Strategy is the pattern of decisions in a company that determines and reveals its objectives, produces principal policies and plans for achieving these goals. -It is therefore essential in terms of: 1 Defining objectives 2 Providing a coherent framework for decision making 3 Defining the organization’s markets 4 Achievement of competitive advantage over risks 5 Differentiating managerial roles -Strategic management is a process by which an organization establishes its objectives, formulates strategies to achieve these objectives. Matching Strategy to a Company’s Situation Strategies For Competing In Emerging Industry -An emerging industry is one in the early formative stages *Challenges of a start-up include; 1. acquiring and constructing facilities 2. gearing up production 3. shortage of funds to support the R&D 4. trying to broaden distribution 5. gaining buyer acceptance Strategies 1. a bold creative/risk taking entrepreneurship 2. searching out new customer groups 3. persuasive advertising to create brand loyalty 4. perfecting technology to improve product quality 5. using price cuts to attract customers Maturing Industry -Translation into market maturity usually produces fundamental changes in the industry’s competitive environment. Challenges -following growth in buyer demand generates more head competition for market share -competition produces a greater emphasis on cost and services -international competition increases -buyers become more sophisticated often during a harder bargain Strategies -pricing the product line -more emphasis on process innovation (manufacturing process benefits may include lower costs and a better production quality) -expanding internationally -purchasing rival firms (takeover) -strong focus on cost reduction Stagnant/Declining Industries -Generally a company that succeeds in declining industries rely heavily on the following: a) a focused strategy on special market segments or niche markets b) product differentiation based on quality improvements c) cost reduction through productivity improvement and the process of innovation Strategies for competing in Fragmented Industries -The number of people are populated by hundreds and even thousands of small-medium sized companies e.g. hair salons, food outlets etc. -There are no market leaders -Some find it easier to enter the market because of low entry and that the industry’s product is local Strategies 1. Expansion 2. Becoming a low cost operator 3. Specialization by product type 4. Focusing on a limited geographic area 5. Backward or forward integration Strategies for competing in International Markets 1. Licensing 2. Low cost leadership 3. Product differentiation to create a globally consistent image e.g. Coca Cola 4. Maintaining a one country production base and exporting goods to foreign markets. Strategies for weak or crisis businesses 1. Offensive turn around strategies 2. Phase out other products (stream-line) 3. Fortify and defend (maintaining the existing levels of sales market share profitability) 4. Immediate abandonment (get out of the business by either closing down the operations or selling out)